We Are Primerica - AnnualReports.com

2011 Annual Report

We Are Primerica

Cover: Approximately 40,000 people from all over the U.S., Canada and Puerto Rico gathered in the Georgia Dome for Primerica’s 2011 Convention. The company launched a string of initiatives that would change the way representatives do business, including innovative new products, technology and incentive programs.

Primerica is a Main Street company driven by a mission to

help Main Street families become financially independent. As

the largest independent financial services marketing organiza-

tion in North America, we are uniquely positioned to effectively

reach and assist Main Street families with their personal finances.

There has never been a bigger need for what Primerica does

to help underserved middle-income families become properly

protected, debt free and financially independent through our

product offerings and entrepreneurial business opportunity.

2011 Distribution Accomplishments

In 2011, we enhanced our product offerings and the sales

process for our clients while expanding the business opportunity

for our independent representatives. We focused on develop-

ing incentives, new technology and product enhancements that

would create energy and enthusiasm in our representatives and

drive momentum and growth in the future.

In our Term Life Insurance Segment, we launched Term-

Now — a new rapid issue term life insurance product for clients

purchasing face amounts of $250,000 and below. The new Term-

Now online application process includes database queries as part

of the underwriting process, replacing the previous, longer and

more invasive underwriting process. We also moved our online

sales tools from a device-specific system to an Internet-based

system, allowing representatives to use their current web-based

devices to give sales presentations and take online applications.

These initiatives created a fundamental change in how our repre-

sentatives transact business. Now more than 80% of life insur-

ance applications are submitted electronically, up significantly

from 55% prior to the TermNow product launch.

In 2011, our Term Life business outperformed the life insur-

ance industry as our life insurance policies issued increased 6%

from 2010, while the MIB Life Index reported the industry’s life

application activity was flat in 2011 over the prior year. And,

according to LIMRA, term life policies issued in 2011 compared

to 2010 declined 4% compared with Primerica’s 6% increase in

issued term life policies.

Investment and Savings Products (ISP) sales were very

strong in 2011, up 18% driven by a 43% year-over-year increase

in variable annuity sales. During the year, we continued to ex-

ecute on our strategy of expanding our ISP product portfolio by

adding managed accounts and indexed annuities to our product

offerings. Managed accounts provide our clients the opportunity

to have an actively managed investment while rewarding our

representatives for developing lasting client relationships. We

believe long-term, indexed annuities are a good fit for our busi-

ness because they expand our offerings for conservative-minded

investors and work well with our sales force structure.

In June, our convention provided the environment and plat-

form to launch new products, technology initiatives and incentive

programs that led to significant activity during the second half of

the year. The last time we held a convention was in 2007, when

Primerica and the U.S. economy were in a fundamentally differ-

ent place. Four years later, as a public company, this convention

was another celebration of our independence with approximately

Message to Stockholders

Co-CEOs Rick Williams and John Addison

In 2011, Primerica’s life insurance companies paid more than $1 billion in death claims.

40,000 people from the United States, Canada and Puerto Rico

in attendance. Our conventions have historically increased the

energy level, excitement and sense of team within the sales

force but this convention truly surpassed our expectations. The

energetic environment paired with the revolutionary announce-

ments created excitement that led to a post-convention recruit-

ing record. Recruiting finished the year up 6%, outpacing the

direct sales industry that was down 1% in recruiting in 2011 from

2010, according to the Direct Selling Association. We continue to

build on the business enhancements announced at the conven-

tion to generate distribution and sales growth.

2011 Capital Strategy Accomplishments

Significant strides were made on our capital management

strategy in 2011. The $200 million share repurchase we com-

pleted in November allowed us to cancel approximately 12% of

total shares outstanding, was accretive to earnings per share and

brought us closer to our longer-term Risk Based Capital (RBC)

objective of 300%-350%. This capital deployment also enabled

Citi to completely divest its Primerica shares in a secondary offer-

ing in December, less than two years after completion of our ini-

tial public offering (IPO). The two Citi secondary offerings during

the year allowed us to attract new investors, provide additional

float in the stock and more fully consider open market share

repurchases as part of our long-term capital strategy.

In addition to providing shareholder value with the stock

repurchase in 2011, we increased our quarterly cash dividend as

we took the first step in our long-term goal to align our dividend

return with our peers. We also completed most of the adminis-

trative work needed for a triple X reserve financing solution and

continue to work diligently with our regulators to obtain approv-

al. A triple X transaction would allow us to deploy approximately

$150 million of capital for share repurchases.

During the year, S&P affirmed Primerica Life Insurance

Company’s (PLIC) stable AA- financial strength rating and as-

signed Primerica, Inc. (PRI) an A- counterparty credit rating for

senior unsecured debt. Moody’s assigned an A2 insurance finan-

cial strength rating to PLIC and a Baa2 senior unsecured debt rat-

ing to PRI. A.M. Best affirmed PLIC’s A+ financial strength rating,

Agency Financial Strength (PLIC) Senior Unsecured Debt (PRI)

Standard & Poor’s AA-, stable outlook A-, stable outlook

Moody’s A2, stable outlook Baa2, stable outlook

A.M. Best Company A+, stable outlook a-, stable outlook

Primerica’s new TermNow product, launched in 2011, is a rapid-issue term life insurance product. Representatives can take an application on an iPad and a policy is issued within an average of less than 60 seconds.

Primerica broke ground on its new international headquarters in 2011. The majority of our employees will move to the state-of-the-art 345,000 square-foot facility beginning April 2013. This new facility will allow us to maximize business efficiencies and enhance our services to our sales force as well as our clients.

improved our outlook to stable and assigned PRI a senior unse-

cured debt rating of a-. With these ratings, we are well-positioned

to approach the debt market at an opportune time. The ability to

access the debt market would enable us to increase our low 17.4%

debt to capital ratio to the 20-25% range to help maximize capital

efficiency.

2011 Performance

We are proud of what we were able to accomplish in 2011

as we focused on building Primerica for the future by pursuing

opportunities to grow our existing businesses while seeking to

enhance shareholder value over time. Our business continued to

perform well in 2011, driven primarily by a 27% increase in Term

Life net premium revenue on an operating basis and an 18%

increase in ISP sales compared with 2010. Net income was $178.3

million in 2011, compared with $257.8 million for 2010. Note

that net income for the first quarter of 2010 did not reflect the

impact of the Citi reinsurance and reorganization transactions.

Adjusted to reflect the impact of these transactions as well as

other operating adjustments, net operating income was up 10%

to $177.1 million for 2011, compared with $161.5 million for 2010.

Our net operating income growth demonstrates the flexibility and

resilience of our unique business model as our predominantly

cash generative ISP fee-based income complemented the growth

in our capital intensive New Term Life business.

Our capital structure remained solid during the year as our

adjusted book value per share increased 12% to $20.46 from

$18.33 in 2010. At the end of the year, Primerica Life Insurance

Company’s statutory RBC ratio was 426%, showing that the com-

pany remains well positioned to support existing operations and

fund future growth. Our invested asset to adjusted equity ratio of

1.6x remains beneficially low in this low interest rate environment.

We are less reliant on investment income as a source of earnings

and our capital position is less sensitive to asset risk than compa-

nies that underwrite interest-sensitive products.

Looking Ahead

As we move forward, our continued financial strength and

conservative balance sheet position us well to improve returns on

capital through continued execution of the capital strategy we

began in 2011. Our unique distribution model provides the

opportunity to grow our business by catering to the needs of

vastly underserved Main Street families. We are focused on sup-

porting and building our sales force to drive continued perfor-

mance and positive financial results going forward. We plan to

follow through on the business enhancements delivered in 2011

and focus on growing distribution through refined sales force in-

centives and sales tools to help more Main Street families, like the

ones highlighted in this report, navigate their financial situations.

We believe every family in North America deserves a chance to

be financially independent.

As stewards of this business for more than 30 years now, we

remain committed to building Primerica for the future to create

value and enhance the return for our sales force, employees,

clients, and stockholders.

$1.10 Billion of Revenue in 2011 (by Segment)

Investment & Savings Products

36%

Corporate & Other14%

Term Life Insurance50%

Sincerely,

Rick Williams John AddisonChairman of the Board and Chairman of Primerica Distribution andCo-Chief Executive Officer Co-Chief Executive Officer

Chris MelendyMiddleboro, MAFirefighterPart-Time Primerica Representative

Chris MelendyMiddleboro, MAFirefighterPart-Time Primerica Representative

Primerica is about education. We believe that there are no “secrets”

to financial security … and financial education isn’t just for the wealthy.

Primerica’s goal is to educate hardworking families on simple concepts

that can change their financial future forever.

Chris Melendy of Middleboro, MA, became a firefighter because he

wanted to make a difference. He joined Primerica part-time to do the

same thing. “Over the years, I’ve seen a lot of my fellow firefighters

being taken advantage of financially and I am passionate about

changing that. We see our Primerica business as a way that I can turn

my passion for helping people into a business that will pay me a

potentially unlimited income for doing just that!”

Our representatives take the time to meet with families one-on-

one in their own homes, at their convenience. We sit down with them

and teach our clients simple financial principles such as the Rule of

72, pay yourself first, buy term and invest the difference, the power of

compound interest and more. Our mission is to help families become

properly protected, debt free and financially independent, and we take

that mission seriously.

We don’t follow the fads. We lay a foundation. We’re a Main Street

company for Main Street North America.

We believethat all people need to understand how money works.

Tom ReasonWixam, MITeacher/CoachPrimerica Client

Thirty-five years ago, Primerica began a revolutionary crusade to

transform the life insurance industry with a simple philosophy called

“buy term and invest the difference.” This philosophy encourages

families to purchase affordable term life insurance so they can get the

protection they need at a price they can afford and have more money to

invest in their future.

We’re not a “product of the month” kind of company. Our principles,

philosophy and products have stood the test of time. We’ve proudly been

part of the solution, not the problem. We’ve focused on helping under-

served Main Street families become financially independent. Our

solutions are available to everyone, no matter what their “bottom line” is.

Tom Reason of Wixam, MI, a self-described “middle-income Joe,”

saved more than $300 a month on his family’s life insurance by replacing

a whole life policy with a Primerica term insurance policy. “Our Primerica

representative, Jeff Sarandrea, showed us how we can take that money

and fund an IRA – and that’s going to really change our future for the

better. It was like finding money!”

Our simple solutions for Main Street families have been the

foundation for our success even as we expanded over the years. Today,

Primerica is perfectly positioned for growth and ready to transform the

financial services industry, because Main Street families need our help

now more than ever before.

We believefamilies have a right to simple solutions to their financial challenges.

Angie ReedAtlanta, GAPrimerica Regional Vice President

We believeleaders come from all backgrounds and all walks of life.

Primerica offers average and ordinary individuals a chance to

build their own business and change their lives. Our leaders come

from many different backgrounds. You’ll find former coaches, teach-

ers, firefighters and bookkeepers — each working side by side to build

a Primerica business.

Our business opportunity is available to anyone who wants to

achieve their dreams, regardless of their employment background, edu-

cation level, age or ethnicity. Many people dream of starting a business

but feel they don’t have enough money or business experience. With

Primerica, our representatives are in business for themselves, but not by

themselves. For a nominal cost, they can follow their dreams of becom-

ing an entrepreneur.

“I was intrigued by the Primerica business opportunity because it

presented a way for me to potentially earn the kind of income I wanted

while making a difference in my community,” recalls former real estate

agent Angie Reed of Atlanta, GA.

Primerica provides an opportunity for future entrepreneurs to

start a business part-time and earn extra money while they keep their

full-time jobs. The full-time opportunity provides the potential for

unlimited income. At Primerica, there’s always room at the top. It’s a

place where average and ordinary people can help others and have

extraordinary success.

Hagan and Courtney HarrisonStaff Sergeant, United States Air ForcePrimerica Clients

Primerica teaches Main Street families the basic financial concepts

that most people don’t learn in school. A lot of people think long-term

security is impossible on their income. But Primerica helps families

understand that, no matter what a person’s income level, he or she can

achieve financial security if they take the time to learn a few simple

principles.

While other financial services companies ignore this market and

focus on the wealthy, Primerica doesn’t. We have the distribution system

in place to meet the needs of this vastly underserved market.

We help them understand the difference between a Traditional and a

Roth IRA. We show them how to take advantage of tax-deferred saving

and the power of dollar-cost averaging. While other companies have large

minimum investment requirements, Primerica helps families get started

on a systematic investment program for as little as $50 each month.

Hagan Harrison of Warner Robins, GA, says he and his wife Courtney

hadn’t thought much about their finances before they were introduced to

Primerica’s solutions. “We had never really thought about starting to plan

for our future before Primerica. But thanks to what our representative

did for us, we’re off to a good start for a great retirement some day.”

Primerica believes that getting started is the first step toward

financial independence.

We believeevery family in North America deserves a chance to be financially independent.

John A. Addison, Jr.Chairman of Primerica Distribution and Co-CEO, Primerica, Inc.

Joel M. BabbitCEO, Mother Nature Network

P. George Benson President, The College of Charleston

Michael E. Martin Partner, Warburg Pincus & Co.Managing Director, Warburg Pincus LLC

Mark MasonChief Operating Officer, Citi Holdings

Left to right: D. Zilberman, R. McCullough, B. Yastine, J. Babbit, J. Addison, P. G. Benson, D. R. Williams, M. Mason, M. Martin

Robert F. McCulloughFormer Senior Partner of Invesco Ltd.

D. Richard WilliamsChairman of the Board and Co-CEO, Primerica, Inc.

Barbara A. YastineChief Administrative Officer, Ally Financial, Inc.

Daniel ZilbermanPartner, Warburg Pincus & Co.Managing Director, Warburg Pincus LLC

Board of Directors

Michael AdamsExecutive Vice President and Chief Business Technology Officer

John A. Addison, Jr.Chairman of Primerica Distribution and Co-CEO and Director, Primerica, Inc.

Chess BrittExecutive Vice President and Chief Marketing Officer

Jeffrey S. FendlerPresident of Primerica Life

William A. KellyPresident of PFS Investments

Left to right: G. Williams, G. Pitts, D. R. Williams, J. Fendler, J. Addison, M. Adams, C. Britt, P. Schneider, A. Rand, W. Kelly

Gregory C. PittsExecutive Vice President and Chief Operating Officer

Alison S. RandExecutive Vice President and Chief Financial Officer

Peter W. SchneiderExecutive Vice President, General Counsel, Corporate Secretary and Chief Administrative Officer

D. Richard WilliamsChairman of the Board and Co-CEO, Primerica, Inc.

Glenn J. WilliamsPresident

Executive Officers

UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2011

OR

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934

For the transition period from to

Commission File Number: 001-34680

Primerica, Inc.(Exact name of registrant as specified in its charter)

Delaware 27-1204330(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

3120 Breckinridge BoulevardDuluth, Georgia 30099

(Address of principal executive offices) (ZIP Code)

Registrant’s telephone number, including area code: (770) 381-1000

Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registered

Common Stock, $.01 Par Value New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. ‘ Yes È No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act. ‘ Yes È No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 days. È Yes ‘ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that theregistrant was required to submit and post such files). È Yes ‘ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 ofthis chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-acceleratedfiler, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and“smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer È Accelerated filer ‘

Non-accelerated filer ‘ (Do not check if a smaller reporting company) Smaller reporting company ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). ‘ Yes È No

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2011, was$842,037,313. The number of shares of the registrant’s Common Stock outstanding at January 31, 2012, with$.01 par value, was 64,938,806.

Documents Incorporated By Reference

Certain information contained in the Proxy Statement for the Company’s Annual Meeting of Stockholders to beheld on May 16, 2012 is incorporated by reference into Part III hereof.

TABLE OF CONTENTS

Page

PART I 3

Item 1. Business. 3

Item 1A. Risk Factors. 33

Item 1B. Unresolved Staff Comments. 53

Item 2. Properties. 54

Item 3. Legal Proceedings. 54

Item 4. Mine Safety Disclosures. 54

Item X. Executive Officers of the Registrant. 55

PART II 57

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities. 57

Item 6. Selected Financial Data. 60

Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations. 61

Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 101

Item 8. Financial Statements and Supplementary Data. 103

Item 9. Changes in and Disagreements With Accountants on Accounting and FinancialDisclosure. 155

Item 9A. Controls and Procedures. 155

Item 9B. Other Information. 157

PART III 158

Item 10. Directors, Executive Officers and Corporate Governance. 158

Item 11. Executive Compensation. 159

Item 12. Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters. 159

Item 13. Certain Relationships and Related Transactions, and Director Independence. 159

Item 14. Principal Accounting Fees and Services. 159

PART IV 160

Item 15. Exhibits, Financial Statement Schedules. 160

Signatures 177

Cautionary Statement Concerning Forward-Looking Statements

CAUTIONARY STATEMENTCONCERNING FORWARD-LOOKINGSTATEMENTS

Investors are cautioned that certain statementscontained in this report as well as somestatements in periodic press releases and someoral statements made by our officials duringour presentations are “forward-looking”statements. Forward-looking statementsinclude, without limitation, any statement thatmay project, indicate or imply future results,events, performance or achievements, and maycontain the words “expect,” “intend,” “plan,”“anticipate,” “estimate,” “believe,” “will be,”“will continue,” “will likely result,” and similarexpressions, or future conditional verbs such as“may,” “will,” “should,” “would,” and “could.” Inaddition, any statement concerning futurefinancial performance (including futurerevenues, earnings or growth rates), ongoingbusiness strategies or prospects, and possibleactions taken by us or our subsidiaries are alsoforward-looking statements. These forward-looking statements involve external risks anduncertainties, including, but not limited to,those described under the section entitled “RiskFactors” included herein.

Forward-looking statements are based oncurrent expectations and projections aboutfuture events and are inherently subject to avariety of risks and uncertainties, many ofwhich are beyond the control of ourmanagement team. All forward-lookingstatements in this report and subsequentwritten and oral forward-looking statementsattributable to us, or to persons acting on ourbehalf, are expressly qualified in their entiretyby these risks and uncertainties. These risksand uncertainties include, among others:

• our failure to continue to attract andlicense new recruits, retain salesrepresentatives, or license or maintain thelicensing of our sales representatives;

• changes to the independent contractorstatus of our sales representatives;

• our or our sales representatives’ violationof, or non-compliance, with laws andregulations;

• our or our sales representatives’ failure toprotect the confidentiality of clientinformation;

• differences between our actual experienceand our expectations regarding mortality,persistency, expenses and investmentyields as reflected in the pricing for ourinsurance policies;

• the occurrence of a catastrophic event thatcauses a large number of prematuredeaths of our insureds;

• changes in federal and state legislation andregulation, including other legislation orregulation that affects our insurance andinvestment product businesses;

• our failure to meet risk-based capitalstandards or other minimum capital orsurplus requirements;

• a downgrade or potential downgrade in ourinsurance subsidiaries’ financial strengthratings or in our investment grade creditratings for the senior unsecured debt thatwe may elect to offer pursuant to ourexisting shelf registration statement atsome time in the future;

• the effects of credit deterioration andinterest rate fluctuations on our investedasset portfolio;

• incorrectly valuing our investments;

• inadequate or unaffordable reinsurance orthe failure of our reinsurers to performtheir obligations;

• changes in accounting for deferred policyacquisition costs of insurance entities andother changes in accounting standards;

• the failure of our investment products toremain competitive with other investmentoptions;

Primerica 2011 Annual Report 1

Cautionary Statement Concerning Forward-Looking Statements

• heightened standards of conduct or morestringent licensing requirements for oursales representatives;

• inadequate policies and proceduresregarding suitability review of clienttransactions;

• the failure of, or legal challenges to, thesupport tools we provide to our sales force;

• the inability of our subsidiaries to paydividends or make distributions;

• the effects of economic down cycles in theUnited States and Canada;

• our ability to generate and maintain asufficient amount of capital;

• our non-compliance with the covenants ofour note payable;

• legal and regulatory investigations andactions concerning us or our salesrepresentatives;

• the competitive environment;

• the loss of key personnel;

• the failure of our information technologysystems, breach of our informationsecurity or failure of our businesscontinuity plan;

• fluctuations in Canadian currencyexchange rates; and

• conflicts of interest due to the significantinterest in us held by certain private equityfunds managed by Warburg Pincus LLC.

Developments in any of these areas couldcause actual results to differ materially fromthose anticipated or projected or cause asignificant reduction in the market price of ourcommon stock.

The foregoing list of risks and uncertaintiesmay not contain all of the risks anduncertainties that could affect us. In addition, inlight of these risks and uncertainties, thematters referred to in the forward-lookingstatements contained in this report may not infact occur. Accordingly, undue reliance shouldnot be placed on these statements. Weundertake no obligation to publicly update orrevise any forward-looking statements as aresult of new information, future events orotherwise, except as otherwise required by law.

2 Freedom Lives HereTM

Item 1. Business

PART I

ITEM 1. BUSINESS.

Primerica, Inc. (“Primerica”, “we” or the“Parent Company”) is a leading distributor offinancial products to middle income householdsin the United States and Canada withapproximately 91,000 licensed salesrepresentatives at December 31, 2011. We assistour clients in meeting their needs for term lifeinsurance, which we underwrite, and mutualfunds, annuities and other financial products,which we distribute primarily on behalf of thirdparties. We insured more than 4.3 million livesand approximately 2 million clients maintainedinvestment accounts with us at December 31,2011. Our distribution model uniquely positionsus to reach underserved middle incomeconsumers in a cost effective manner and hasproven itself in both favorable and challengingeconomic environments.

Our mission is to serve middle income familiesby helping them make informed financialdecisions and providing them with a strategyand means to gain financial independence. Ourdistribution model is designed to:

• Address our clients’ financial needs. Oursales representatives use our proprietaryfinancial needs analysis tool (“FNA”) andan educational approach to demonstratehow our products can assist clients toprovide financial protection for theirfamilies, save for their retirement andother needs and manage their debt.Typically, our clients are the friends, familymembers and personal acquaintances ofour sales representatives. Meetings aregenerally held in informal, face-to-facesettings, usually in the clients’ homes.

• Provide a business opportunity. Weprovide an entrepreneurial businessopportunity for individuals to distribute ourfinancial products. Low entry costs and theability to begin part-time allow our salesrepresentatives to supplement theirincome by starting their own independentbusinesses without incurring significant

start-up costs or leaving their current jobs.Our unique compensation structure,technology, training and back-officeprocessing are designed to enable oursales representatives to successfully growtheir independent businesses.

Corporate Structure

We conduct our core business activities in theUnited States through three principal entities,all of which are direct or indirect wholly ownedsubsidiaries of the Parent Company:

• Primerica Financial Services, Inc. (“PFS”),our general agency and marketingcompany;

• Primerica Life Insurance Company(“Primerica Life”), our principal lifeinsurance underwriting company; and

• PFS Investments Inc. (“PFS Investments”),our investment and savings productscompany and broker-dealer.

Primerica Life is domiciled in Massachusettsand its wholly owned subsidiary, NationalBenefit Life Insurance Company (“NBLIC”), is aNew York life insurance underwriting company.

We conduct our principal business activities inCanada through two principal entities, both ofwhich are indirect wholly owned subsidiaries ofthe Parent Company:

• Primerica Life Insurance Company ofCanada (“Primerica Life Canada”), ourCanadian life insurance underwritingcompany; and

• PFSL Investments Canada Ltd. (“PFSLInvestments Canada”), our Canadianlicensed mutual fund dealer.

Primerica, Inc. was incorporated in the UnitedStates as a Delaware corporation in October2009 to serve as a holding company for thePrimerica businesses. Our businesses, whichprior to April 1, 2010 were wholly owned indirectsubsidiaries of Citigroup Inc. (“Citi”), weretransferred to us by Citi on April 1, 2010 in areorganization pursuant to which we completed


Item 1. Business

an initial public offering in April 2010 (the“IPO”). For a description of our corporatereorganization, see “Management’s Discussionand Analysis of Financial Condition and Resultsof Operations — The Transactions.”

In November 2011, we repurchased from Citiapproximately 8.9 million shares of ourcommon stock at a price of $22.42 per share,for a total purchase price of approximately$200.0 million. The per-share purchase pricewas determined based on the volume-weightedaverage price per share of Primerica, Inc.common stock during the seven-day periodprior to execution of the repurchaseagreement. We funded this repurchase withfunds made available by a dividend fromPrimerica Life to the Parent Company.

In April 2011, Citi sold 12.0 million shares of ourcommon stock in an underwritten public offeringat a price of $22.75 per share. In December 2011,Citi sold approximately 8.1 million shares of ourcommon stock, representing all of its remainingshares of our common stock, in an underwrittenpublic offering at a price of $22.29 per share. Wedid not receive any proceeds from the sale ofthese shares.

Our Clients

Our clients are generally middle incomeconsumers, which we define as households with$30,000 to $100,000 of annual income.According to the 2009 U.S. Census BureauCurrent Population Survey, the latest period forwhich data is available, approximately 50% ofU.S. households fall in this range. We believethat we understand the financial needs of themiddle income segment well:

• They have inadequate or no life insurancecoverage. Individual life insurance salesin the United States declined from12.5 million policy sales in 1975 to6.7 million policy sales in 2010, the latestperiod for which data is available,according to LIMRA, a worldwideassociation of insurance and financialservices companies. We believe that term

life insurance, which we have provided tomiddle income clients for many years, isgenerally the best option for them to meettheir life insurance needs due to its lowerinitial cost versus cash value life insurance.

• They need help saving for retirement andother personal goals. The currenteconomic environment has intensified thechallenges of middle income families tosave for retirement and other goals. Bydeveloping personalized savings programsfor our clients using our proprietary FNAtool and offering a wide range of mutualfunds, annuities and segregated fundproducts sponsored and managed byreputable firms, our sales representativesare well equipped to help clients developlong-term savings plans to address theirfinancial needs.

• They need to reduce their consumerdebt. Many middle income families havenumerous debt obligations from creditcards, auto loans, and home mortgages.We help our clients address these financialburdens by providing personalized client-driven debt management techniques thatcan help them reduce and ultimately payoff their debts.

• They prefer to meet face-to-face whenconsidering financial products. Historically,middle income consumers have indicated apreference to meet face-to-face whenconsidering financial products or services.As such, we have designed our businessmodel to address this preference in a cost-effective manner.

Our Distribution Model

Our distribution model, which borrows aspectsfrom franchising, direct sales and traditionalinsurance agencies — is designed to reach andserve middle income consumers efficiently. Keycharacteristics of our unique distribution modelinclude:

• Independent entrepreneurs: Our salesrepresentatives are independent


Item 1. Business

contractors building and operating theirown businesses. This business-within-a-business approach means that our salesrepresentatives are entrepreneurs whotake responsibility for selling products,recruiting sales representatives, settingtheir own schedules and managing andpaying the expenses associated with theirsales activities, including office rent andadministrative overhead.

• Part-time opportunity: By offering aflexible part-time opportunity, we are ableto attract a significant number of recruitswho desire to earn supplemental incomeand generally concentrate on smaller-sizedtransactions typical of middle incomeconsumers. Virtually all of our salesrepresentatives begin selling our productson a part-time basis, which enables them tohold jobs while exploring an opportunitywith us.

• Incentive to build distribution: When asale is made, the selling representativereceives a commission, as does therepresentative who recruited him or her,which we refer to as overridecompensation. Override compensation ispaid through several levels of the sellingrepresentative’s recruitment andsupervisory organization. This structuremotivates existing sales representatives togrow our sales force and ensures theirsuccess by providing them withcommission income from the salescompleted by their recruits.

• Sales force leadership: A salesrepresentative who has built a successfulorganization can achieve the salesdesignation of Regional Vice President(“RVP”) and can earn higher compensationand bonuses. RVPs are independentcontractors who open and operate officesfor their sales organizations and devotetheir full attention to their Primericabusinesses. RVPs also support and monitorthe part-time sales representatives onwhose sales they earn override

commissions in compliance with applicableregulatory requirements. RVPs’ efforts toexpand their businesses are a primarydriver of our success.

• Innovative compensation system: We havedeveloped an innovative system forcompensating our independent sales forcethat is primarily tied to, and contingentupon, product sales. We advance to ourrepresentatives a significant portion of theirinsurance commissions upon theirsubmission of an insurance application andthe first month’s premium payment. Inaddition to being a source of motivation,this upfront payment provides our salesrepresentatives with immediate cash flow tooffset costs associated with originating thebusiness. In addition, monthly productionbonuses are paid to sales representativeswhose downline sales organizations meetcertain sales levels. With compensationpredominantly tied to sales activity, ourcompensation approach accommodatesvarying degrees of individual productivity,which allows us to effectively use a largegroup of part-time representatives whileproviding a variable cost structure. Inaddition, we incentivize our RVPs withequity compensation, which aligns theirinterests with those of our stockholders.

• Large dynamic sales force: The membersof our sales force primarily target and servetheir friends, family members and personalacquaintances through individually drivennetworking activities. We believe that thiswarm markets approach is an effective wayto distribute our products because itfacilitates face-to-face interaction initiatedby a trusted acquaintance of theprospective client, which is difficult toreplicate using other distributionapproaches. Due to the large size of oursales force, attrition and our activerecruiting of new sales representatives, oursales force is constantly renewing itself,which allows us to continually access anexpanding base of prospective clientswithout engaging costly media channels.


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• Motivational culture: Through sales forcerecognition events and contests, we seekto create a culture that inspires andrewards our sales representatives for theirpersonal successes and those of their salesorganizations. We believe this motivationalenvironment is a major reason that manysales representatives join and achievesuccess in our business.

Structure and Scalability of OurSales Force

New sales representatives are recruited byexisting sales representatives. When these newrecruits join our sales force, they are assignedan upline relationship with the salesrepresentative who recruited them and with therecruiting sales representative’s respectiveupline RVP organization. As new salesrepresentatives are successful in recruitingother sales representatives, they begin to buildtheir own organization of sales representativeswho become their downline salesrepresentatives. We encourage our salesrepresentatives to bring in new recruits to buildtheir own sales organizations, enabling them toearn override commissions on sales made bymembers of their downline organization.Members of our sales force view building theirown downline organizations as building theirown business within a business.

While the substantial majority of our salesrepresentatives are part-time, approximately4,000 served as RVPs at December 31, 2011.RVPs establish and maintain their own offices,which we refer to as field offices. Additionally,they are responsible for funding the costs oftheir administrative staff, marketing materials,travel and training and exclusive recognitionevents for the sales representatives in theirrespective downline organizations. Field officesprovide a location for conducting recruitingmeetings, training events and sales-relatedmeetings, disseminating our Internet-streamedTV programming, conducting compliancefunctions, and housing field office businessrecords.

Our sales-related expenses are largely variablecosts that fluctuate with product sales volume.Sales-related expenses consist primarily ofsales commissions and incentive programs forour sales representatives as well as costsassociated with information technology,compliance, administrative activities, salesmanagement and training.

With support provided by our home office staff,RVPs play a major role in training, motivatingand monitoring our sales representatives.Because the primary determinant of a salesrepresentative’s compensation is the size andproductivity of his or her downlineorganization, our distribution model providesfinancial rewards to our sales representativeswho successfully recruit, support and monitorproductive sales representatives. Furthermore,we have developed proprietary tools andtechnology to enable our RVPs to reduce thetime spent on administrative responsibilitiesassociated with their sales organization so theycan devote more time to the sales andrecruiting activities that drive our growth. Webelieve that our tools and technology, coupledwith our equity incentive award program,further incentivize our sales representatives tobecome RVPs.

To encourage our most successful RVPs tobuild large downline sales organizations thatgenerate strong sales volumes, we establishedthe Primerica Ownership Program to providecertain qualifying RVPs a contractual right,upon meeting certain criteria, to sell theirPrimerica business to another RVP or transferit to a qualifying family member.

Both the structure of our sales force and thecapacity of our support capabilities provide uswith a high degree of scalability as we grow ourbusiness. Our support systems and technologyare capable of supporting a large sales forceand a high volume of transactions. In addition,by sharing training and compliance activitieswith our RVPs, we are able to grow withoutincurring proportionate overhead expenses,which accommodates an increase in salesrepresentatives, clients, product sales andtransactions.


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Recruitment of SalesRepresentatives

Recruiting sales representatives is undertakenby our existing sales representatives, whoidentify prospects and share with them thebenefits of associating with our organization.Our sales representatives showcase ourorganization as dynamic and capable ofimproving lives by demonstrating the successachieved by the members of our sales force.

After the initial contact, prospective recruitstypically are invited to an opportunity meeting,which is conducted by an RVP. The objective ofan opportunity meeting is to inform recruitsabout our mission and their opportunity to joinour sales force. At the conclusion of eachopportunity meeting, prospective recruits areasked to complete an application and pay a $99fee to commence their pre-licensing trainingand licensing examination preparationprograms. While recruits arenot obligated to purchaseany of our products tobecome a salesrepresentative, theyoften elect to do so.

Our sales force is our soledistribution channel andour success depends onthe ongoing recruitment,training and licensing ofnew sales representatives.Recruits often becomeour clients or provide us with access to theirfriends, family members and personalacquaintances. As a result, we continually workto improve our systematic approach torecruiting and training new salesrepresentatives so they can obtain the licensingand skills necessary for success.

Similar to other distribution systems that relyupon part-time sales representatives, andtypical of the life insurance industry generally,we experience wide disparities in theproductivity of individual sales representatives.Many new recruits do not get licensed, mainlydue to the time commitment required to obtain

licenses and various regulatory hurdles. Manyof our licensed sales representatives are onlymarginally active in our business. As a result,we plan for this disparate level of productivityand view a continuous recruiting cycle as a keycomponent of our distribution model. Ourdistribution model is designed to address thevarying productivity associated with part-timesales representatives by paying production-based compensation, emphasizing recruiting,and continuing initiatives to address barriers tolicensing new recruits. By providing overridecommissions to sales representatives on thesales generated by their downline salesorganization, our compensation structurealigns the interests of our sales representativeswith our interest in recruiting newrepresentatives and maximizing their success.

The following table provides information onnew recruits and sales representatives:

Year ended December 31,

2011 2010 2009

Number of new recruits 244,756 231,390 221,920

Number of newly insurance-licensedsales representatives 33,711 34,488 37,629

Number of insurance-licensed salesrepresentatives, at period end (1) 91,176 94,850 99,785

Average number of insurance-licensedsales representatives during period 91,855 96,840 100,569

(1) A change in the methodology for terminating agents resulted in an immaterialincrease in the size of the year-end 2011 sales force relative to what it would havebeen under the prior methodology.

We define new recruits as individuals who havesubmitted an application to join our sales force,together with payment of a fee to commencetheir pre-licensing training. We may notapprove certain new recruits to join our salesforce, and others elect to withdraw from oursales force prior to becoming active in ourbusiness.

On average, it requires approximately threemonths for our sales representatives tocomplete the necessary applications andpre-licensing coursework and to pass theapplicable state or provincial examinations to


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obtain a license to sell our term life insuranceproducts. As a result, individuals recruited tojoin our sales force within a given fiscal periodmay not become licensed sales representativesuntil a subsequent period.

We have launched several initiatives that aredesigned to maintain and increase ourrecruiting, licensing and sales activity, including:

• implementing a bonus program thatprovides incentives to new recruits to getlicensed and make sales quickly;

• providing our sales force with the ability toregister new recruits almostinstantaneously using their mobile devices,which allows our new recruits to getstarted in pre-licensing activities andbuilding their businesses immediately;

• developing a wide array of courses,training tools and incentives that assist andencourage new recruits to obtain therequisite licenses; and

• working with industry and tradeassociations to address unnecessaryregulatory barriers to licensing qualifiedcandidates, including efforts to modifystate licensing laws and regulations.

Sales Force Motivation, Training andCommunication

Motivating, training and communicating withour sales force are critical to our success andthat of our sales force.

Motivation. Through our proven system ofsales force recognition events, contests, andcommunications, we provide incentives thatdrive our results. Motivation is driven in part byour sales representatives’ belief that they canachieve higher levels of financial success bybuilding their own businesses as Primericasales representatives. The opportunity to helpothers address financial challenges is also asignificant source of motivation for many of oursales representatives, as well as for ourmanagement and home office employees.

We motivate our sales representatives tosucceed in our business by:

• compensating our sales representatives forproduct sales by them and their downlineorganizations;

• helping our sales representatives learnfinancial fundamentals so they canconfidently and effectively assist ourclients;

• reducing the administrative burden on oursales force, which allows them to devotemore of their time to building a downlineorganization and selling products; and

• creating a culture in which salesrepresentatives are encouraged to achievegoals through the recognition of their salesand recruiting achievements as well asthose of their sales organizations.

To help our sales representatives understandthat they are part of a larger enterprise thantheir field office, we conduct numerous local,regional and national meetings. These meetingsare a vehicle to inform and motivate our salesforce. For example, in January 2012 weconducted ten regional meetings across theUnited States and Canada and in June 2011,approximately 40,000 people attended ournational convention at the Georgia Dome inAtlanta. We believe the fact that so many of ournew recruits and sales representatives elect toattend our meetings at their own expensedemonstrates their commitment to ourorganization and mission.

Training. Our sales representatives must holdlicenses to sell most of our products. Ourin-house insurance licensing center offers asignificant number of classroom, online andcorrespondence insurance pre-licensing classesto meet applicable state and provinciallicensing requirements and prepare recruits topass applicable licensing exams. For thoserepresentatives who wish to sell our investmentand savings products, we contract with third-party training firms to conduct exampreparation.


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We continue to develop courses, tools andincentives to help new recruits become licensedsales representatives. Among other tools, weprovide to our sales force, generally at no costto them, an online exam simulator, exampreparation review classes in addition to stateor province mandated life insurance pre-licensing classes, and life insurance exam reviewvideos. We also developed an interactive toolon Primerica Online (“POL”), our intranetwebsite, that provides new recruits with astep-by-step guide to building their Primericabusinesses.

Other internal training program opportunitiesinclude sales, management skills, businessownership, product and compliance trainingmodules and videos. Additionally, many RVPsconduct sales training either on nights orweekends, providing new recruits a convenientopportunity to attend training outside ofweekday jobs or family commitments.

Communication. We communicate with oursales force through multiple channels,including:

• POL, which is designed to be a supportsystem for our sales force. POL providessales representatives with access to theirPrimerica e-mail, bulletins and alerts,business tracking tools and real-timeupdates on their pending life applicationsand new recruits. We also use POL toprovide real-time recognition of salesrepresentatives’ successes andscoreboards for sales force production,contests and trips. POL also is a gateway toour product providers and product support.Over 140,000 of our sales representatives,both licensed and not-yet licensed,subscribed to POL at December 31, 2011.Subscribers generally pay a $25 monthlyfee to subscribe to POL, which helps coverthe cost of maintaining this supportsystem.

• our in-house TV network, which isbroadcast by Internet-streaming video. Wecreate original broadcasts and videos thatenable senior management to update our

sales force and provide training andmotivational presentations. We broadcast alive weekly program hosted by home officemanagement and selected RVPs thatfocuses on new developments and providesmotivational messages to our sales force.We also broadcast a training-orientedprogram to our sales force on a weeklybasis and profile successful salesrepresentatives, allowing these individualsto share their secrets for success with ourother sales representatives.

• our publications department, whichproduces materials to support, motivateand inform our sales force. We sellrecruiting materials, sales pieces, businesscards and stationery and provide totalcommunications services, including webdesign, print presentations, graphic designand script writing. We also produce aweekly mailing that includes materialspromoting our current incentives, as wellas the latest news about our productofferings.

• our GoSolo® voice messaging tool andmass texting, which allow us to widelydistribute motivational and informationalvoice messages, broadcasts and textmessages to our sales force. GoSolo® is asubscription service provided by a thirdparty.

Sales Force Support and Tools

Our information systems and technology aredesigned to support a sales and distributionmodel that relies on a large group ofpredominantly part-time representatives toassist them in building their own businesses. Weprovide our sales representatives with salestools that allow both new and experienced salesrepresentatives to offer financial informationand products to their clients. The mostsignificant of these tools are:

• Our Financial Needs Analysis: Our FNA is aproprietary, web-based, needs-basedanalysis tool. The FNA gives our sales


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representatives the ability to collect andsynthesize client financial data and developa financial analysis for the client that iseasily understood. The FNA, while not afinancial plan, provides our clients with apersonalized explanation of how ourproducts work and introduces prudentfinancial concepts, such as regular savingand accelerating the repayment of high costcredit card debt to help them reach theirfinancial goals. The FNA provides clientswith a snapshot of their current financialposition and identifies their life insurance,savings and debt management needs.

• Our Point-of-Sale Application Tool: Ourweb-based, point-of-sale software,TurboApps, is an internally developedsystem that streamlines the applicationprocess for our insurance products. Thisapplication populates client informationfrom the FNA to eliminate redundant datacollection and provides real-time feedbackto eliminate incomplete and illegibleapplications. Integrated with our paperlessfield office management system describedbelow and with our home office systems,TurboApps allows our RVPs and us torealize the efficiencies of straight-through-processing of application data and otherinformation collected on our salesrepresentatives’ mobile devices, whichresults in expedited processing of our lifeinsurance product sales. TurboApps alsosupports our recruiting activity and ourU.S. mutual fund product sales. Wedeveloped the web-based versions ofTurboApps to take advantage of theproliferation of portable devices andwireless Internet connections, includingsmartphones, laptop computers andtablets. We have also introduced our firstedition of the Primerica App, which allowsour representatives to provide aninsurance quote when they do not haveaccess to the Internet.

• Virtual Base Shop: In an effort to ease theadministrative burden on RVPs and

simplify sales force operations, we makeavailable to RVPs a secure Intranet-basedpaperless field office management systemas part of the POL subscription. This virtualoffice is designed to automate the RVP’sadministrative responsibilities and can beaccessed by all sales representatives in anRVP’s immediate downline salesorganization, which we refer to as his orher base shop.

• Our Morningstar Investment PresentationTools: We have licensed from Morningstartwo web-based sales presentation tools,Portfolio Solutions and Morningstar®

Hypothetical IllustratorSM. In addition, wehave contracted with Ibbotson AssociatesAdvisors, LLC, a leading asset allocationadvisory firm, to build detailed assetallocation portfolios. These tools allow oursales representatives to illustrate forclients and prospective clients the long-term benefits of proper asset allocationand the potential wealth creation overspecific time horizons. We believe thesetools offer the benefit of objective third-party advice from an industry leader andhelp establish the credibility of both oursales representatives and products.

• Client Account Manager: We also useClient Account Manager, a portfoliomanagement tool that assists our salesrepresentatives with monitoring individualclient investment accounts. Client AccountManager provides our salesrepresentatives with additional productsales opportunities for our investment andsavings products by providing betteraccess to detailed account information foractive client accounts and accounts thatour representatives have inherited upondeparture of the representative whoestablished the relationship. We believethat Client Account Manager enablesbetter service and more relevant clientcontact to present additional investmentrecommendations and productopportunities.


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We also make available other technology tosupport our sales force in managing theirbusinesses and in serving our clients, including:

• a toll-free sales support call center toaddress questions and assist withpaperwork, underwriting and licensing;

• a tele-underwriting process that allowsclients to provide needed medicalinformation without disclosing it to oursales representatives; and

• POL for tracking the status of pending lifeinsurance applications and the progress oftheir new recruits in their training andlicensing efforts.

Performance-Based CompensationStructure

Our compensation system is rooted in ourorigin as an insurance agency. Our salesrepresentatives can earn compensation inmultiple ways, including:

• sales commissions and fees based on theirpersonal sales and client assets undermanagement;

• override commissions based on sales bythe sales representatives and fees basedon client assets under management in theirdownline organizations;

• bonuses and other compensation, includingequity-based compensation, based on theirown sales performance, the aggregatesales performance of their downlineorganizations and other criteria; and

• participation in our contests and otherincentive programs.

Our compensation system pays a commissionto the selling representative who actually sellsthe product and override commissions toseveral levels of the selling representative’supline organization. With respect to term lifeinsurance sales, commissions are calculatedbased on the total first-year premium(excluding policy fee) for all policies and riders.To motivate our sales force, we compensate

them for term life insurance product sales asquickly as possible. We advance a majority ofthe insurance commission upon the submissionof a completed application and the first month’spremium payment. The remainder of the lifeinsurance sales commission is paid upon receiptof the first 12 months of premium. As the clientmakes his or her premium payments, thecommission is earned by the salesrepresentative and the commission advance isrecovered. If premium payments are not madeby the client and the policy terminates, anyoutstanding advance commission is chargedback to the sales representative. Thechargeback would equal that portion of theadvance that was made, but not earned, by therepresentative because the client did not paythe full premium for the period of time forwhich the advance was made to therepresentative. Chargebacks, which occur inthe normal course of business, may berecovered by reducing any amounts otherwisepayable to the sales representative.

Sales representatives and their uplineorganizations are contractually obligated torepay us any commission advances that areultimately not earned due to the underlyingpolicy lapsing prior to the full commission beingearned. Additionally, we hold back a portion ofthe commissions earned by our salesrepresentatives as a reserve out of which wemay recover chargebacks. The amounts heldback are referred to as deferred compensationaccount commissions (“DCA commissions”).DCA commissions are available to reduceamounts owed to the Company by salesrepresentatives. DCA commissions also providean upline sales representative with a cushionagainst the chargeback obligations of theirdownline sales representatives. DCAcommissions, unless applied to amounts owed,are ultimately released to the salesrepresentatives.

Generally, commissions are not paid after thefirst year with respect to a policy. One of ourriders provides for coverage increases eachyear. For such riders, commissions in thesecond year and thereafter are only paid with


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respect to the premium increase related to theincreased coverage. Renewal commissions arepaid on some older in-force policies. At the endof the policy duration, compensation is paid onconversions.

We also pay compensation to our sales forcefor the sale of mutual funds, annuities, long-term care insurance, prepaid legal protectionand our Primerica DebtWatchers™ products,and for the referral of customers seeking autoand home insurance. For most mutual funds(non-managed accounts) and annuity products,commissions are paid both on the sale and onthe total of assets under management and arecalculated based on the dealer re-allowanceand trail compensation actually paid to us. Formanaged account mutual fund products, feesearned are based on the total of assets undermanagement. Long-term care insurancecommissions are calculated based on theamount of premium paid. Prepaid legalprotection commissions and PrimericaDebtWatchers™ commissions are payable infixed amounts on the sale of the respectiveproduct. For auto and homeowners’ insuranceproducts, fees are paid for referrals that resultin completed applications.

We pay bonuses and other incentivecompensation for the sale of certain products.Bonuses are payable to the sellingrepresentative or to selected override levels, orboth, for achieving specified production levelsfor the sale of term life insurance, investmentand savings products, and prepaid legalprotection, and for auto and home insurancereferrals. Upon achieving certain goals andbuilding their teams, new representatives canqualify for additional bonuses, which aregenerally contingent on new recruitscompleting their first personal sales.

In addition to these methods of compensation,we use a quarterly compensation programunder which RVPs can earn equity awardsbased on various production and sales criteria.Effective deployment of these programs allowsus to align the interests of our sales force withthose of our stockholders.

Sales Force Licensing

The states, provinces and territories in whichour sales representatives operate generallyrequire our sales representatives to obtain andmaintain licenses to sell our insurance andsecurities products. Our sales representativesmay also be required to maintain licenses tosell certain of our other financial products. Oursales representatives must pass applicableexaminations to be licensed to sell ourinsurance and securities products. Toencourage new recruits to obtain their lifelicenses, we either pay directly or reimbursethe sales representative for certain licensing-related fees and expenses once he or shepasses the applicable exam and obtains theapplicable life insurance license.

To sell insurance products, our salesrepresentatives must be licensed by theirresident state, province or territory and by anyother state, province or territory in which theydo business. In most states, our salesrepresentatives must be appointed by ourapplicable insurance subsidiary.

To sell mutual funds, our U.S. salesrepresentatives must be registered with theFinancial Industry Regulatory Authority(“FINRA”) and licensed as Series 6, and in moststates Series 63, registered salesrepresentatives of our broker-dealer subsidiaryand by each state in which they sell securitiesproducts. To sell variable annuity products, oursales representatives must have these licensesand FINRA registrations and be appointed bythe annuity underwriter in the states in whichthey market annuity products. To sell ourmanaged account product, our representativesmust be Series 65 licensed in most states.

Our Canadian sales representatives sellingmutual fund products are required to belicensed by the securities commissions in theprovinces and territories in which they sellmutual fund products. Our Canadian salesrepresentatives who are licensed to sell ourinsurance products do not need any furtherlicensing to sell our segregated funds productsin Canada. In Canada, sales representatives


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who refer clients to a mortgage lender do nothave to be licensed as a mortgage broker.

Supervision and Compliance

To ensure compliance with various federal,state, provincial and territorial legalrequirements, we and our RVPs shareresponsibility for maintaining an overallcompliance program that involves compliancetraining and supporting and monitoring theactivities of our sales representatives. OurOffice of the General Counsel and our FieldSupervision Department work with RVPs todevelop appropriate compliance proceduresand systems.

Generally, all RVPs must obtain a principallicense (FINRA Series 26 in the United Statesand Branch Manager license in Canada) and asa result, they assume supervisory responsibilityover the activities of their downline salesorganizations. Additional supervision isprovided by approximately 490 Offices ofSupervisory Jurisdiction (“OSJs”), which arerun by select RVPs who receive additionalcompensation for assuming additionalresponsibility for supervision and compliancemonitoring across all product lines. OSJs arerequired to periodically inspect our field officesand report any compliance issues they observeto us.

All of our sales representatives are required toparticipate in our annual compliance meeting, aprogram administered by our seniormanagement and our legal and compliancestaff at which we provide a compliance trainingoverview across all product lines and requirethe completion of compliance checklists byeach of our licensed sales representatives foreach product he or she offers. Additionally, oursales representatives receive periodiccompliance newsletters regarding newcompliance developments and issues of specialsignificance. Furthermore, the OSJs arerequired to complete an annual trainingseminar that focuses on securities complianceand field supervision.

Our Compliance Department regularly runssurveillance reports designed to monitor theactivity of our sales force. If we detect anyunusual or suspicious activity, our ComplianceDepartment commences an investigation andensures that appropriate action is taken toresolve any issues and address disciplinaryaction. Our Field Supervision Departmentregularly assists the OSJs and communicatescompliance requirements to them to ensurethat they properly discharge their supervisoryresponsibilities. The Field SupervisionDepartment also periodically inspects OSJoffices.

Our Field Audit Department regularly conductsaudits of all sales representative offices,including scheduled and no-notice audits. Ourpolicy is to conduct approximately 50% of thefield office audits on a no-notice basis. TheField Audit Department reviews all regulatory-required records that are not maintained at ourhome office. Any compliance deficiencies notedin the audit must be corrected, and we carefullymonitor all corrective action. Field offices thatfail an audit are subject to a follow-up audit in150 days. Continued audit deficiencies areaddressed through a progressive disciplinarystructure that includes fines, reprimands,probations and terminations.

Our Products

We tailor our products to appeal to middleincome consumers. We believe our face-to-facedelivery of products and the FNA add sufficientvalue to the client to allow us to compete on thebasis of product value and service in addition toprice. Reflecting our philosophy of helpingmiddle income clients with their financialproduct needs and to ensure compatibility withour distribution model, our products generallyincorporate the following criteria:

• Consistent with sound individual financeprinciples: Products must be consistentwith good personal finance principles formiddle income consumers, such asreducing debt, minimizing expenses andencouraging long-term savings.


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• Designed to support client multiplegoals: Products are designed to addressand support a broad range of financialgoals rather than compete with orcannibalize each other. For example, termlife insurance does not compete withmutual funds because term life has no cashvalue or investment element.

• Ongoing needs based: Products mustmeet the ongoing financial needs of manymiddle income consumers so that thelikelihood of a potential sale is high.

• Easily understood and sold: Productsmust be appropriate for distribution by oursales force, which requires that theapplication and approval process must be

simple to understand and explain, and thelikelihood of approval must be sufficientlyhigh to justify the investment of time byour sales representatives.

We use three operating segments to organize,evaluate and manage our business: Term LifeInsurance, Investment and Savings Products,and Corporate and Other Distributed Products.See “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations —Results of Operations” and Note 2 to ourconsolidated and combined financialstatements included elsewhere in this reportfor certain financial information regarding ouroperating segments and the geographic areasin which we operate.


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The following table provides information on our principal products and the principal sources thereofby operating segment.

Operating Segment Principal ProductsPrincipal Sources of Products

(Applicable Geographic Territory)

Term Life Insurance Term Life Insurance Primerica Life (U.S. (except New York), theDistrict of Columbia and certain territories)

NBLIC (New York)Primerica Life Canada (Canada)

Investment and SavingsProducts

Mutual Funds American Funds (U.S.)Franklin Templeton (U.S.)Invesco (U.S.)Legg Mason Global Asset Management (U.S.)Pioneer Investments (U.S.)AGF Funds (Canada)Concert™ Funds (Canada)

Managed Accounts Lockwood Advisors (U.S.)

Variable Annuities MetLife Investors and its affiliates (U.S.)

Fixed Annuities MetLife Investors USA Life Insurance Companyand its affiliates (U.S.)

The Lincoln National Life Insurance Companyand its affiliates (U.S.)

Segregated Funds Primerica Life Canada (Canada)

Corporate and OtherDistributed Products

Primerica DebtWatchers™ Equifax Consumer Services LLC (U.S. andCanada)

Long-Term Care Insurance Genworth Life Insurance Company and itsaffiliates (U.S.)

Prepaid Legal Services Prepaid Legal Services, Inc. (U.S. and Canada)

Auto and Homeowners’Insurance

Various insurance companies, as offered throughAnswer Financial, Inc. (U.S.)

Mortgage Loan referrals(Canada only)

AGF Trust Company (Canada)

Mail-Order Student Life NBLIC (U.S., except Alaska, Hawaii, Montana,Washington and the District of Columbia)

Short-Term Disability BenefitInsurance

NBLIC (New York and New Jersey)


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Term Life Insurance Products

Through our three life insurance subsidiaries —Primerica Life, NBLIC and Primerica LifeCanada — we offer term life insurance to clientsin the United States, its territories, the Districtof Columbia and Canada. In 2010, the latestperiod for which data is available, we were thelargest provider of individual term lifeinsurance in the United States based on theamount of in-force premiums collected,according to LIMRA.

We believe that term life insurance is a betteralternative for middle income clients than cashvalue life insurance. Term life insuranceprovides a guaranteed death benefit if theinsured dies during the fixed coverage period ofan in-force policy, thereby providing financialprotection for his or her named beneficiaries inreturn for the periodic payment of premiums.Term insurance products, which are sometimesreferred to as pure protection products, haveno savings or investment features. By buyingterm life insurance rather than cash value lifeinsurance, a policyholder initially pays a lowerpremium and, as a result, may have fundsavailable to invest for retirement and otherneeds. We also believe that a person’s need forlife insurance is inversely proportional to thatperson’s need for retirement savings, a conceptwe refer to as the theory of decreasingresponsibility. Young adults with children, newmortgages and other obligations need to buyhigher amounts of insurance to protect theirfamily from the loss of future income resultingfrom the death of a primary bread winner. Withits lower initial premium, term life insurancelets young families buy more coverage for theirpremium dollar when their needs are greatestand still have the ability to have funds for theirretirement and other savings goals.

We design our term life insurance products tobe easily understood by, and meet the needs of,our clients. Clients purchasing our term lifeinsurance products generally seek stable,longer-term income protection products forthemselves and their families. In response tothis demand, we offer term life insurance

products with level premium coverage periodsthat range from 10 to 35 years. Policies remainin force until the expiration of the coverageperiod or until the policyholder ceases to makepremium payments and terminates the policy.Premiums are guaranteed not to rise above acertain amount each year during the life of thepolicy. The initial guarantee period for policiesissued in the United States equals the initialterm period, up to a maximum of 20 years.After 20 years, we have the right to raise thepremium, subject to limits provided for in theapplicable policy. In Canada, the amount of thepremium is guaranteed for the entire term ofthe policy.

Our Custom Advantage term life insurancepolicies may be customized through theaddition of riders to provide coverage forspecific protection needs, such as mortgageand college expense protection. Theseadditional riders are available individually forboth the primary insured and a spouse. Forinsureds under the age of 56 who are issuednon-rated coverage, we offer an increasingbenefit rider that allows for an automatic 10%annual increase in coverage (subject to amaximum lifetime increase of $500,000)without new underwriting. All children underthe age of 25 in a family may be insured underone rider for one premium. Providing insurancefor an entire family under one policy results inonly one policy fee, premium banding for thetotal coverage on the primary insured andspouse, and reduced administrative expenses.The term premium banding refers to levels ofdeath benefits payable on a term life insurancepolicy at which the cost to the insured of each$1,000 of death benefits payable decreases.Our premium bands are currently $150,000,$250,000 and $500,000. The death benefitsattributable to an insured individual and his orher insured spouse are combined for purposesof determining which premium band will beused to calculate individual premiums.Therefore, the couple together may be chargedpremiums that are less per person per $1,000of death benefits payable than they wouldotherwise be charged as individuals.


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At our 2011 national convention, we launched anew rapid issue term life product calledTermNow™ for face amounts of $250,000 andbelow. In the United States, TermNow allows asales representative to take an onlineapplication and, with the client’s permission,allows the Company to access databases,including prescription drug, Medical InformationBureau (“MIB”), and motor vehicle records aspart of the underwriting process. In Canada,TermNow is underwritten using the onlineapplication and MIB data, but the Companyuses this data and the client’s responses toapplication questions to determine additionalunderwriting procedures in lieu of accessingmotor vehicle records and prescription drugdatabases. These new processes replaced theprior process of collecting a saliva sample.Results of these searches are reported in realtime to our underwriting system, which thenmakes a decision about whether or not torapidly issue a policy.

The average face amount of our in-forcepolicies issued in 2011 was approximately$248,400. The following table sets forthselected information regarding our term lifeinsurance product portfolio:


2011 2010 2009

Life insurance issued:Number of policies issued 237,535 223,514 233,837Face amount issued (In millions) $ 73,146 $ 74,401 $ 80,497

December 31,

2011 2010 2009

Life insurance in force:Number of policies in force 2,316,131 2,311,030 2,332,273Face amount in force (In millions) $664,955 $ 656,791 $ 650,195

Pricing and Underwriting. We believe thateffective pricing and underwriting aresignificant drivers of the profitability of our lifeinsurance business and we have established ourpricing assumptions to be consistent with ourunderwriting practices. We set pricingassumptions for expected claims, lapses,investment returns and expenses based on our

experience and other factors. These otherfactors include:

• expected changes from relevantexperience due to changes incircumstances, such as (i) revisedunderwriting procedures affecting futuremortality and reinsurance rates, (ii) newproduct features, and (iii) revisedadministrative programs affecting saleslevels, expenses, and client continuation ortermination of policies; and

• observed trends in experience that weexpect to continue, such as generalmortality improvement in the generalpopulation and better or worse policypersistency (the period over which a policyremains in force) due to changingeconomic conditions.

Under our current underwriting guidelines, weindividually assess each insurable adult applicantand place such applicant into one of four riskclassifications based on current health, medicalhistory and other factors. Each of these fourclassifications (preferred plus, preferred,non-tobacco and tobacco) has specific healthcriteria. We may decline an applicant’s requestfor coverage if his or her health or activitiescreate unacceptable risks for us.

We do not have our salesrepresentatives collect sensitiveand personal medical informationfrom an applicant. Our salesrepresentatives ask applicants aseries of yes or no questionsregarding the applicant’s medicalhistory. If we believe that followup regarding an applicant’smedical history is warranted, weuse a third-party provider and itstrained personnel to contact the

applicant by telephone to obtain a detailedmedical history. The report resulting from thetele-underwriting process is electronicallytransmitted to us and is evaluated in ourunderwriting process. During the underwritingprocess, we may consider information aboutthe applicant from third-party sources such asthe MIB, prescription drug databases, motorvehicle bureaus and physician statements.


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To accommodate the significant volume ofinsurance business that we process, we and oursales force use technology to make ouroperations more efficient. At our 2011 nationalconvention, we also rolled out a new web-basedlife insurance application that supports bothour existing Custom Advantage term productsand TermNow. We designed theweb-based application andTermNow product to allow oursales representatives to submitan application via our Intranet,allowing us to underwrite theapplicant in real-time and sendan approval or additionalunderwriting notice back to theapplicant and representative allwithin minutes. Approximately 65% of the lifeinsurance applications we received in 2011 weresubmitted electronically, including through ourweb-based life insurance application. Ourweb-based life insurance application ensuresthat the application is submitted error-free,collects the applicant’s electronic signaturesand populates the RVP’s sales log. For paperapplications, we use our proprietary review andscreening system to automatically screen thatan application meets regulatory and otherrequirements, as well as alert our applicationprocessing staff to any deficiencies with theapplication. If any deficiencies are noted, ourapplication processing staff telephones thesales representative to obtain the necessaryinformation. Once an application is complete,the pertinent application data is uploaded toour life insurance administrative systems,which manage the underwriting process byelectronically analyzing data andrecommending underwriting decisions andcommunicating with the sales representativeand third-party providers.

Claims Management. Our insurancesubsidiaries processed over 14,000 lifeinsurance benefit claims in 2011 on policiesunderwritten by us and sold by our salesrepresentatives. These claims fall into threecategories: death, waiver of premium(applicable to disabled policyholders whopurchased a rider pursuant to which Primerica

agrees to waive remaining life insurancepremiums during a qualifying disability), orterminal illness. The claim may be reported byour sales representative, a beneficiary or, in thecase of terminal illness, the policyholder.Following are the benefits paid by us for eachcategory of claim:


2011 2010 2009

(In thousands)Death $993,396 $939,107 $942,622Waiver of premium 25,836 24,136 21,395Terminal illness (1) 9,654 9,354 9,295

(1) We consider claims paid for terminal illness to be loans made to thebeneficiary that are repaid to us upon death of the beneficiary from thedeath benefit.

In the United States, after coverage has been inforce for two years, we may not contest thepolicy for misrepresentations in the applicationor the suicide of the insured. In Canada, wehave a similar two-year contestability period,but we are permitted to contest insurancefraud at any time. As a matter of policy, we donot contest any coverage issued by us toreplace the face amount of another insurancecompany’s individual coverage to the extentthe replaced coverage would not becontestable by the replaced company. Webelieve this approach helps our salesrepresentatives sell replacement policies, as itreassures clients that claims made under theirreplacement policies are not more likely to becontested as to the face amount replaced.Through our claims administration system, werecord, process and pay the appropriate benefitwith respect to any reported claim. Our claimssystem is used by our home office investigatorsto order medical and investigative reports fromthird-party providers, calculate amounts due tothe beneficiary (including interest) and reportpayments to the appropriate reinsurancecompanies.

In 2011, the New York State Department ofFinancial Services (“NYSDFS”) sent industry-wide inquiries to insurers, including NBLIC,instructing them to cross-check their U.S. lifeinsurance policyholders with public deathrecords to identify deceased policyholders for


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whom claims had not been filed and reporttheir findings to the NYSDFS. NBLIC has filedreports in response to the inquiry. Inaccordance with Massachusetts Division ofInsurance (“Massachusetts DOI”) bestpractices, Primerica Life, a Massachusettsdomestic insurer, has cross-checked publicdeath records and is continuing to review suchinformation. Primerica Life is in the process ofcontacting the beneficiaries of its insureds whowere identified in the public death recordssearch and who have not previously submitteddeath claims or previously been contacted, andwe expect a number of these beneficiaries toreceive payment under our policies. Inaccordance with Massachusetts DOI bestpractices, Primerica Life will cross-check publicdeath records semi-annually to timely identifypotential unreported claims.

Reinsurance. We use reinsurance primarily toreduce the volatility risk with respect tomortality. Since 1994, we have reinsured deathbenefits in the United States on a first dollarquota share yearly renewable term (“YRT”)basis. We pay premiums to each reinsurerbased on rates in the applicable agreement.

We automatically reinsure 90% of all U.S.insurance policies that we underwrite withrespect to the first $4 million per life ofcoverage, excluding coverage under certainriders. For all risks in excess of $4 million per lifeof coverage, we reinsure on a case-by-case, orfacultative, basis. With respect to our Canadianinsurance policies, we reinsure face amountsabove $500,000 per life on an excess loss YRTbasis and for all risk in excess of $2 million perlife, we reinsure on a facultative basis. We alsoreinsure substandard cases on a facultativebasis to capitalize on the extensive experiencesome of our reinsurers have with substandardcases. A substandard case has a level of risk thatis acceptable to us, but at higher premium ratesthan a standard case because of the health,habits or occupation of the applicant.

While our reinsurance agreements are expectedto continue indefinitely, both we and ourreinsurers are entitled to discontinue anyreinsurance agreement as to future policies by

giving 90 days’ advance notice to the other.Each reinsurer’s ability to terminate coveragefor existing policies is limited to circumstancessuch as a material breach of contract ornonpayment of premiums by us. Each reinsurerhas the right to increase rates with certainrestrictions. If a reinsurer increases rates, wehave the right to immediately recapture thebusiness. Either party may offset any balancedue from the other party. For additionalinformation, see Notes 1 and 5 to ourconsolidated and combined financial statements.

Financial Strength Ratings. Ratings withrespect to financial strength are an importantfactor in establishing our competitive positionand maintaining public confidence in us and ourability to market our products. Ratingsorganizations review the financial performanceand condition of most insurers and provideopinions regarding financial strength, operatingperformance and ability to meet obligations topolicyholders. For additional information, see“Management’s Discussion and Analysis ofFinancial Condition and Results of Operations –Liquidity and Capital Resources – RatingAgencies.”

Investment and Savings Products

We believe that middle income families havesignificant unmet retirement and other savingsneeds. Using our FNA tool, our salesrepresentatives help our clients understandtheir current financial situation and how theycan use time-tested financial principles, such asprioritizing personal savings, to reach theirsavings goals. Our products comprise basicsaving and investment vehicles that seek tomeet the needs of clients in all stages of life.

Through PFS, our U.S. licensed insuranceagency; PFS Investments, our U.S. licensedbroker-dealer subsidiary; Primerica LifeCanada; PFSL Investments Canada, ourCanadian licensed dealer; and our licensedsales representatives, we distribute and sell toour clients mutual funds, variable and fixedannuities and segregated funds. As ofDecember 31, 2011, approximately 21,700 of


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our sales representatives were licensed todistribute mutual funds in the United States andCanada. As of December 31, 2011, approximately12,400 of our sales representatives werelicensed and appointed to distribute variableand fixed annuities in the United States andapproximately 9,000 of our salesrepresentatives were licensed to sellsegregated funds in Canada.

Mutual Funds. In the United States, ourlicensed sales representatives primarilydistribute mutual funds from five select assetmanagement firms: American Funds, FranklinTempleton, Invesco, Legg Mason and Pioneer.We have selling agreements with each of thesefund companies and a number of other fundcompanies. These firms have diversifiedproduct offerings, including domestic andinternational stock, bond and money marketfunds. Each firm has individual funds with longtrack records and each continually evaluates itsfund offerings and adds new funds on a regularbasis. Additionally, their product offeringsreflect diversified asset classes and variedinvestment styles. We believe these assetmanagement firms provide funds that meet theinvestment needs of our clients.

During 2011, four of these fund families (LeggMason, Invesco, American Funds and FranklinTempleton) accounted for approximately 94%of our mutual fund sales in the United States.Legg Mason and Invesco each have largewholesaling teams that support our sales forcein distributing their mutual fund products. Ourselling agreements with Legg Mason, Invesco,American Funds and Franklin Templeton allhave indefinite terms and provide fortermination at will. Each of these agreementsauthorizes us to receive purchase orders forshares of mutual funds or similar investmentsunderwritten by the fund company and to selland distribute the shares on behalf of the fundcompany. All purchase orders are subject toacceptance or rejection by the relevant fundcompany in its sole discretion. Purchase ordersreceived by the fund company from us areaccepted only at the then-applicable publicoffering price for the shares ordered (the net

asset value of the shares plus any applicablesales charge). For sales of shares that weinitiate, we are paid commissions based uponthe dollar amount of the sales and earnmarketing and distribution (12b-1) fees, onmutual fund products sold based on assetvalues in our client accounts. Pursuantto agreements with Legg Mason, Invesco, andother fund companies, we also receive, asconsideration for our mutual fund salesinfrastructure, a mutual fund support fee basedon one or more of the following: a percentageof fund sales, a percentage of the value of ourclients’ assets in the funds, or an agreed-uponfixed amount.

In Canada, our sales representatives offerPrimerica-branded Concert™ Series funds,which accounted for 47% of our Canadianmutual fund product sales in 2011. OurConcert™ Series of funds are six different assetallocation funds with varying investmentobjectives ranging from fixed income toaggressive growth. Each Concert™ Series fundis a fund of funds that allocates fund assetsamong equity and income mutual funds of AGFFunds, a major asset management firm inCanada. The asset allocation within eachConcert™ Series fund is determined on acontract basis by Legg Mason. The principalnon-proprietary funds that we offer our clientsin Canada are funds of AGF Funds, Mackenzieand Invesco Trimark. Sales of these non-proprietary funds accounted for 40% of mutualfund product sales in Canada in 2011. Like ourU.S. fund family list, the asset managementpartners we have chosen in Canada have adiversified offering of stock, bond and moneymarket funds, including domestic andinternational funds with a variety of investmentstyles.

A key part of our investment philosophy for ourclients is the long-term benefits of dollar costaveraging through systematic investing. Toaccomplish this, we assist our clients byfacilitating monthly contributions to theirinvestment account by bank draft against theirchecking accounts. As of December 31, 2011,qualified retirement plans for which we serve as


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nominee accounted for 71% of client accountassets in the United States and 79% of clientaccount assets in Canada. Our highconcentration of retirement plan accounts andour systematic savings philosophy arebeneficial to us as these accounts tend to havelower redemption rates than the industry and,therefore, generate more recurring asset-basedrevenues.

Variable Annuities. Our U.S. licensed salesrepresentatives also distribute variableannuities underwritten and provided by twoMetLife insurance companies. Variableannuities are insurance products that enableour clients to invest in accounts with attributessimilar to mutual funds, but also have benefitsnot found in mutual funds, including deathbenefits that protect beneficiaries from lossesdue to a market downturn and income benefitsthat guarantee future income payments for thelife of the policyholder(s). MetLife bears theinsurance risk on the variable annuities that wedistribute.

With our assistance, Metlife has developed aseries of private label annuity productsspecifically designed to meet the needs of ourclients. We are a party to a selling agreementwith MetLife which, among certain other rights,gives them the right to supply us with certainannuity and other insurance products on anexclusive basis until July 2013 and on anon-exclusive basis until July 2015.

Segregated Funds. In Canada, we offersegregated fund products, which are brandedas our Common Sense FundsTM, that have someof the characteristics of our variable annuityproducts distributed in the United States. OurCommon Sense FundsTM are underwritten byPrimerica Life Canada and offer our clients theability to participate in a diversified managedinvestment program that can be opened foras little as C$25. While the assets andcorresponding liability (reserves) arerecognized on our balance sheet, the assets areheld in trust for the benefit of the segregatedfund contract owners and are not commingledwith the general assets of the Company.

The investment objective of segregated fundsis long-term capital appreciation combined withsome guarantee of principal. Unlike mutualfunds, our segregated fund product guaranteesclients at least 75% of their net contributions(net of withdrawals) at the earlier of the date oftheir death or at the segregated fund’s maturitydate, which is selected by the client. Theportfolio consists of both equities and bondswith the equity component consisting of a poolof large cap Canadian equities and the bondcomponent consisting of Canadian federalgovernment zero coupon treasuries. Theportion of the segregated fund portfolioallocated to zero coupon treasuries are held insufficient quantity to satisfy the guaranteespayable at the maturity date of the segregatedfund. As a result, our potential exposure tomarket risk is very low as it comes from theguarantees payable upon the death of the clientprior to the maturity date. With the guaranteelevel at 75% and in light of the time until thescheduled maturity of our segregated fundscontracts, we currently do not believe it isnecessary to allocate any corporate capital asreserves for segregated fund contract benefits.

Many of our Canadian clients invest insegregated funds through a registeredretirement savings plan (“RRSP”). An RRSP issimilar to an individual retirement account, orIRA, in the United States in that contributionsare made to the RRSP on a pre-tax basis andincome is earned on a tax-deferred basis. OurCommon Sense Funds™ are managed by AGFFunds, one of Canada’s leading investmentmanagement firms, and a leading provider ofour mutual fund products.

Fixed Annuities. To expand our investmentand savings product offerings, we entered intoan agreement with The Lincoln NationalFinancial Life Insurance Company to offer threefixed indexed annuity products, which we beganselling throughout the United States in January2012. These products combine safety ofprincipal and guaranteed rates of return withadditional investment options tied to the S&P500 Index that allow for higher returns basedon the performance of the index. We also sell


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fixed annuities underwritten by MetLifeInvestors USA Insurance Company and itsaffiliates. Our current offering includes a fixedpremium deferred annuity, a single premiumimmediate annuity and a longevity incomeguaranteed annuity. The fixed premiumdeferred annuity allows our clients toaccumulate savings on a tax deferred basis withsafety of principal and a guaranteed rate ofreturn. The single premium immediate annuityand longevity income guaranteed annuityprovide clients with income alternatives duringretirement. We believe these fixed annuityproducts give both our life and securitiesrepresentatives more ways to assist our clientswith their retirement planning needs.

Managed Accounts. In 2011, PFS Investmentsbecame a registered investment adviser in theUnited States and introduced a managedaccounts program under a contract withLockwood Advisors, a registered investmentadviser and unit of Bank of New York Mellon. Theinitial offering consists of a mutual fund advisoryprogram with a $25,000 minimum initialinvestment. As part of our contract, LockwoodAdvisors participated in the design and assists inthe ongoing administration of the program,including the investment of client assets on adiscretionary basis into one or more assetallocation portfolios. In contrast to our existingmutual fund and annuity business, in an advisoryfee program, clients do not pay an upfrontcommission. Rather, they pay an annual feebased on the value of the assets in their account.

Revenue and Sales Force Compensation. Inthe 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 (non-managedaccounts) and annuities, we earn a dealerreallowance or commission on new purchasesas well as trail commissions on the assets heldin our clients’ accounts, and we pay our salesrepresentatives a percentage of the dealerreallowance and trail commissions we receive.Sales representatives that qualify to offer

managed accounts receive a portion of theannual fee we receive as compensation for aslong as we retain the account. We also receivemarketing and support fees from most of ourfund providers. These payments are typically apercentage of sales or a percentage of the totalclients’ asset values, or a combination of both.

We perform custodial services and receive feeson a per-account basis for serving as a non-bank custodian for certain of our clients’retirement plan accounts for certain of thefunds offered in the United States. We alsoperform recordkeeping services for some ofour select U.S. fund companies and receivecompensation on a per-account basis for theseservices. Because the total amount of thesefees fluctuates with the number of suchaccounts, the opening or closing of accountshas a direct impact on our revenues. From timeto time, the fund companies for whom weprovide these services request that accountswith small balances be closed.

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 also earn a dealer reallowance orcommission. We pay a percentage of the dealerreallowance and trail commissions we receivefrom mutual fund sales as compensation to oursales representatives. On the sale of segregatedfunds, we earn a fee based on total asset value.We pay our sales representatives a salescommission on segregated fund sales and a feepaid quarterly based on clients’ asset values.

Other Distributed Products

We offer Primerica DebtWatchers™, long-termcare insurance, prepaid legal services, and autoand homeowners’ insurance referrals as well asdebt consolidation referrals in Canada. Whilemany of these products are Primerica-branded,all of them are underwritten or otherwiseprovided by a third party.


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We offer our Primerica DebtWatchers™ productin the United States and a very similar productin three provinces in Canada. PrimericaDebtWatchers™ allows clients to create asimple-to-understand plan for paying off theirdebt and provides clients with periodic updatesof their credit score and other personal creditinformation. Primerica DebtWatchers™ isco-branded with and supported by a subsidiaryof Equifax Inc.

We offer our U.S. clients long-term careinsurance, underwritten and provided byGenworth Life Insurance Company and itsaffiliates. We receive a commission based onour sales of these policies.

We offer our U.S. and Canadian clients aPrimerica-branded prepaid legal servicesprogram on a subscription basis that isunderwritten and provided by Prepaid LegalServices, Inc. The prepaid legal servicesprogram offers a network of attorneys in eachstate, province or territory to assist subscriberswith legal matters such as drafting wills, livingwills and powers of attorney, trial defense andmotor vehicle-related matters. We receive acommission based on our sales of thesecontracts.

We have an arrangement with AnswerFinancial, Inc. (“Answer Financial”), anindependent insurance agency, whereby ourU.S. sales representatives refer clients toAnswer Financial to receive multiple,competitive auto and homeowners’ insurancequotes. Answer Financial’s comparative quoteprocess allows clients to easily identify theunderwriter that is most competitively pricedfor their type of risk. We receive commissionsbased on completed auto and homeowners’insurance applications and pay our salesrepresentatives a flat referral fee for eachcompleted application.

In Canada, we have a referral program for adebt consolidation loan product offered by athird party lender, AGF Trust Company, andassist clients with developing debt reduction/elimination strategies. Due to regulatoryrequirements, our sales representatives in

Canada only refer clients to the lender and arenot involved in the loan application and closingprocess.

Primerica Financial Services Home Mortgages,Inc. (“Primerica Mortgages”), our U.S. loanbrokering company, ceased its loan brokeringactivities in all states in which it held licenseseffective December 31, 2011. As of January 1,2012, Primerica Mortgages no longer acceptsloan requests from U.S. clients. As the pendingloan requests are processed by our lender,which we anticipate should be completed by theend of the first quarter of 2012, PrimericaMortgages is commencing the process ofsurrendering its state licenses and completelyexiting the loan brokering business in theUnited States.

We also offer mail-order student life and short-term disability benefit insurance, which weunderwrite through our New York insurancesubsidiary, NBLIC. These products are distributedby third parties but not by our sales force.

Regulation

Our operations are subject to extensive lawsand governmental regulations, includingadministrative determinations, court decisionsand similar constraints. The purpose of the lawsand regulations affecting our operations isprimarily to protect our clients and otherconsumers and not our stockholders. Many ofthe laws and regulations to which we aresubject are regularly re-examined, and existingor future laws and regulations may becomemore restrictive or otherwise adversely affectour operations.

Insurance and securities regulatory authoritiesperiodically make inquiries regardingcompliance by us and our subsidiaries withinsurance, securities and other laws andregulations regarding the conduct of ourinsurance and securities businesses. At anygiven time, a number of financial or marketconduct examinations of our subsidiaries maybe ongoing. We cooperate with such inquiriesand take corrective action when warranted.


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Regulation of Our Insurance Business

Primerica Life, as a Massachusetts domesticinsurer, is regulated by the Massachusetts DOIand is licensed to transact business in theUnited States (except New York), certainterritories and the District of Columbia. NBLIC,as a New York domestic insurer, is regulatedby the NYSDFS and is licensed to transactbusiness in all 50 states, the District ofColumbia and the U.S. Virgin Islands.

State insurance laws and regulations regulateall aspects of our U.S. insurance business. Suchregulation is vested in state agencies havingbroad administrative and, in some instances,discretionary power dealing with many aspectsof our business, which may include, amongother things, premium rates and increasesthereto, reserve requirements, marketingpractices, advertising, privacy, policy forms,reinsurance reserve requirements, acquisitions,mergers, and capital adequacy.

Our U.S. insurance subsidiaries are required tofile certain annual, quarterly and periodicreports with the supervisory agencies in thejurisdictions in which they do business, andtheir business and accounts are subject toexamination by such agencies at any time.These examinations generally are conductedunder National Association of InsuranceCommissioners (“NAIC”) guidelines. Underthe rules of these jurisdictions, insurancecompanies are examined periodically (generallyevery three to five years) by one or more of thesupervisory agencies on behalf of the states inwhich they do business. Our most recentinsurance department examinations have notproduced any significant adverse findingsregarding any of our insurance subsidiaries.

Primerica Life Canada is federally incorporatedand provincially licensed. It transacts businessin all Canadian provinces and territories.Primerica Life Canada is regulated federally bythe Office of the Superintendent of FinancialInstitutions Canada (“OSFI”) and provinciallyby the Superintendents of Insurance for eachprovince and territory. Federal and provincialinsurance laws regulate all aspects of our

Canadian insurance business. OSFI regulatesinsurers’ corporate governance, financial andprudential oversight, and regulatorycompliance, while provincial and territorialregulators oversee insurers’ market conductpractices and related compliance.

Our Canadian insurance subsidiary filesquarterly and annual financial statementsprepared in accordance with InternationalFinancial Reporting Standards (“IFRS”) withOSFI in compliance with legal and regulatoryrequirements. OSFI conducts periodic detailedexaminations of insurers’ business and financialpractices, including the control environment,internal and external auditing and minimumcapital adequacy, surpluses and related testing,legislative compliance and appointed actuaryrequirements. These examinations also addressregulatory compliance with anti-moneylaundering practices, outsourcing, related-party transactions, privacy and corporategovernance. Provincial regulators conductperiodic market conduct examinations ofinsurers doing business in their jurisdiction.

In addition to federal and provincial oversight,Primerica Life Canada is also subject to theguidelines set out by the Canadian Life andHealth Insurance Association (“CLHIA”). CLHIAis an industry association that works closelywith federal and provincial regulators toestablish market conduct guidelines and soundbusiness and financial practices addressingmatters such as sales representative suitabilityand screening, insurance illustrations andpartially guaranteed savings products.

The laws and regulations governing our U.S.and Canadian insurance businesses includenumerous provisions governing themarketplace activities of insurers, includingpolicy filings, payment of insurancecommissions, disclosures, advertising, productreplacement, sales and underwriting practicesand complaints and claims handling. The stateinsurance regulatory authorities in the UnitedStates and the federal and provincial regulatorsin Canada generally enforce these provisionsthrough periodic market conduct examinations.


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In addition, most U.S. states and Canadianprovinces and territories, as well as theCanadian federal government, have laws andregulations governing the financial condition ofinsurers, including standards of solvency, typesand concentration of investments,establishment and maintenance of reserves,reinsurance and requirements of capitaladequacy, and the business conduct of insurers,including sales and marketing practices, claimprocedures and practices, and policy formcontent. As discussed previously, U.S. stateinsurance law and Canadian provincialinsurance law also require certain licensingof insurers and their agents.

Insurance HoldingCompany Regulation;Limitations onDividends. The statesin which our U.S.insurance subsidiariesare domiciled haveenacted legislation andadopted regulationsregarding insurance holding company systems.These laws require registration of, and periodicreporting by, insurance companies domiciledwithin the jurisdiction that control, or arecontrolled by, other corporations or persons soas to constitute an insurance holding companysystem. These laws also affect the acquisitionof control of insurance companies as well astransactions between insurance companiesand companies controlling them.

The Parent Company is a holding company thathas no significant operations. Our primary assetis the capital stock of our subsidiaries and ourprimary liability is a $300.0 million notepayable to Citi (the “Citi note”). As a result, wedepend on dividends or other distributions fromour insurance and other subsidiaries as theprincipal source of cash to meet ourobligations, including the payment of intereston, and repayment of, principal of any debtobligations.

The states in which our U.S. insurancesubsidiaries are domiciled impose certainrestrictions on our insurance subsidiaries’ability to pay dividends to us. In Canada,dividends can be paid subject to the payinginsurance company’s continuing compliancewith regulatory requirements and upon noticeto OSFI. We determine the dividend capacity ofour insurance subsidiaries using statutoryaccounting principles (“SAP”) in the UnitedStates and IFRS in Canada.

The following table sets forth the statutoryvalue of cash and securities dividends paid orpayable by our insurance subsidiaries:

Cash and Securities Dividends Paid or Payable


2011 2010 2009

(In thousands)Primerica Life $200,000(1) $1,447,759 $149,000(2)NBLIC — 296,839 —Primerica Life Canada — 566,754 —

(1) Used to fund our share repurchase in November 2011.(2) Dividend declared by Primerica Life in 2009 and paid in 2010.

Due to its negative unassigned surplus position,Primerica Life’s 2011 dividend required approvalby the Massachusetts DOI. In 2010, PrimericaLife’s dividend and NBLIC’s dividend were bothdeemed extraordinary. For additionalinformation on dividend capacity andrestrictions, see Note 15 to our consolidatedand combined financial statements.

Policy and Contract Reserve SufficiencyAnalysis. Under the laws and regulations oftheir jurisdictions of domicile, our U.S.insurance subsidiaries are required to conductannual analyses of the sufficiency of their lifeinsurance statutory reserves. In addition, otherU.S. jurisdictions in which our U.S. subsidiariesare licensed may have certain reserverequirements that differ from those of theirdomiciliary jurisdictions. In each case, aqualified actuary must submit an opinion thatstates that the aggregate statutory reserves,when considered in light of the assets held withrespect to such reserves, make good andsufficient provision for the associated


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contractual obligations and related expenses ofthe insurer. If such an opinion cannot beprovided, the affected insurer must set upadditional reserves by moving funds fromsurplus. Our U.S. insurance subsidiaries mostrecently submitted these opinions withoutqualification as of December 31, 2011 toapplicable insurance regulatory authorities.

Our Canadian insurance subsidiary also isrequired to conduct regular analyses of thesufficiency of its life insurance statutoryreserves. Life insurance reserving andreporting requirements are completed by ourCanadian insurance subsidiary’s appointedactuary. Materials provided by the appointedactuary are filed with OSFI as part of ourannual filing and are subject to OSFI’s review.Based upon this review, OSFI may instituteremedial action against our Canadian insurancesubsidiary as OSFI deems necessary. OurCanadian insurance subsidiary has not beensubject to any such remediation orenforcement by OSFI.

Surplus and Capital Requirements. U.S.insurance regulators have the discretionaryauthority, in connection with the ongoinglicensing of our U.S. insurance subsidiaries, tolimit or prohibit the ability of an insurer to issuenew policies if, in the regulators’ judgment, theinsurer is not maintaining a minimum amountof surplus or is in hazardous financial condition.Insurance regulators may also limit the abilityof an insurer to issue new life insurance policiesand annuity contracts above an amount basedupon the face amount and premiums of policiesof a similar type issued in the prior year. We donot believe that the current or anticipatedlevels of statutory surplus of our U.S. insurancesubsidiaries present a material risk that anysuch regulator would limit the amount of newpolicies that our U.S. insurance subsidiariesmay issue.

The NAIC has established risk-based capital(“RBC”) standards for U.S. life insurancecompanies, as well as a model act to be appliedat the state level. The model act provides thatlife insurance companies must submit anannual RBC report to state regulators reporting

their RBC based upon four categories of risk:asset risk, insurance risk, interest rate risk andbusiness risk. For each category, the capitalrequirement is determined by applying factorsto various asset, premium and reserve items,with the factor being higher for those itemswith greater underlying risk and lower for lessrisky items. The formula is intended to be usedby insurance regulators as an early warningtool to identify possible weakly capitalizedcompanies for purposes of initiating furtherregulatory action. If an insurer’s RBC fallsbelow specified levels, the insurer would besubject to different degrees of regulatoryaction depending upon the level. These actionsrange from requiring the insurer to proposeactions to correct the capital deficiency toplacing the insurer under regulatory control. Asof December 31, 2011, Primerica Life and NBLIChad combined statutory capital and surplus inexcess of the applicable regulatory thresholds.

In Canada, OSFI has authority to request aninsurer to enter into a prudential agreementimplementing measures to maintain or improvethe insurer’s safety and soundness. OSFI alsomay issue orders to an insurer directing it torefrain from unsafe or unsound practices or totake action to remedy financial concerns. OSFIhas neither requested that our Canadianinsurance subsidiary enter into any prudentialagreement nor has OSFI issued any orderagainst our Canadian insurance subsidiary.

In Canada, an insurer’s minimum capitalrequirement is overseen by OSFI anddetermined as the sum of the capitalrequirements for five categories of risk: assetdefault risk, mortality/morbidity/lapse risks,changes in interest rate environment risk,segregated funds risk and foreign exchangerisk. As of December 31, 2011, Primerica LifeCanada had statutory capital in excess of theapplicable regulatory thresholds.

NAIC Pronouncements and Reviews.Although we and our insurance subsidiaries aresubject to state insurance regulation, in manyinstances the state regulations emanate fromNAIC model statutes and pronouncements.Certain changes to NAIC model statutes and


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pronouncements, particularly as they affectaccounting issues, may take effectautomatically without affirmative action by agiven state. With respect to some financialregulations and guidelines, non-domiciliarystates sometimes defer to the interpretation ofthe insurance department of the state ofdomicile. However, neither the action of thedomiciliary state nor the action of the NAIC isbinding on a non-domiciliary state. Accordingly,a non-domiciliary state could choose to follow adifferent interpretation. In addition, workinggroups within the NAIC have studied whether tochange the accounting standards that relate tocertain reinsurance credits, and if changes weremade, whether they should be appliedretrospectively, prospectively only, or in aphased-in manner. A requirement to reduce thereserve credits on ceded business, if appliedretroactively, would have a negative impact onour statutory capital. The NAIC is also currentlyworking on reforming state regulation invarious areas, including comprehensive reformsrelating to insurance reserves.

The NAIC has established guidelines to assess thefinancial strength of insurance companies for U.S.state regulatory purposes. The NAIC conductsannual reviews of the financial data of insurancecompanies primarily through the application of 12financial ratios prepared on a statutory basis. Theannual statements are submitted to stateinsurance departments to assist them inmonitoring insurance companies in their state.

Statutory Accounting Principles. SAP is abasis of accounting developed by U.S. insuranceregulators to monitor and regulate the solvencyof insurance companies. In developing SAP,insurance regulators were primarily concernedwith evaluating an insurer’s ability to pay all itscurrent and future obligations to policyholders.As a result, statutory accounting focuses onconservatively valuing the assets and liabilitiesof insurers, generally in accordance withstandards specified by the insurer’s domiciliaryjurisdiction. Uniform statutory accountingpractices are established by the NAIC andgenerally adopted by regulators in the various

U.S. jurisdictions. These accounting principlesand related regulations determine, amongother things, the amounts our insurancesubsidiaries may pay to us as dividends, andthey differ somewhat from accountingprinciples generally accepted in the UnitedStates of America (“U.S. GAAP”), which aredesigned to measure a business on a going-concern basis. Under U.S. GAAP, certainexpenses are capitalized when incurred andthen amortized over the life of the associatedpolicies. The valuation of assets and liabilitiesunder U.S. GAAP is based in part upon bestestimate assumptions made by the insurer. U.S.GAAP-basis stockholders’ equity representsboth amounts currently available and amountsexpected to emerge over the life of thebusiness. As a result, the values for assets,liabilities and equity reflected in financialstatements prepared in accordance with U.S.GAAP may be different from those reflected infinancial statements prepared under SAP.

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. Most insurance guaranty fund lawscurrently provide that an assessment may beexcused or deferred if it would threaten aninsurer’s own financial strength. In addition,assessments may be partially offset by creditsagainst future state premium taxes.

Additional Oversight in Canada. Inconnection with our corporate reorganization,we entered into an undertaking agreement withOSFI pursuant to which we are subject toongoing obligations to provide OSFI withcertain information. In particular, we agreed toprovide 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 beneficial


Item 1. Business

owner 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 ourfilings with the Securities and ExchangeCommission (the “SEC”), material pressreleases and access to our senior officers andauditors to discuss any prudential concernsOSFI may have concerning Primerica LifeCanada. The following items are exempt fromthe advance notice commitment: (a) matterssubject to confidentiality and disclosurerestrictions imposed by governmentalauthorities and (b) matters that management,acting in good faith, deems would have anadverse 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 oroperational support to its subsidiary shouldsuch support prove necessary. The Minister hasrequired us to sign a support principle letterwhich provides, without limiting the scope ofthe support principle letter, that this ongoingsupport may take the form of additional capital,the provision of managerial expertise or theprovision of support in such areas as riskmanagement, internal control systems andtraining. The provision of the support principleletter is intended to ensure that the personcontrolling the federal insurance company isaware of the importance and relevance of thesupport principle in the consideration of theapplication. However, the letter does not createa legal obligation on our part to provide thesupport.

Our Canadian insurance subsidiary is currentlyin compliance with the terms of the undertakingagreement and support principle letter.

Regulation of Our Investment andSavings Products Business

PFS Investments is registered with, andregulated by, FINRA and the SEC. It is alsosubject to regulation by the MunicipalSecurities Rulemaking Board (the “MSRB”)with respect to 529 plans as well as by statesecurities agencies. PFS Investments operatesas an introducing broker-dealer and isregistered in all 50 states and with the SEC.As such, it performs the suitability review ofinvestment recommendations in accordancewith FINRA requirements, but it does not holdclient accounts. U.S. client funds are held by themutual fund in which such client funds areinvested or by MetLife in the case of variableannuities.

The SEC rules and regulations that currentlyapply to PFS Investments and our registeredrepresentatives generally require that we makesuitable investment recommendations to ourcustomers and disclose conflicts of interestthat might affect the recommendations oradvice we provide. The Dodd-Frank Wall StreetReform and Consumer Protection Act of 2010(the “Dodd-Frank Act”) gave the SEC the powerto impose on broker-dealers a heightenedstandard of conduct (fiduciary duty) that iscurrently applicable only to investmentadvisers. As required by the Dodd-Frank Act,the SEC staff submitted a report to Congress in2010 in which it recommended that the SECadopt a uniform fiduciary standard of conduct.The timing of any future rulemaking is unclear.

In October 2010, the Department of Labor (the“DOL”) published a proposed rule (the “DOLProposed Rule”) that would more broadlydefine the circumstances under which a personor entity may be considered a fiduciary forpurposes of the prohibited transaction rules ofInternal Revenue Code Section 4975 (“IRCSection 4975”). Under IRC Section 4975,certain types of compensation paid by thirdparties with respect to transactions involvingassets in qualified accounts, including IRAs,may be prohibited. In September 2011, the DOLwithdrew the DOL Proposed Rule, but has


Item 1. Business

indicated that it will re-propose a similarfiduciary rule in early 2012. If PFS Investmentsand its securities-licensed representatives aredeemed to be fiduciaries under a rule similar tothe DOL Proposed Rule, our ability to receiveand retain certain types of compensation paidby third parties with respect to both new andexisting assets in qualified accounts could besignificantly limited. Furthermore, our licensedrepresentatives could be required to obtainadditional securities licenses, which they maynot be willing or able to obtain. Due to theuncertainty of present facts and circumstances,we currently are unable to determine theimpact, if any, on our business, financialposition or results of operations. See “RiskFactors — Risks Related to Our Investments andSavings Products Business — If heightenedstandards of conduct or more stringentlicensing requirements, such as those recentlyproposed by the SEC and proposed andwithdrawn by the DOL, are imposed on us orour sales representatives or sellingcompensation is reduced as a result of newlegislation or regulations, it could have amaterial adverse effect on our business,financial condition and results of operations.”

PFS Investments is also approved as a non-bank custodian under Internal Revenue Service(“IRS”) regulations and, in that capacity, mayact as a custodian or trustee for certainretirement accounts. Our sales representativeswho sell securities products through PFSInvestments (including, in certain jurisdictions,variable annuities) are required to beregistered representatives of PFS Investments.All aspects of PFS Investments’ business areregulated, including sales methods and charges,trade practices, the use and safeguarding ofcustomer securities, capital structure,recordkeeping, conduct and supervision of itsemployees.

In 2011, PFS Investments became an SEC-registered investment adviser and, under thename Primerica Advisors, began offering amanaged accounts, or mutual fund advisory,program. In most states, our representatives

are required to obtain an additional license tooffer this program.

Primerica Shareholder Services, Inc. (“PSS”) isregistered with the SEC as a transfer agent and,accordingly, is subject to SEC rules andexaminations.

PFSL Investments Canada is a mutual funddealer registered with and regulated by theMutual Fund Dealers Association of Canada(the “MFDA”), the national self-regulatoryorganization for the distribution side for theCanadian mutual fund industry. It is alsoregistered with provincial and territorialsecurities commissions throughout Canada.As a registered mutual fund dealer, PFSLInvestments Canada performs the suitabilityreview of mutual fund investmentrecommendations, and like our U.S. broker-dealer, it does not hold client accounts.

PFSL Investments Canada salesrepresentatives are required to be registered inthe provinces and territories in which they dobusiness and are also subject to regulation bythe MFDA. These regulators have broadadministrative powers, including the power tolimit or restrict the conduct of our business andimpose censures or fines for failure to complywith the law or regulations.

PFSL Investments Canada is registered as anInvestment Fund Manager in connection withour Concert™ Series mutual funds.

Other Laws and Regulations

The USA Patriot Act of 2001 (the “Patriot Act”)contains anti-money laundering and financialtransparency laws and mandates theimplementation of various regulationsapplicable to broker-dealers and other financialservices companies, including insurancecompanies. The Patriot Act seeks to promotecooperation among financial institutions,regulators and law enforcement entities inidentifying parties that may be involved interrorism or money laundering.

U.S. federal and state laws and regulationsrequire financial institutions, including


Item 1. Business

insurance companies, to protect the securityand confidentiality of consumer financialinformation and to notify consumers abouttheir policies and practices relating to theircollection and disclosure of consumerinformation and their policies relating toprotecting the security and confidentiality ofthat information. Similarly, federal and statelaws and regulations also govern the disclosureand security of consumer health information. Inparticular, regulations promulgated by theU.S. Department of Health and Human Servicesregulate the disclosure and use of protectedhealth information by health insurers andothers (including certain life insurers), thephysical and procedural safeguards employedto protect the security of that information andthe electronic storage and transmission of suchinformation. Congress and state legislaturesare expected to consider additional legislationrelating to privacy and other aspects ofconsumer information.

The Financial Consumer Agency of Canada(“FCAC”), a Canadian federal regulatory body,is responsible for ensuring that federallyregulated financial institutions, which includePrimerica Life Canada and PFSL InvestmentsCanada, comply with federal consumerprotection laws and regulations, voluntarycodes of conduct and their own publiccommitments. The Financial Transactions andReports Analysis Centre of Canada(“FINTRAC”) is Canada’s financial intelligenceunit. Its mandate includes ensuring that entitiessubject to the Proceeds of Crime (MoneyLaundering) and Terrorist Financing Act,

comply with reporting, recordkeeping and otherobligations under that act. We are also subjectto privacy laws under the jurisdiction of federaland provincial privacy commissioners, anti-money laundering laws enforced by FINTRACand OSFI, and the consumer complaintsprovisions of federal insurance laws under themandate of the FCAC, which requires insurersto belong to a complaints ombud-service andfile a copy of their complaints handling policywith the FCAC.

Segment Financial and GeographicDisclosures

We have two primary operating segments —Term Life Insurance and Investment andSavings Products. The Term Life Insurancesegment includes underwriting profits on ourin-force book of term life insurance policies, netof reinsurance, which are underwritten by ourlife insurance company subsidiaries. TheInvestment and Savings Products segmentincludes mutual funds and variable annuitiesdistributed through licensed broker-dealersubsidiaries and includes segregated funds, anindividual annuity savings product that weunderwrite in Canada through Primerica LifeCanada. We also have a Corporate and OtherDistributed Products segment, which consistsprimarily of revenues and expenses related tothe distribution of non-core products, prepaidlegal services and various insurance productsother than our core term life insuranceproducts.


Item 1. Business

Information regarding operations by segment follows:


2011 2010 2009

(In thousands)Revenues:

Term life insurance segment $ 554,995 $808,568 $1,742,065Investment and savings products segment 396,703 361,807 300,140Corporate and other distributed products segment 151,395 191,488 178,196

Total revenues $1,103,093 $1,361,863 $2,220,401

Income (loss) before income taxes:Term life insurance segment $ 194,609 $ 299,044 $ 659,012Investment and savings products segment 117,076 113,530 93,404Corporate and other distributed products segment (35,841) (13,431) 7,539

Total income before income taxes $ 275,844 $ 399,143 $ 759,955

Information regarding operations by country follows:


2011 2010 2009

(In thousands)Revenues by country:

United States $ 895,067 $ 1,136,414 $1,922,047Canada 208,026 225,449 298,354

Total revenues $1,103,093 $1,361,863 $2,220,401

Income before income taxes by country:United States $ 209,685 $ 317,195 $ 637,355Canada 66,159 81,948 122,600


Information regarding assets by segment follows:

December 31,

2011 2010 2009

(In thousands)Assets:

Term life insurance segment $ 6,137,033 $ 5,738,219 $ 9,016,674Investment and savings products segment 2,591,137 2,615,916 2,192,583Corporate and other distributed products segment 1,270,374 1,530,171 2,505,887

Total assets $9,998,544 $9,884,306 $ 13,715,144

Information regarding long-lived assets by country follows:

December 31,

2011 2010 2009

(In thousands)Long-lived assets:

United States $84,550 $90,566 $90,905Canada 316 1,114 1,265

Total long-lived assets $84,866 $ 91,680 $ 92,170


Item 1. Business

For information on risks relating to ourCanadian operation, see “Risk Factors” and“Item 7A. Quantitative and QualitativeInformation About Market Risks — CanadianCurrency Risk.”

Competition

We operate in a highly competitive environmentwith respect to the sale of financial productsand, to a lesser extent, for retaining our moreproductive sales representatives. Because weoffer several different financial products, wecompete directly with a variety of financialinstitutions, such as insurance companies andbrokers, banks, finance companies, creditunions, broker-dealers, mutual fund companiesand other financial products and servicescompanies.

Competitors with respect to our term lifeinsurance products consist both of stock andmutual insurance companies, as well as otherfinancial intermediaries. Competitive factorsaffecting the sale of life insurance productsinclude the level of premium rates, benefitfeatures, risk selection practices, compensationof sales representatives and financial strengthratings from ratings agencies such as A.M. Best.

In offering our securities products, our salesrepresentatives compete with a range of otheradvisors, broker-dealers and direct channels,including wirehouses, regional broker-dealers,independent broker-dealers, insurers, banks,asset managers, registered investmentadvisors, mutual fund companies and otherdirect distributors. The mutual funds that weoffer face competition from other mutual fundfamilies and alternative investment products,such as exchange traded funds. Our annuityproducts compete with products fromnumerous other companies. Competitivefactors affecting the sale of annuity productsinclude price, product features, investmentperformance, commission structure, perceivedfinancial strength, claims-paying ratings,service and distribution capabilities.

Information Technology

We have built a sophisticated informationtechnology platform that is designed to supportour clients, operations and sales force. Locatedat our main campus in Duluth, Georgia, our datacenter houses an enterprise-class IBMmainframe that serves as the repository for allclient and sales force data and as a databaseserver for our distributed environment. Our ITinfrastructure supports 45 core businessapplications. Our business applications, many ofwhich are proprietary, are supported byapplication developers and data center staff atour main campus. Our information securityteam provides services that include projectconsulting, threat management, application andinfrastructure assessments, secureconfiguration management and informationsecurity administration. This infrastructure alsosupports a combination of local and remoterecovery solutions for business resumption inthe event of a disaster.

Employees

As of December 31, 2011, we had 1,784 full-timeemployees in the United States and 208 full-time employees in Canada. In addition, as ofDecember 31, 2011, we had 468 on-callemployees in the United States and 77 on-callemployees in Canada who provide certainservices on an as-needed hourly basis. None ofour employees is a member of any labor unionand we have never experienced any businessinterruption as a result of any labor disputes.

Internet Website

Our website address is www.primerica.com. Wemake available free of charge on our websiteour annual report on Form 10-K, quarterlyreports on Form 10-Q, current reports on Form8-K, and amendments to those reports as soonas reasonably practicable upon filing suchinformation with, or furnishing it to, the SEC.


Item 1A. Risk Factors

ITEM 1A. RISK FACTORS.

Risks Related to Our DistributionStructure

Our failure to continue to attract newrecruits, retain sales representatives orlicense or maintain the licensing of oursales representatives would materiallyadversely affect our business.

New sales representatives provide us with accessto new referrals, enable us to increase sales,expand our client base and provide the nextgeneration of successful sales representatives. Asis typical with distribution businesses, weexperience a high rate of turnover among ourpart-time sales representatives, which requires usto attract, retain and motivate a large number ofsales representatives. Recruiting is performed byour current sales representatives, and theeffectiveness of our recruiting is generallydependent upon our reputation as a provider ofa rewarding and potentially lucrative incomeopportunity, as well as the general competitiveand economic environment. The motivation ofrecruits to complete their training and licensingrequirements and to commit to selling ourproducts is largely dependent upon theeffectiveness of our compensation andpromotional programs and the competitiveness ofsuch programs compared with other companies,including other part-time business opportunities.

If our new business opportunities and productsdo not generate sufficient interest to attractnew recruits, motivate them to becomelicensed sales representatives and maintaintheir licenses and incentivize them to sell ourproducts and recruit other new salesrepresentatives, our business would bematerially adversely affected.

Furthermore, if we or any other direct salesbusinesses with a similar distribution structureengage in practices resulting in increasednegative public attention for our business, theresulting reputational challenges couldadversely affect our ability to attract newrecruits. Direct sales companies such as ours can

be the subject of negative commentary onwebsite postings, social media and othernon-traditional media. This negativecommentary can spread inaccurate orincomplete information about the direct salesindustry in general or our company in particular,which can make our recruiting more difficult.

Certain of our key RVPs have large salesorganizations that include thousands of downlinesales representatives. These key RVPs areresponsible for attracting, motivating, supportingand assisting the sales representatives in theirsales organizations. The loss of one or more keyRVPs together with a substantial number of theirsales representatives for any reason, includingmovement to a competitor, or any other eventthat causes the departure of a large numberof sales representatives, could materiallyadversely affect our financial results and couldimpair our ability to attract new salesrepresentatives.

There are a number of laws andregulations that could apply to ourdistribution model, which subject us tothe risk that we may have to modify ourdistribution structure.

In the past, certain direct sales distributionmodels have been subject to challenge undervarious laws, including laws relating to businessopportunities, franchising, pyramid schemesand unfair or deceptive trade practices.

In general, state business opportunity andfranchise laws in the United States prohibitsales of business opportunities or franchisesunless the seller provides potential purchaserswith a pre-sale disclosure document that hasfirst been filed with a designated state agencyand grants purchasers certain legal recourseagainst sellers of business opportunities andfranchises. In Canada, the provinces of Alberta,Ontario, New Brunswick and Prince EdwardIsland have enacted legislation dealing withfranchising, which typically requires mandatorydisclosure to prospective franchisees.



We have not been, and are not currently,subject to business opportunity laws becausethe amounts paid by our new representatives tous: (i) are less than the minimum thresholds setby many state statutes and (ii) are not fees paidfor the right to participate in a business, butrather are for bona fide expenses such as state-required insurance examinations andpre-licensing training. We have not been, andare not currently, subject to franchise laws forsimilar reasons. However, there is a risk that agovernmental agency or court could disagreewith our assessment or that these laws andregulations could change. In addition, theFederal Trade Commission (“FTC”) recentlyfinalized a new Business Opportunity Rule. Wedo not believe that the FTC’s BusinessOpportunity Rule applies to our company.However, it could be interpreted in a mannerinconsistent with our interpretation. Becomingsubject to business opportunity or franchiselaws or regulations could require us to providecertain disclosures and regulate the manner inwhich we recruit our sales representatives thatmay increase the expense of, or adverselyimpact our success in, recruiting new salesrepresentatives and make it more difficult forus to successfully attract and recruit new salesrepresentatives.

There are various laws and regulations thatprohibit fraudulent or deceptive schemesknown as pyramid schemes. In general, apyramid scheme is defined as an arrangementin which new participants are required to pay afee to participate in the organization and thenreceive compensation primarily for recruitingother persons to participate, either directly orthrough sales of goods or services that aremerely disguised payments for recruitingothers. The application of these laws andregulations to a given set of business practicesis inherently fact-based and, therefore, issubject to interpretation by applicableenforcement authorities. Our representativesare paid by commissions based on sales of our

products and services to bona fide purchasers,and for this and other reasons we do notbelieve that we are subject to laws regulatingpyramid schemes. Moreover, ourrepresentatives are not required to purchaseany of the products marketed by us. However,even though we believe that our distributionpractices are currently in compliance with, orexempt from, these laws and regulations, thereis a risk that a governmental agency or courtcould disagree with our assessment or thatthese laws and regulations could change, whichmay require us to cease our operations incertain jurisdictions or result in other costs orfines.

There are also federal, state and provincial lawsof general application, such as the FTC Act, andstate or provincial unfair and deceptive tradepractices laws that could potentially be invokedto challenge aspects of our recruiting of salesrepresentatives and compensation practices. Inparticular, our recruiting efforts includepromotional materials for recruits that describethe potential opportunity available to them ifthey join our sales force. These materials, aswell as our other recruiting efforts and those ofour sales representatives, are subject toscrutiny by the FTC and state and provincialenforcement authorities with respect tomisleading statements, including misleadingearnings claims made to convince potential newrecruits to join our sales force. If claims madeby us or by our sales representatives aredeemed to be misleading, it could result inviolations of the FTC Act or comparable stateand provincial statutes prohibiting unfair ordeceptive trade practices or result inreputational harm.

Being subject to, or out of compliance with, theaforementioned laws and regulations couldrequire us to change our distribution structure,which could materially adversely affect ourbusiness, financial condition and results ofoperations.



There may be adverse tax andemployment law consequences if theindependent contractor status of oursales representatives is successfullychallenged.

Our sales representatives are independentcontractors who operate their own businesses.In the past, we have been successful indefending our company in various contextsbefore courts and governmental agenciesagainst claims that our sales representativesshould be treated like employees. Although webelieve that we have properly classified ourrepresentatives as independent contractors,there is nevertheless a risk that the IRS oranother authority will take a different view.Furthermore, the tests governing thedetermination of whether an individual isconsidered to be an independent contractor oran employee are typically fact sensitive andvary from jurisdiction to jurisdiction. Lawsand regulations that govern the status andmisclassification of independent salesrepresentatives are subject to change orinterpretation by various authorities.

The classification of workers as independentcontractors has been the subject of federallegislative and regulatory interest over the lastseveral years, with proposals being made thatcall for greater scrutiny of independentcontractor classifications and greater penaltiesfor companies who wrongly classify workers asindependent contractors instead of employees.Thus far, none of these proposals has beenenacted by the federal government. In July2011, the DOL issued a statement in which itannounced its intention to pursue rulemakingunder the Fair Labor Standards Act referredto as “Right to Know” that would requirecompanies utilizing independent contractorsto make disclosures to the independentcontractors regarding their classification assuch and the rationale supporting theclassification, as well as a description of theirrights under the Fair Labor Standards Act. InSeptember 2011, the Appropriations Committeeof the U.S. House of Representatives released a

draft funding bill for fiscal 2012 for the DOLthat would, if enacted, prohibit the DOL fromusing any of its funding to develop orpromulgate the “Right to Know” rule beingconsidered by the DOL. We cannot predict theoutcome of these legislative and regulatoryefforts, but the topic of independent contractorclassification seems likely to remain active.

If a federal, state or provincial authority enactslegislation or adopts regulations that change themanner in which employees and independentcontractors are classified or makes any adversedetermination with respect to some or all of ourindependent contractors, we could incursignificant costs in complying with such lawsand regulations, including in respect of taxwithholding, social security payments andrecordkeeping, or we may be required to modifyour business model, any of which could havea material adverse effect on our business,financial condition and results of operations. Inaddition, there is the risk that we may be subjectto significant monetary liabilities arising fromfines or judgments as a result of any such actualor alleged non-compliance with federal, state, orprovincial tax or employment laws or withrespect to any applicable employee benefit plan.

Our or our sales representatives’violation of, or non-compliance with,laws and regulations and the relatedclaims and proceedings could expose usto material liabilities.

Extensive federal, state, provincial andterritorial laws regulate our products and ourrelationships with our clients, imposing certainrequirements that our sales representativesmust follow. The laws and regulationsapplicable to our business include thosepromulgated by FINRA, the SEC, the MSRB,the FTC and state insurance and securitiesregulatory agencies in the United States. InCanada, our business is regulated by OSFI,FINTRAC, FCAC, MFDA, and provincial andterritorial insurance regulators and provincialand territorial securities regulators. At anygiven time, we may have pending state, federal



or provincial examinations or inquiries of ourinvestment and savings products and insurancebusinesses. In addition to imposingrequirements that representatives must followin their dealings with clients, these laws andregulations generally require us to maintain asystem of supervision to attempt to ensure thatour sales representatives comply with therequirements to which they are subject. Wehave developed policies and procedures tocomply with these laws and regulations.However, despite these compliance andsupervisory efforts, the breadth of ouroperations and the broad regulatoryrequirements could result in oversight failuresand instances of non-compliance or misconducton the part of our sales representatives.

From time to time, we are subject to privatelitigation as a result of alleged misconduct byour sales representatives. Examples includeclaims that a sales representative’s failure todisclose underwriting-related informationregarding the insured on an insuranceapplication resulted in the denial of a lifeinsurance policy claim, and with respect toinvestment and savings products sales, errors oromissions that a representative made inconnection with an account. In addition to thepotential for non-compliance with laws ormisconduct applicable to our existing productofferings, we could experience similar regulatoryissues or litigation with respect to new products,such as fixed annuities or our managed accountsproducts. Non-compliance or misconduct by oursales representatives could result in adversefindings in either examinations or litigation andcould subject us to sanctions, monetaryliabilities, restrictions on or the loss of theoperation of our business, claims against us orreputational harm, any of which could have amaterial adverse effect on our business,financial condition and results of operations.

Any failure to protect theconfidentiality of client informationcould adversely affect our reputationand have a material adverse effect on

our business, financial condition andresults of operations.

Pursuant to federal laws, various federalagencies have established rules protecting theprivacy and security of personal information. Inaddition, most states and some provinces haveenacted laws, which vary significantly fromjurisdiction to jurisdiction, to safeguard theprivacy and security of personal information.Many of our sales representatives andemployees have access to, and routinelyprocess, personal information of clientsthrough a variety of media, including theInternet and software applications. We rely onvarious internal processes and controls toprotect the confidentiality of client informationthat is accessible to, or in the possession of, ourcompany, our employees and our salesrepresentatives. It is possible that a salesrepresentative or employee could, intentionallyor unintentionally, disclose or misappropriateconfidential client information. If we fail tomaintain adequate internal controls or if oursales representatives or employees fail tocomply with our policies and procedures,misappropriation or intentional or unintentionalinappropriate disclosure or misuse of clientinformation could occur. Such internal controlinadequacies or non-compliance couldmaterially damage our reputation or lead tocivil or criminal penalties, which, in turn, couldhave a material adverse effect on our business,financial condition and results of operations.

Risks Related to Our InsuranceBusiness and Reinsurance

We may face significant losses if ouractual experience differs from ourexpectations regarding mortality orpersistency.

We set prices for life insurance policies basedupon expected claim payment patterns derivedfrom assumptions we make about the mortalityrates, or likelihood of death, of our policyholdersin any given year. The long-term profitability of



these products depends upon how our actualmortality rates compare to our pricingassumptions. For example, if mortality rates arehigher than those assumed in our pricingassumptions, we could be required to make moredeath benefit payments under our life insurancepolicies or to make such payments sooner thanwe had projected, which may decrease theprofitability of our term life insurance productsand result in an increase in the cost of oursubsequent reinsurance transactions.

The prices and expected future profitability of ourlife insurance products are also based, in part,upon assumptions related to persistency. Actualpersistency that is lower than our persistencyassumptions could have an adverse effect onprofitability, especially in the early years of apolicy, primarily because we would be requiredto accelerate the amortization of expenses wedeferred in connection with the acquisition of thepolicy. Actual persistency that is higher than ourpersistency assumptions could have an adverseeffect on profitability in the later years of a blockof policies because the anticipated claimsexperience is higher in these later years. If actualpersistency is significantly different from thatassumed in our pricing assumptions, our reservesfor future policy benefits may prove to beinadequate. We are precluded from adjustingpremiums on our in-force business during theinitial term of the policies, and our ability to adjustpremiums on in-force business after the initialpolicy term is limited to the maximum premiumrates in the policy.

Our assumptions and estimates regardingmortality and persistency require us to makenumerous judgments and, therefore, areinherently uncertain. We cannot determine withprecision the actual persistency or ultimateamounts that we will pay for actual claimpayments on a block of policies, the timingof those payments, or whether the assetssupporting these contingent future paymentobligations will increase to the levels weestimate before payment of claims. If weconclude that our reserves, together with future

premiums, are insufficient to cover actual orexpected claims payments and the scheduledamortization of our deferred policy acquisitioncosts (“DAC”) assets, we would be required tofirst accelerate our amortization of the DACassets and then increase our reserves and incurincome statement charges for the period inwhich we make the determination, which couldmaterially adversely affect our business,financial condition and results of operations.

The occurrence of a catastrophic eventcould materially adversely affect ourbusiness, financial condition and resultsof operations.

Our insurance operations are exposed to therisk of catastrophic events, which could causea large number of premature deaths of ourinsureds. A catastrophic event could also causesignificant volatility in global financial marketsand disrupt the economy. Although we haveceded a significant majority of our mortalityrisk to reinsurers since the mid-1990s, acatastrophic event could cause a materialadverse effect on our business, financialcondition and results of operations. Claimsresulting from a catastrophic event could causesubstantial volatility in our financial results forany quarter or year and could also materiallyharm the financial condition of our reinsurers,which would increase the probability of defaulton reinsurance recoveries. Our ability to writenew business could also be adversely affected.

In addition, most of the jurisdictions in which ourinsurance subsidiaries are admitted to transactbusiness require life insurers doing businesswithin the jurisdiction to participate in guarantyassociations, which raise funds to paycontractual benefits owed pursuant to insurancepolicies issued by impaired, insolvent or failedissuers. It is possible that a catastrophic eventcould require extraordinary assessments on ourinsurance companies, which may have a materialadverse effect on our business, financialcondition and results of operations.



Our insurance business is highlyregulated, and statutory and regulatorychanges may materially adverselyaffect our business, financial conditionand results of operations.

Life insurance statutes and regulations aregenerally designed to protect the interests ofthe public and policyholders. Those interestsmay conflict with the interests of ourstockholders. Currently, in the United States,the power to regulate insurance resides almostexclusively with the states. The laws of thevarious U.S. jurisdictions grant state insuranceregulators broad powers to regulate almost allaspects of our insurance business. Much of thisstate regulation follows model statutes orregulations developed or amended by the NAIC,which is composed of the insurancecommissioners of each U.S. jurisdiction. TheNAIC re-examines and amends existing modellaws and regulations (including holdingcompany regulations) in addition todetermining whether new ones are needed.

The U.S. Congress continues to examine thecurrent condition of U.S. state-based insuranceregulation to determine whether to imposefederal regulation and to allow optional federalinsurance company incorporation. The Dodd-Frank Act created an Office of FederalInsurance Reform that was authorized to,among other things, study methods tomodernize and improve insurance regulation,including uniformity and the feasibility offederal regulation. We cannot predict withcertainty whether, or in what form, reforms willbe enacted and, if so, whether the enactedreforms will materially affect our business.Changes in federal statutes, including theGramm-Leach-Bliley Act and the McCarran-Ferguson Act, financial services regulation andfederal taxation, in addition to changes to statestatutes and regulations, may be morerestrictive than current requirements or mayresult in higher costs, and could materiallyadversely affect our business, financialcondition and results of operations.

Provincial and federal insurance laws regulateall aspects of our Canadian insurance business.Changes to provincial or federal statutes andregulations may be more restrictive thancurrent requirements or may result in highercosts, which could materially adversely affectour business, financial condition and results ofoperations. We have also entered into anundertaking agreement with OSFI in connectionwith the IPO and our corporate reorganizationpursuant to which we have agreed to provideOSFI certain information, including advancenotice, where practicable, of certain corporateactions. If we fail to comply with ourundertaking to OSFI, or if OSFI determines thatour corporate actions do not comply withapplicable Canadian law, Primerica Life Canadacould face sanctions or fines, and Primerica LifeCanada could be subject to increased capitalrequirements or other requirements deemedappropriate by OSFI.

We received approval from the Minister ofFinance (Canada) under the InsuranceCompanies Act (Canada) in connection with ourindirect acquisition of Primerica Life Canada.The Minister expects that a person controlling afederal insurance company will provide ongoingfinancial, managerial or operational support toits subsidiary should such support provenecessary, and has required us to sign asupport principle letter to that effect. Thisongoing support may take the form ofadditional capital, the provision of managerialexpertise or the provision of support in suchareas as risk management, internal controlsystems and training. However, the letter doesnot create a legal obligation on the part of theperson to provide the support. In the event thatOSFI determines Primerica Life Canada is notreceiving adequate support from us underapplicable Canadian law, Primerica Life Canadamay be subject to increased capitalrequirements or other requirements deemedappropriate by OSFI.

If there were to be extraordinary changes tostatutory or regulatory requirements in theUnited States or Canada, we may be unable tofully comply with or maintain all required



insurance licenses and approvals. Regulatoryauthorities have relatively broad discretion togrant, renew and revoke licenses and approvals.If we do not have all requisite licenses andapprovals, or do not comply with applicablestatutory and regulatory requirements, theregulatory authorities could preclude ortemporarily suspend us from carrying on someor all of our insurance activities or impose finesor penalties on us, which could materiallyadversely affect our business, financial conditionand results of operations. We cannot predictwith certainty the effect any proposed or futurelegislation or regulatory initiatives may have onthe conduct of our business.

A decline in the regulatory capitalratios of our insurance subsidiariescould result in increased scrutiny byinsurance regulators and ratingsagencies and have a material adverseeffect on our business, financialcondition and results of operations.

Each of our U.S. insurance subsidiaries is subjectto RBC standards (imposed under the laws of itsrespective jurisdiction of domicile. The RBCformula for U.S. life insurance companiesgenerally establishes capital requirementsrelating to insurance, business, asset andinterest rate risks. Our U.S. insurancesubsidiaries are required to report their resultsof RBC calculations annually to the applicablestate department of insurance and the NAIC. OurCanadian life insurance subsidiary is subject tominimum continuing capital and surplusrequirements (“MCCSR”), and Tier 1 capital ratiorequirements, and is required to provide itsMCCSR and Tier 1 capital ratio calculations to theCanadian regulators. The capitalization of ourinsurance subsidiaries is maintained at levels inexcess of the effective minimum requirementsof the NAIC in the United States and OSFI inCanada. In any particular year, statutory capitaland surplus amounts and RBC and MCCSR ratiosmay increase or decrease depending on avariety of factors, including the amount of

statutory income or losses generated by ourinsurance subsidiaries (which is sensitive toequity and credit market conditions), the amountof additional capital our insurance subsidiariesmust hold to support business growth, changesin their reserve requirements, the value ofcertain fixed-income and equity securities intheir investment portfolios, the credit ratings ofinvestments held in their portfolios, the valueof certain derivative instruments, changes ininterest rates, credit market volatility, changesin consumer behavior, as well as changes to theNAIC’s RBC formula or the MCCSR calculation ofOSFI. Many of these factors are outside of ourcontrol.

Our financial strength and credit ratings aresignificantly influenced by the statutory surplusamounts and RBC and MCCSR ratios of ourinsurance company subsidiaries. Ratingsagencies may change their internal models,effectively increasing or decreasing the amountof statutory capital our insurance subsidiariesmust hold to maintain their current ratings. Inaddition, ratings agencies may downgrade theinvested assets held in our portfolio, which couldresult in a reduction of their capital and surplus.Changes in statutory accounting principles couldalso adversely impact our insurance subsidiaries’ability to meet minimum RBC, MCCSR andstatutory capital and surplus requirements.There is no assurance that our insurancesubsidiaries will not need additional capital or,if needed, that we will be able to provide it tomaintain the targeted RBC and MCCSR levelsto support their business operations.

The failure of any of our insurance subsidiariesto meet its applicable RBC and MCCSRrequirements or minimum capital and surplusrequirements could subject it to furtherexamination or corrective action imposed byinsurance regulators, including limitations on itsability to write additional business, supervisionby regulators or seizure or liquidation. Anycorrective action imposed could have amaterial adverse effect on our business,financial condition and results of operations. Adecline in RBC or MCCSR also limits the ability



of our insurance subsidiaries to pay dividendsor make distributions and could be a factor incausing ratings agencies to downgrade thefinancial strength ratings of all our insurancesubsidiaries. Such downgrades would have anadverse effect on our ability to write newinsurance business and, therefore, could have amaterial adverse effect on our business,financial condition and results of operations.

A ratings downgrade by a ratingsorganization could materially adverselyaffect our business, financial conditionand results of operations.

Each of our insurance subsidiaries has beenassigned a financial strength rating by A.M.Best. Primerica Life currently also has aninsurer financial strength rating fromStandard & Poor’s, Moody’s and Fitch. NBLICand Primerica Life Canada are not rated byStandard & Poor’s, Moody’s or Fitch.

The financial strength ratings of our insurancesubsidiaries are subject to periodic reviewusing, among other things, the ratings agencies’proprietary capital adequacy models, and aresubject to revision or withdrawal at any time.Insurance financial strength ratings aredirected toward the concerns of policyholdersand are not intended for the protection ofstockholders or as a recommendation to buy,hold or sell securities. Our financial strengthratings will affect our competitive positionrelative to other insurance companies. If thefinancial strength ratings of our insurancesubsidiaries fall below certain levels, some ofour policyholders may move their business toour competitors. In addition, the models usedby ratings agencies to determine financialstrength are different from the capitalrequirements set by insurance regulators.

Ratings organizations review the financialperformance and financial conditions ofinsurance companies, and provide opinionsregarding financial strength, operatingperformance and ability to meet obligations topolicyholders. A downgrade in the financialstrength ratings of any of our insurance

subsidiaries, or the announced potential for adowngrade, could have a material adverseeffect on our business, financial condition andresults of operations, including by:

• reducing sales of insurance products;

• adversely affecting our relationships withour sales representatives;

• materially increasing the amount of policycancellations by our policyholders;

• requiring us to reduce prices to remaincompetitive; and

• adversely affecting our ability to obtainreinsurance at reasonable prices or at all.

If the rating agencies or regulators change theirapproach to financial strength ratings andstatutory capital requirements, we may need totake action to maintain current ratings andcapital adequacy ratios, which could have amaterial adverse effect on our business,financial condition and results of operations.

In addition to financial strength ratings of ourinsurance subsidiaries, the Parent Companycurrently has investment grade credit ratingsfrom Standard & Poor’s, Moody’s, and A.M. Bestfor the senior unsecured debt that it may electto offer pursuant to its existing shelfregistration statement at some point in thefuture. These ratings are indicators of a debtissuer’s ability to meet the terms of debtobligations and are important factors in itsability to access liquidity in the debt markets. Arating downgrade by a rating agency can occurat any time if the rating agency perceives anadverse change in our financial condition,results of operations or ability to service debt.If such a downgrade occurs, it could have amaterial adverse effect on our financialcondition and results of operations in manyways, including adversely limiting our access tocapital in the unsecured debt market andpotentially increasing the cost of such debt.



Credit deterioration in, and the effects ofinterest rate fluctuations on, ourinvested asset portfolio could materiallyadversely affect our business, financialcondition and results of operations.

A large percentage of our invested assetportfolio is invested in fixed-income securities.As a result, credit deterioration and interest ratefluctuations could materially affect the value andearnings of our invested asset portfolio. Fixed-income securities decline in value if there is noactive trading market for the securities or themarket’s impression of, or the ratings agencies’views on, the credit quality of an issuer worsens.During periods of declining market interestrates, any interest income we receive on variableinterest rate investments would decrease andwe would be forced to invest the cash we receiveas interest, return of principal on ourinvestments and cash from operations in lower-yielding, high-grade instruments or in lower-credit instruments to maintain comparablereturns. Issuers of fixed-income securities couldalso decide to prepay their obligations to borrowat lower market rates, which would increase ourreinvestment risk. If interest rates generallyincrease, the market value of our fixed rateincome portfolio decreases. Additionally, if themarket value of any security in our investedasset portfolio decreases, we may realize lossesif we deem the value of the security to be other-than-temporarily impaired. To the extent thatany fluctuations in fair value or interest ratesare significant or we recognize impairments thatare material, it could have a material adverseeffect on our business, financial condition andresults of operations.

Valuation of our investments and thedetermination of whether a decline inthe fair value of our invested assets isother-than-temporary are based onmethodologies and estimates that mayprove to be incorrect.

U.S. GAAP requires that when the fair value ofany of our invested assets declines and such

decline is deemed to be other-than-temporary,we recognize a loss in either accumulated othercomprehensive income or on our statement ofincome based on certain criteria in the periodthat such determination is made. Determiningthe fair value of certain invested assets,particularly those that do not trade on a regularbasis, requires an assessment of available dataand the use of assumptions and estimates.Once it is determined that the fair value of anasset is below its carrying value, we mustdetermine whether the decline in fair value isother-than-temporary, which is based onsubjective factors and involves a variety ofassumptions and estimates.

There are certain risks and uncertaintiesassociated with determining whether declinesin market value are other-than-temporary.These include significant changes in generaleconomic conditions and business markets,trends in certain industry segments, interestrate fluctuations, rating agency actions,changes in significant accounting estimates andassumptions and legislative actions. In the caseof mortgage-and asset-backed securities, thereis added uncertainty as to the performance ofthe underlying collateral assets. To the extentthat we are incorrect in our determination ofthe fair value of our investment securities orour determination that a decline in their valueis other-than-temporary, we may realize lossesthat never actually materialize or may fail torecognize losses within the appropriatereporting period.

The failure by any of our reinsurers toperform its obligations to us could havea material adverse effect on ourbusiness, financial condition and resultsof operations.

We extensively use reinsurance in the UnitedStates to diversify our risk and to manage ourloss exposure to mortality risk. Reinsurancedoes not relieve us of our direct liability to ourpolicyholders, even when the reinsurer is liableto us. We, as the insurer, are required to paythe full amount of death benefits even in



circumstances where we are entitled to receivepayments from the reinsurer. Due to factorssuch as insolvency, adverse underwritingresults or inadequate investment returns, ourreinsurers may not be able to pay the amountsthey owe us on a timely basis or at all. Further,reinsurers might refuse or fail to pay lossesthat we cede to them or might delay payment.Since death benefit claims may be paid longafter a policy is issued, we bear credit risk withrespect to our reinsurers. The creditworthinessof our reinsurers may change before we canrecover amounts to which we are entitled. Anysuch failure to pay by our reinsurers could havea material adverse effect on our business,financial condition and results of operations.

The failure by the affiliates of Citi whoare parties to the Citi reinsurancetransactions to perform theirobligations to us under our coinsuranceagreements could have a materialadverse effect on our business, financialcondition and results of operations.

Immediately prior to the IPO, we entered intofour coinsurance agreements with threereinsurer affiliates of Citi pursuant to which weceded between 80% and 90% of the risks andrewards of our term life insurance policies thatwere in force at year-end 2009. Under thisarrangement, our current third-partyreinsurance agreements remain in place. Thelargest of these transactions involved twocoinsurance agreements between PrimericaLife and Prime Reinsurance Company, Inc.(“Prime Re”), then a wholly owned subsidiary ofPrimerica Life. Pursuant to these reinsuranceagreements, we distributed to Citi all of theissued and outstanding common stock of PrimeRe. Prime Re was formed solely for the purposeof entering into these reinsurance transactions,had no operating history at the time thecoinsurance agreements were executed anddoes not possess a financial strength ratingfrom any rating agency. The other transactionswere between (i) Primerica Life Canada andFinancial Reassurance Company 2010 Ltd., a

Bermuda reinsurer and wholly ownedsubsidiary of Citi, formed to operate solely forthe purpose of reinsuring Citi-related risks and(ii) NBLIC and American Health and LifeInsurance Company (“AHL”), a wholly ownedinsurance subsidiary of Citi that has a financialstrength rating of “A” by A.M. Best. Each of thethree reinsurers entered into trust agreementswith our respective insurance subsidiaries anda trustee pursuant to which the reinsurerplaced assets (primarily treasury and fixed-income securities) in trust for such subsidiary’sbenefit to secure the reinsurer’s obligations tosuch subsidiary. Each such coinsuranceagreement requires each reinsurer to maintainassets in trust sufficient to give the subsidiaryfull credit for regulatory purposes for theinsurance, which amount will not be less thanthe amount of the reserves for the reinsuredliabilities. In addition, in the case of thereinsurance transactions between Prime Re andPrimerica Life, Citi has agreed in a capitalmaintenance agreement to maintain Prime Re’sRBC above a specified minimum level, subjectto a maximum amount being contributed byCiti. In the case of the reinsurance transactionbetween NBLIC and AHL, Citi has agreed toover-collateralize the assets in the trust forNBLIC for the life of the coinsurance agreementbetween NBLIC and AHL. Furthermore, ourinsurance subsidiaries have the right torecapture the business upon the occurrence ofan event of default under their respectivecoinsurance agreement with the Citi affiliatessubject to any applicable cure periods. An eventof default includes: (1) a reinsurer insolvency,(2) failure through the fault of the reinsurer toprovide full statutory financial statement creditfor the reinsurance ceded, (3) a material breachof any covenant, representation or warrantyby the reinsurer, (4) failure by the reinsurerto fund the trust account required to beestablished under the coinsurance agreementsin any material respects, or (5) in connectionwith the coinsurance agreements with PrimeRe, failure by Citi to maintain sufficient capitalin the reinsurer, pursuant to the capitalmaintenance agreement between Citi and thereinsurer within 45 calendar days of any



demand for payment by or on behalf ofPrimerica Life, and any 45-day extensionthereof as consented to by Primerica Life,which consent may not be unreasonablyconditioned, delayed or withheld, for a total ofnot more than 90 days to obtain such consent;provided that Primerica Life is not required toconsent to extend such period beyond anadditional 45 days. While any such recapturewould be at no cost to us, such recapture wouldresult in a substantial increase in our insuranceexposure and require us to be fully responsiblefor the management of the assets set aside tosupport statutory reserves. The type of assetswe might obtain as a result of a recapture maynot be as liquid as our current invested assetportfolio and could result in an unfavorableimpact on our risk profile.

There is no assurance that the relevant Citireinsurer will pay the reinsurance obligationsowed to us now or in the future or that it willpay these obligations on a timely basis.Notwithstanding the capital maintenanceagreement between Prime Re and Citi and theinitial over-collateralization of assets in trustfor the benefit of our insurance companies, ifany of our Citi reinsurers becomes insolvent,the amount in the trust account to support theobligations of such reinsurer is insufficient topay such reinsurer’s obligations to us and wefail to enforce our right to recapture thebusiness, it could have a material adverseeffect on our business, financial condition andresults of operations.

Changes in accounting for DAC ofinsurance entities will accelerate therecognition for certain acquisition costsnot deemed to be directly related to thesuccessful acquisition of new insurancecontracts.

In October 2010, the Financial AccountingStandards Board (the “FASB”), issued ASU2010-26, Accounting for Costs Associated withAcquiring or Renewing Insurance Contracts(“ASU 2010-26”). The update revises thedefinition of DAC to reflect incremental costs

directly related to the successful acquisition ofnew and renewed insurance contracts. Theupdate creates a more limited definition than thecurrent guidance, which defines DAC as thosecosts that vary with, and primarily relate to, theacquisition of insurance contracts. The reviseddefinition materially increases the portion ofacquisition costs being expensed as incurredrather than deferred and amortized over thelives of the underlying policies. The updateallows either prospective or retrospectiveadoption and is required to be adopted for ourfiscal year beginning January 1, 2012. We plan toadopt this update retrospectively. We estimatethat the adoption will result in a reduction to ourDAC asset in the range of approximately $140million to $160 million as of December 31, 2011.We further estimate that it will reduce incomebefore income taxes in the range ofapproximately $27 million to $33 million. Therelated analysis and implementation of thisaccounting change is ongoing and may result ina different impact that is higher or lower thanthese anticipated ranges, which could have amaterial adverse effect on our financial positionand results of operations.

Risks Related to Our Investmentsand Savings Products Business

Our investment and savings productssegment is heavily dependent onmutual fund and annuity productsoffered by a relatively small number ofcompanies and if these products fail toremain competitive with otherinvestment options or we lose ourrelationship with one or more of thesefund companies or with the source ofour annuity products, our business,financial condition and results ofoperations may be materially adverselyaffected.

We earn a significant portion of our earningsthrough our relationships with a small group ofmutual fund companies. A decision by one or



more of these companies to alter or discontinuetheir current arrangements with us couldmaterially adversely affect our business,financial condition and results of operations. Inaddition, if any of our investment and savingsproducts fail to achieve satisfactory investmentperformance, our clients may seek higheryielding alternative investment products and wecould experience higher redemption rates. Insuch circumstances, we may also experiencere-allocations of existing client assets andincreased allocations of new assets toinvestment and savings products with higherinvestment returns, which ultimately results inchanges in our mix of business. Since differentinvestment and savings products have differentrevenue and expense characteristics, suchchanges could have significant negativeconsequences for us.

In recent years there has been an increase inthe popularity of alternative investments, whichwe do not currently offer, principally indexfunds and exchange traded funds. Theseinvestment options typically have low feestructures and provide some of the attributesof mutual funds, such as risk diversification. Ifthese products continue to gain traction amongour client base as viable alternatives to mutualfund investments, our investment and savingsproducts revenues could decline.

In addition to sales commissions and asset-basedcompensation, a significant portion of ourearnings from investment and savings productscomes from recordkeeping services that weprovide to third parties and from fees earned forcustodial services that we provide to clients withretirement plan accounts in the funds of thesemutual fund companies. We also receive revenuesharing payments from each of these mutualfund companies. A decision by one or more ofthese fund companies to alter or discontinuetheir current arrangements with us wouldmaterially adversely affect our business,financial condition and results of operations.

Our or our securities-licensed salesrepresentatives violations of, or

non-compliance with, laws andregulations could expose us to materialliabilities.

Our subsidiary broker-dealer and registeredinvestment advisor, PFS Investments, is subjectto federal and state regulation of its securitiesbusiness. These regulations cover salespractices, trade suitability, supervision ofregistered representatives, recordkeeping, theconduct and qualification of officers andemployees, the rules and regulations of theMSRB and state blue sky regulation. Investmentadvisory representatives are generally held to ahigher standard of conduct than registeredrepresentatives. Our subsidiary, PSS, is aregistered transfer agent engaged in therecordkeeping business and is subject to SECregulation. Violations of laws or regulationsapplicable to the activities of PFS Investmentsor PSS, or violations by a third party with whichPFS Investments or PSS contracts whichimproperly performs its task, could subject usto disciplinary actions and could result in theimposition of cease and desist orders, fines orcensures, restitution to clients, disciplinaryactions, including the potential suspension orrevocation of its license by the SEC, or thesuspension or expulsion from FINRA andreputational damage, which could materiallyadversely affect our business, financialcondition and results of operations.

Our Canadian dealer subsidiary, PFSLInvestments Canada and its salesrepresentatives are subject to the securitieslaws of the provinces and territories of Canadain which we sell our mutual fund products andthose of third parties and to the rules of theMFDA, the self-regulatory organizationgoverning mutual fund dealers. PFSLInvestments Canada is subject to periodicreview by both the MFDA and the provincial andterritorial securities commissions to assess itscompliance with, among other things,applicable capital requirements and salespractices and procedures. These regulatorshave broad administrative powers, includingthe power to limit or restrict the conduct of ourbusiness for failure to comply with applicable



laws or regulations. Possible sanctions thatcould be imposed include the suspension ofindividual sales representatives, limitations onthe activities in which the dealer may engage,suspension or revocation of the dealerregistration, censure or fines, any of whichcould materially adversely affect our business,financial condition and results of operations.

If heightened standards of conduct ormore stringent licensing requirements,such as those recently proposed by theSEC and proposed and withdrawn by theDOL, are imposed on us or our salesrepresentatives or selling compensationis reduced as a result of new legislationor regulations, it could have a materialadverse effect on our business, financialcondition and results of operations.

Our U.S. sales representatives are subject tofederal and state regulation as well as statelicensing requirements. PFS Investments, whichis regulated as a broker-dealer, and our U.S. salesrepresentatives are currently subject to generalanti-fraud limitations under the SecuritiesExchange Act of 1934, as amended (the“Exchange Act”) and SEC rules and regulations,as well as other conduct standards prescribed byFINRA. These standards generally require thatbroker-dealers and their sales representativesdisclose conflicts of interest that might affect theadvice or recommendations they provide andrequire them to make suitable investmentrecommendations to their customers. The Dodd-Frank Act, which gives the SEC the power toimpose on broker-dealers a heightened standardof conduct that is currently applicable only toinvestment advisers, requires the SEC to conducta study to evaluate the effectiveness of thecurrent legal standards of conduct for those thatprovide personalized investment adviceregarding securities to retail customers. In 2010,the SEC staff submitted a report to Congress inwhich it recommended that the SEC adopt auniform fiduciary standard of conduct. Thetiming of any future rulemaking is unclear.

In October 2010, the DOL published the DOLProposed Rule, which would more broadlydefine the circumstances under which a personor entity may be considered a fiduciary forpurposes of the prohibited transaction rules ofIRC Section 4975. IRC Section 4975 prohibitscertain types of compensation paid by thirdparties with respect to transactions involvingassets in qualified accounts, including IRAs. InSeptember 2011, the DOL withdrew the DOLProposed Rule, but has indicated that it willre-propose a similar fiduciary rule in early 2012.If PFS Investments and its securities-licensedrepresentatives are deemed to be fiduciariesunder a rule similar to the DOL Proposed Rule,our ability to receive and retain certain types ofcompensation paid by third parties with respectto both new and existing assets in qualifiedaccounts could be significantly limited.

IRAs and other qualified accounts are a corecomponent of the Investment and SavingsProducts segment of our business and accountedfor a significant portion of the total revenue ofthis segment for the year ended December 31,2011. Thus, if a fiduciary rule similar to the DOLProposed Rule is re-proposed and adopted, wewould expect to substantially restructure ourcurrent business model for qualified accounts.Such restructuring could make it significantlymore difficult for us and our representatives toprofitably serve the middle-income market andcould result in a significant reduction in thenumber of IRAs and qualified accounts that weserve, which could materially adversely affect theamount of revenue that we generate from thisline of business and ultimately could result in adecline in the number of our securities-licensedrepresentatives. Furthermore, our licensedrepresentatives could be required to obtainadditional securities licenses, which they may notbe willing or able to obtain.

The form, substance and timing of anyre-proposed or final rule are unknown at thistime. It is possible that a rule could be adoptedin a form that does not materially adverselyaffect us. If re-proposed and adopted in theform initially proposed, however, the DOLProposed Rule could have a materially adverse



effect on our business, financial condition andresults of operations.

Heightened standards of conduct as a result ofeither of the above proposals or another similarproposed rule or regulation could also increasethe compliance and regulatory burdens on ourrepresentatives, and could lead to increasedlitigation and regulatory risks, changes to ourbusiness model, a decrease in the number ofour securities-licensed representatives and areduction in the products we offer to ourclients, any of which could have a materialadverse effect on our business, financialcondition and results of operations.

If our suitability policies andprocedures were deemed inadequate, itcould have a material adverse effect onour business, financial condition andresults of operations.

We review the account applications that wereceive for our investment and savings productsfor suitability. While we believe that the policiesand procedures we implemented to help oursales representatives assist clients in makingappropriate and suitable investment choices arereasonably designed to achieve compliance withapplicable securities laws and regulations, it ispossible that the SEC, FINRA or MFDA may notagree. Further, we could be subject to regulatoryactions or private litigation, which couldmaterially adversely affect our business,financial condition and results of operations.

Our sales force support tools may failto appropriately identify suitableinvestment products.

Our support tools are designed to educateclients, help identify their financial needs, andintroduce the potential benefits of ourproducts. There could be a risk that theassumptions and methods of analyses

embedded in our support tools could besuccessfully challenged and subject us toregulatory action or private litigation, whichcould materially adversely affect our business,financial condition and results of operations.

Non-compliance with applicableregulations could lead to revocation ofour subsidiary’s status as a non-bankcustodian.

PFS Investments is a non-bank custodian ofretirement accounts, as permitted underTreasury Regulation 1.408-2. A non-bankcustodian is an entity that is not a bank and thatis permitted by the IRS to act as a custodian forretirement plan account assets of our clients. TheIRS retains authority to revoke or suspend thatstatus if it finds that PFS Investments is unwillingor unable to administer retirement accounts in amanner consistent with the requirements of theapplicable regulations. Revocation of PFSInvestments’ non-bank custodian status wouldaffect its ability to earn revenue for providingsuch services and, consequently, could materiallyadversely affect our business, financial conditionand results of operations.

Failure of our agents to becomelicensed to offer our managed accountsprogram could adversely affect ourinvestments business.

In 2011, PFS Investments became an SEC-registered investment adviser and, under thename Primerica Advisors, began offering amutual fund advisory program. In most states,our representatives are required to obtain anadditional license to offer this program. If asignificant number of our representatives whoare required to obtain such additional licensesto offer this program fail to do so, then therevenue and earnings we generate from thisbusiness could be materially adversely affected.



Other Risks Related to Our Business

We may be exposed to regulatoryliabilities in connection with the wind-down of our U.S. mortgage business.

Primerica Mortgages ceased its loan brokeringactivities in all states in which it held licenseseffective December 31, 2011. Accordingly, wehave instructed our sales force to ceaseoffering loan products on behalf of PrimericaMortgages in the United States from and afterJanuary 1, 2012. We anticipate that all loanrequests which were pending as ofDecember 31, 2011 will be processed by the endof the first quarter of 2012. As of January 1,2012, Primerica Mortgages commenced theprocess of surrendering its state licenses sothat it may completely exit the loan brokeringbusiness in the United States. AlthoughPrimerica Mortgages is no longer engaged inoffering loan products, it and other Primericacompanies could be subject to potentialregulatory or other liability for violations ofstate or federal laws governing the loanindustry if our sales representatives engage inmisconduct while continuing to conduct themortgage loan brokering business as an outsidebusiness activity.

Changes in accounting standards canbe difficult to predict and couldadversely impact how we record andreport our financial condition andresults of operations.

Our accounting policies and methods arefundamental to how we record and report ourfinancial condition and results of operations.U.S. GAAP continues to evolve and, as a result,may change the financial accounting andreporting standards that govern thepreparation of our financial statements. Thesechanges can be hard to anticipate andimplement and can materially impact how werecord and report our financial condition andresults of operations. For example, the FASB’scurrent insurance contracts project could,

among other things, significantly change theway we measure insurance liabilities on ourbalance sheet and the way we present earningson our statement of income. This project, inaddition to a related proposal to modify how toaccount for insurance contracts under IFRS,could adversely impact both our financialcondition and results of operations as reportedon a U.S. GAAP basis as well as our statutorycapital calculations.

The effects of economic down cycles inthe United States and Canada couldmaterially adversely affect ourbusiness, financial condition and resultsof operations.

Our business, financial condition and results ofoperations have been materially adverselyaffected by the economic downturn in theUnited States and Canada and the slowrecovery that has occurred since the last half of2009. This economic downturn, which has beencharacterized by higher unemployment, lowerfamily income, lower valuation of retirementsavings accounts, lower corporate earnings,lower business investment and lower consumerspending, has adversely affected the demandfor the term life insurance, investment andother financial products that we sell. Futureeconomic down cycles could severely adverselyaffect new sales and cause clients to liquidatemutual funds and other investments sold by oursales representatives. This could cause adecrease in the asset value of client accounts,reduce our trailing commission revenues andresult in other-than-temporary-impairments inour invested asset portfolio. In addition, we mayexperience an elevated incidence of lapses orsurrenders of insurance policies, and some ofour policyholders may choose to defer payinginsurance premiums or stop paying insurancepremiums altogether. Further, volatility inequity markets or downturns could discouragepurchases of the investment products that wedistribute and could have a materially adverseeffect on our business, including our ability torecruit and retain sales representatives. If



credit markets remain tight for a prolongedperiod, our liquidity will be more limited than itotherwise would have been, and our business,financial condition and results of operationsmay be materially adversely affected.

We are subject to various federal lawsand regulations in the United Statesand Canada, changes in which orviolations of which may require us toalter our business practices and couldmaterially adversely affect ourbusiness, financial condition and resultsof operations.

In the United States, we are subject to manyregulations, including the Gramm-Leach-BlileyAct and its implementing regulations, includingRegulation S-P, the Fair Credit Reporting Act,the Right to Financial Privacy Act, the ForeignCorrupt Practices Act, the Sarbanes-Oxley Act,the Telemarketing and Consumer Fraud andAbuse Prevention Act, the TelephoneConsumer Protection Act, the FTC Act, and theElectronic Funds Transfer Act. We are alsosubject to anti-money laundering laws andregulations, including the Bank Secrecy Act, asamended by the Patriot Act, which requires usto develop and implement customeridentification and risk-based anti-moneylaundering programs, report suspicious activityand maintain certain records. We are alsorequired to follow certain economic and tradesanctions programs that are administered bythe Office of Foreign Asset Control that prohibitor restrict transactions with suspectedcountries, their governments, and in certaincircumstances, their nationals.

In Canada, we are subject to provincial andterritorial regulations, including consumerprotection legislation that pertains to unfairand misleading business practices, provincialand territorial credit reporting legislation thatprovides requirements in respect of obtainingcredit bureau reports and providing notices ofdecline, the Personal Information Protectionand Electronic Documents Act, the Competition

Act, the Corruption of Foreign Public OfficialsAct, the Telecommunications Act and certainCanadian Radio-television andTelecommunications Commission TelecomDecisions in respect of unsolicitedtelecommunications. We are also subject to theProceeds of Crime (Money Laundering) andTerrorist Financing Act and its accompanyingregulations, which require us to develop andimplement money laundering policies andprocedures relating to customerindemnification, reporting and recordkeeping,develop and maintain ongoing trainingprograms for employees, perform a riskassessment on our business and clients andinstitute and document a review of our anti-money laundering program at least once everytwo years. We are also required to followcertain economic and trade sanctions andlegislation that prohibit us from, among otherthings, engaging in transactions with, andproviding services to, persons on lists createdunder various federal statutes and regulationsand blocked persons and foreign countries andterritories subject to Canadian sanctionsadministered by Foreign Affairs andInternational Trade Canada and theDepartment of Public Safety Canada.

Changes in, or violations of, any of these lawsor regulations may require additionalcompliance procedures, or result inenforcement proceedings, sanctions orpenalties, which could have a material adverseeffect on our business, financial condition andresults of operations.

Litigation and regulatory investigationsand actions may result in financiallosses and harm our reputation.

We face a risk of litigation and regulatoryinvestigations and actions in the ordinary courseof operating our businesses. From time to time,we are subject to private litigation andregulatory investigations as a result of salesrepresentative misconduct. In addition, we maybecome subject to lawsuits alleging, amongother things, issues relating to sales orunderwriting practices, payment of improper



sales commissions, claims issues, product designand disclosure, additional premium charges forpremiums paid on a periodic basis, denial ordelay of benefits, pricing and sales practicesissues. Life insurance companies havehistorically been subject to substantial litigationresulting from policy disputes and other matters.If we become subject to similar litigation, anyjudgment or settlement of such claims couldhave a material adverse effect on our business,financial condition and results of operations.

In addition, we are subject to litigation arisingout of our general business activities. Forexample, we have a large sales force, and wecould face claims by some of our salesrepresentatives arising out of their relationshipwith us. We are also subject to variousregulatory inquiries, such as informationrequests, subpoenas and books and recordexaminations, from state, provincial and federalregulators and other authorities. A substantiallegal liability or a significant regulatory actionagainst us could have a material adverse effecton our business, financial condition and resultsof operations.

Moreover, even if we ultimately prevail in anylitigation, regulatory action or investigation, wecould suffer significant reputational harm andwe could incur significant legal expenses, eitherof which could have a material adverse effect onour business, financial condition and results ofoperations. In addition, increased regulatoryscrutiny and any resulting investigations orproceedings could result in new legal precedentsand industry-wide regulations or practices thatcould materially adversely affect our business,financial condition and results of operations.

The current legislative and regulatoryclimate with regard to financial servicesmay adversely affect our operations.

The volume of legislative and regulatoryactivity relating to financial services hasincreased substantially in recent years,including with the passage of the Dodd-FrankAct. The Dodd-Frank Act could cause sweepingchanges in the consumer financial services

industry. We anticipate that the level ofenforcement actions and investigations byfederal regulators will increasecorrespondingly. The same factors that havecontributed to legislative, regulatory andenforcement activity at the federal level arelikely to contribute to heightened activity at thestate and provincial level. If we or our salesrepresentatives become subject to newrequirements or regulations, it could result inincreased litigation, regulatory risks, changes toour business model, a decrease in the numberof our securities-licensed representatives or areduction in the products we offer to our clientsor the profits we earn, which could have amaterial adverse effect on our business,financial condition and results of operations.

The inability of our subsidiaries to paydividends or make distributions orother payments to us in sufficientamounts would impede our ability tomeet our obligations.

We are a holding company, and we have nosignificant operations. Our primary asset is thecapital stock of our subsidiaries and ourprimary liability is the Citi note. We relyprimarily on dividends and other paymentsfrom our subsidiaries to meet our operatingcosts and other corporate expenses, as well asto pay dividends to our stockholders. The abilityof our subsidiaries to pay dividends to usdepends on their earnings, covenants containedin existing and future financing or otheragreements and on regulatory restrictions. Theability of our insurance subsidiaries to paydividends will further depend on their statutoryincome and surplus. If the cash we receive fromour subsidiaries pursuant to dividend paymentsand tax sharing arrangements is insufficient forus to fund our obligations or if a subsidiary isunable to pay dividends to us, we may berequired to raise cash through the incurrenceof debt, the issuance of equity or the sale ofassets. However, given the recent volatility inthe capital markets, there is no assurance thatwe would be able to raise cash by these means.



The jurisdictions in which our insurancesubsidiaries are domiciled impose certainrestrictions on their ability to pay dividends tous. In the United States, these restrictions arebased, in part, on the prior year’s statutoryincome and surplus. In general, dividends up tospecified levels are considered ordinary and maybe paid without prior approval. Dividends inlarger amounts are subject to approval by theinsurance commissioner of the state of domicile.In Canada, dividends can be paid, subject to thepaying insurance company continuing to meetthe regulatory requirements for capitaladequacy and liquidity and upon 15 days’minimum notice to OSFI. No assurance is giventhat more stringent restrictions will not beadopted from time to time by jurisdictions inwhich our insurance subsidiaries are domiciled,and such restrictions could have the effect,under certain circumstances, of significantlyreducing dividends or other amounts payable tous by our subsidiaries without prior approval byregulatory authorities. In addition, in the future,we may become subject to debt instruments orother agreements that limit our ability to paydividends. The ability of our insurancesubsidiaries to pay dividends to us is also limitedby our need to maintain the financial strengthratings assigned to us by the ratings agencies.

If any of our subsidiaries were to becomeinsolvent, liquidate or otherwise reorganize,we, as sole stockholder, will have no right toproceed against the assets of that subsidiary.Furthermore, with respect to our insurancesubsidiaries, we, as sole stockholder, will haveno right to cause the liquidation, bankruptcy orwinding-up of the subsidiary under theapplicable liquidation, bankruptcy or winding-uplaws, although, in Canada, we could apply forpermission to cause liquidation. The applicableinsurance laws of the jurisdictions in whicheach of our insurance subsidiaries is domiciledwould govern any proceedings relating to thatsubsidiary. The insurance authority of thatjurisdiction would act as a liquidator orrehabilitator for the subsidiary. Both creditorsof the subsidiary and policyholders (if aninsurance subsidiary) would be entitled topayment in full from the subsidiary’s assets

before we, as the sole stockholder, would beentitled to receive any distribution from thesubsidiary, which could adversely affect ourability to pay our operating costs and othercorporate expenses.

If the ability of our insurance or non-insurancesubsidiaries to pay dividends or make otherdistributions or payments to us is materiallyrestricted by regulatory requirements,bankruptcy or insolvency, or our need tomaintain our financial strength ratings, or islimited due to operating results or otherfactors, it could materially adversely affect ourability to pay our operating costs and othercorporate expenses.

We may not be able to raise capitalthrough debt or equity offerings ifneeded to meet our operating andregulatory capital requirements or forother purposes.

Historically, we have funded our new businesscapital needs from cash flows provided bypremiums paid on our in-force book of term lifeinsurance policies. As a result of the Citireinsurance transactions, the net cash flow weretain from our existing block of term lifeinsurance policies was reduced proportionatelyto the size of our retained interest. As we growour term life insurance business by issuing newpolicies, we will need to fund all of the upfrontcash requirements of issuing new term lifepolicies (such as commissions payable to thesales force and underwriting expenses), whichcosts generally exceed premiums collected in apolicy’s first year. In light of these anticipatednet cash outflows, there will be significantdemands on our liquidity in the near-tointermediate-term as we grow the size of ourretained block of term life insurance policies.Therefore, to meet our operating andregulatory requirements, we may incur debt orissue equity to fund working capital and capitalexpenditures or to make acquisitions and otherinvestments. If we raise funds through theissuance of debt securities or preferred equitysecurities, any such debt securities or preferred



equity securities issued will have liquidationrights, preferences and privileges senior tothose of the holders of our common stock. If weraise funds through the issuance of equitysecurities, the issuance will dilute theownership interest of our existing stockholders.There is no assurance that debt or equityfinancing will be available to us on acceptableterms, if at all. If we are not able to obtainsufficient financing, we may be unable tomaintain or grow our business.

Our inability to refinance the Citi notewith terms that are acceptable couldmaterially adversely affect our businessor results of operations.

Prior to the completion of the IPO, we issuedto Citi the $300.0 million Citi note. This notematures on March 31, 2015, and we are obligatedunder the terms of the Citi note to usecommercially reasonable efforts to refinance itat certain mutually agreeable dates, based oncertain conditions. As of December 31, 2011, theParent Company had investment grade creditratings from Moody’s, Standard & Poor’s andA.M. Best for the senior unsecured debt that itmay elect to offer pursuant to its existing shelfregistration statement at some time in thefuture. Nonetheless, if we are unable torefinance the Citi note on reasonable economicterms, we may incur significantly higher interestexpense or be unable to repay the Citi note infull upon maturity.

A significant change in the competitiveenvironment in which we operate couldnegatively affect our ability to maintainor increase our market share andprofitability.

We face competition in all of our business lines.Our competitors include financial servicescompanies, mutual fund companies, banks,investment management firms, broker-dealers,insurance companies and direct sales

companies. In many of our product lines, weface competition from competitors that havegreater market share or breadth of distribution,offer a broader range of products, services orfeatures, assume a greater level of risk, havelower profitability expectations or have higherfinancial strength ratings than we do. Asignificant change in this competitiveenvironment could materially adversely affectour ability to maintain or increase our marketshare and profitability.

The loss of key personnel couldnegatively affect our financial resultsand impair our ability to implement ourbusiness strategy.

Our success substantially depends on ourability to attract and retain key members ofour senior management team. The efforts,personality and leadership of our seniormanagement team have been, and will continueto be, critical to our success. The loss of serviceof our senior management team due todisability, death, retirement or some othercause could reduce our ability to successfullymotivate our sales representatives andimplement our business plan and have amaterial adverse effect on our business,financial condition and results of operations.Messrs. John Addison and Rick Williams, ourCo-Chief Executive Officers, are well regardedby our sales representatives and havesubstantial experience in our business and,therefore, are particularly important to ourcompany. Although both Messrs. Addison andWilliams, as well as our other senior executives,have entered into employment agreementswith us, there is no assurance that they willcomplete the term of their employmentagreements or renew them upon expiration.

In addition, the loss of key RVPs for any reasoncould negatively affect our financial results andcould impair our ability to attract new salesrepresentatives.



If one of our significant informationtechnology systems fails, if its securityis compromised or if the Internetbecomes disabled or unavailable, ourbusiness, financial condition and resultsof operations may be materiallyadversely affected.

Our business is highly dependent upon theeffective operation of our information technologysystems, which are centered on a mainframeplatform supported by servers housed at ourhome office and back-up site. We rely on thesesystems throughout our business for a variety offunctions. Our information technology systemsrun a variety of third-party and proprietarysoftware, including POL (our website portal to oursales force), our insurance administration system,Virtual Base Shop (our paperless office for RVPs),TurboApps (our point-of-sale data collection toolfor product/ recruiting applications), our licensingdecision and support system and ourcompensation system.

Despite the implementation of security andback-up measures, our information technologysystems may be vulnerable to physical orelectronic intrusions, viruses or other attacks,programming errors and similar disruptions. Thefailure of any one of these systems for anyreason could cause significant interruptions toour operations, which could have a materialadverse effect on our business, financialcondition and results of operations. We retainconfidential information in our informationtechnology systems, and we rely on industrystandard commercial technologies to maintainthe security of those systems. Anyone who isable to circumvent our security measures andpenetrate our information technology systemscould access, view, misappropriate, alter, ordelete information in the systems, includingpersonally identifiable client information andproprietary business information. In addition, anincreasing number of jurisdictions require thatclients be notified if a security breach results inthe disclosure of personally identifiable clientinformation. Any compromise of the security ofour information technology systems that results

in inappropriate disclosure or use of personallyidentifiable client information could damage ourreputation in the marketplace, deter people frompurchasing our products, subject us tosignificant civil and criminal liability and requireus to incur significant technical, legal and otherexpenses.

In the event of a disaster, our businesscontinuity plan may not be sufficient,which could have a material adverseeffect on our business, financialcondition and results of operations.

Our infrastructure supports a combination oflocal and remote recovery solutions for businessresumption in the event of a disaster. In theevent of either a campus-wide destruction of allbuildings or the inability to access our maincampus in Duluth, Georgia, our businessrecovery plan provides for our employees toperform their work functions via a dedicatedbusiness recovery site located 25 miles from ourmain campus or by remote access from anemployee’s home. However, in the event of a fullscale local or regional disaster, our businessrecovery plan may be inadequate, and ouremployees and sales representatives may beunable to carry out their work, which could havea material adverse effect on our business,financial condition and results of operations.

We may be materially adverselyaffected by currency fluctuations in theUnited States dollar versus theCanadian dollar.

A weaker Canadian dollar relative to the U.S.dollar would result in lower levels of reportedrevenues, net income, assets, liabilities andaccumulated other comprehensive income inour U.S. dollar financial statements. We havenot historically hedged against this exposure.Significant exchange rate fluctuations betweenthe U.S. dollar and Canadian dollar could have amaterial adverse effect on our financialcondition and results of operations.



Risks Related to Our RelationshipWith Warburg Pincus

If Warburg Pincus sells a significantequity interest in our company to athird party in a private transaction, ourstockholders may not realize anychange-of-control premium on sharesof our common stock that such partymay receive and we may becomesubject to the influence of a presentlyunknown third party.

Prior to the IPO, in February 2010, Citi enteredinto a securities purchase agreement with usand certain private equity funds managed byWarburg Pincus LLC (“Warburg Pincus”)pursuant to which, in mid-April 2010, Citi soldto Warburg Pincus 16,412,440 shares of ourcommon stock and warrants to purchase fromus 4,103,110 additional shares of our commonstock. As a result, Warburg Pincus owns asignificant equity interest in our company.Warburg Pincus has the ability, should it chooseto do so, to sell some or all of its shares of ourcommon stock in a privately negotiatedtransaction. The ability of Warburg Pincus toprivately sell its shares of our common stock,with no requirement for a concurrent offer tobe made to acquire all of the shares of ourcommon stock, could prevent our otherstockholders from realizing any change-of-control premium on their shares of ourcommon stock that may otherwise accrue toWarburg Pincus upon its private sale of ourcommon stock. Additionally, if Warburg Pincusprivately sells a significant equity interest inour company, we may become subject to theinfluence of a presently unknown third party.Such third party may have conflicts of interestwith those of other stockholders.

Warburg Pincus may be able to exertsignificant influence over us, which mayresult in conflicts of interest with us.

As of December 31, 2011, Warburg Pincus ownedapproximately 25% of our outstanding commonstock and has rights to acquire additional sharesof our common stock pursuant to its exercise ofwarrants. Warburg Pincus is entitled to nominatetwo directors to serve on our board. However,for as long as Warburg Pincus owns a significantamount of our common stock, Warburg Pincusmay be able to influence the outcome of allcorporate actions requiring stockholderapproval, including the election of directors.

Under the provisions of the securities purchaseagreement, the prior consent of Warburg Pincuswill be required in connection with specifiedcorporate actions by us. In addition, for so longas it owns a significant amount of our commonstock, Warburg Pincus will be entitled topreemptive type rights to purchase equitysecurities issued or proposed to be issued by us,which may limit our ability to access capital fromother sources in a timely manner.

Because Warburg Pincus’ interests may differfrom those of our other stockholders, actionsthat Warburg Pincus may take with respect tous may not be as favorable to otherstockholders as they are to Warburg Pincus.

ITEM 1B. UNRESOLVED STAFFCOMMENTS.

Not applicable.


Item 2. Properties

ITEM 2. PROPERTIES.

We lease all of our office, warehouse, printing,and distribution properties. Our executive andhome office operations for all of our domesticU.S. operations (except New York) are locatedin Duluth, Georgia. The leases for these spacesexpire in May 2013 and June 2013. We alsolease warehouse, continuation of business andprint/distribution space in or around Duluth,Georgia under leases expiring in June 2013,January 2018 and June 2018, respectively.

In September 2011, we signed an agreement tolease a new build-to-suit facility which willreplace and consolidate substantially all of ourexisting Duluth, Georgia-based executive andhome office operations. We expect the buildingto be complete and ready for occupancy in thesecond quarter of 2013. The initial lease termwill be 15 years.

NBLIC subleases general office space in LongIsland City, New York from a subsidiary of Citiunder a sublease expiring in August 2014.

In Canada, we lease general office space inMississauga, Ontario, under a lease expiring inApril 2018 and warehouse and printingoperation space in Mississauga, Ontario, undera lease also expiring in April 2018.

Each of these leased properties is used by eachof our operating segments, with the exception

of our NBLIC office space, which is not used byour investment and savings products segment.

While our existing facilities in Georgia areadequate, the move of our executive and homeoffice operations in 2013 will better support ouroperations. We believe that our existingfacilities in New York and Canada are adequatefor our current requirements and for ouroperations in the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS.

We are involved from time to time in legaldisputes, regulatory inquires and arbitrationproceedings in the normal course of business.Additional information regarding certain legalproceedings to which we are a party isdescribed under “Contingent Liabilities” in Note16 to our consolidated and combined financialstatements, which are included elsewhere inthis report, and such information isincorporated herein by reference. As of thedate of this report, we do not believe anypending legal proceeding to which Primerica orany of its subsidiaries is a party is required tobe disclosed pursuant to this item.

ITEM 4. MINE SAFETYDISCLOSURES.

Not applicable.


Item X. Executive Officers of the Registrant

ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT

Our executive officers are elected or appointed by our board of directors and hold office until theirsuccessors are elected and qualified, or until their death, resignation or removal, subject to the termsof applicable employment agreements. The name, age at February 28, 2012 and position of each ofour executive officers are presented below.

Name Age Position

D. Richard Williams 55 Chairman of the Board and Co-Chief Executive OfficerJohn A. Addison, Jr. 54 Chairman of Primerica Distribution, Co-Chief Executive Officer and

DirectorMichael Adams 55 Executive Vice President and Chief Business Technology OfficerChess Britt 55 Executive Vice President and Chief Marketing OfficerJeffrey S. Fendler 55 President of Primerica LifeWilliam A. Kelly 56 President of PFS InvestmentsGregory C. Pitts 49 Executive Vice President and Chief Operating OfficerAlison S. Rand 44 Executive Vice President and Chief Financial OfficerPeter W. Schneider 55 Executive Vice President, General Counsel, Corporate Secretary and

Chief Administrative OfficerGlenn J. Williams 52 President

Set forth below is biographical informationconcerning our executive officers.

D. Richard Williams was elected to our Boardof Directors and began serving as Chairman inOctober 2009. He has served as our Co-ChiefExecutive Officer since 1999 and has served ourcompany in various capacities since 1989.Mr. Williams earned both his B.S. degree in 1978and his M.B.A. in 1979 from the Wharton Schoolof the University of Pennsylvania. He serves onthe boards of trustees for the Woodruff ArtsCenter and the Anti-Defamation LeagueSoutheast Region.

John A. Addison, Jr. was elected to our Boardof Directors in October 2009. He is Chairman ofPrimerica Distribution, has served as ourCo-Chief Executive Officer since 1999 and hasserved our company in various capacities since1982. Mr. Addison earned his B.A. in economicsfrom the University of Georgia in 1979 and hisM.B.A. from Georgia State University in 1988.

Michael Adams has served as Chief BusinessTechnology Officer since April 2010, asExecutive Vice President responsible forbusiness technology since 1998 and in variouscapacities at our company since 1980.Mr. Adams earned his B.A. in business andeconomics from Hendrix College in 1978.

Chess Britt has served as Chief MarketingOfficer since April 2010, as Executive VicePresident responsible for marketingadministration and field communications since1995 and in various capacities at our companysince 1982. Mr. Britt earned his B.A. in businessadministration from the University of Georgia in1978. He serves on the board of directors of theGwinnett Chamber of Commerce.

Jeffrey S. Fendler has served as President ofPrimerica Life, a subsidiary of Primerica, since2005 and in various capacities at our companysince 1980. Mr. Fendler received a B.A. ineconomics from Tulane University. He is amember of Operation Hope’s National Boardand is the Co-Chair of Operation Hope’sSoutheastern Region Board.

William A. Kelly has overseen Primerica LifeInsurance Company of Canada, a subsidiary ofPrimerica, since 2009, has served as Presidentof PFS Investments, a subsidiary of Primerica,since 2005 and has served our company invarious capacities since 1985. Mr. Kellygraduated from the University of Georgia in1979 with a B.B.A. in accounting.


Item X. Executive Officers of the Registrant

Gregory C. Pitts has served as Executive VicePresident and Chief Operating Officer sinceDecember 2009, as Executive Vice Presidentsince 1995 with responsibilities within the TermLife Insurance and Investment and SavingsProducts segments and information technologydivision and in various capacities at ourcompany since 1985. Mr. Pitts earned his B.A. ingeneral business from the University ofArkansas in 1985.

Alison S. Rand has served as Executive VicePresident and Chief Financial Officer since2000 and in various capacities at our companysince 1995. Prior to 1995, Ms. Rand worked inthe audit department of KPMG LLP. Ms. Randearned her B.S. in accounting from theUniversity of Florida in 1990 and is a certifiedpublic accountant. She is a board member ofthe Georgia Council of Economic Education, theAtlanta Children’s Shelter and the PartnershipAgainst Domestic Violence. She also serves on

the Terry College of Business ExecutiveEducation CFO Roundtable.

Peter W. Schneider has served as ExecutiveVice President, General Counsel, ChiefAdministrative Officer and Corporate Secretarysince 2000. He worked at the law firm ofRogers & Hardin as a partner from 1988 to2000. Mr. Schneider earned both his B.S. inpolitical science and industrial relations in 1978and J.D. in 1981 from the University of NorthCarolina at Chapel Hill. He serves on the boardsof directors of the Georgia Chamber ofCommerce, the Northwest YMCA and theCarolina Center for Jewish Studies.

Glenn J. Williams has served as Presidentsince 2005, as Executive Vice President from2000 to 2005 and in various capacities at ourcompany since 1983. Mr. Williams earned hisB.S. in education from Baptist University ofAmerica in 1981. He serves on the board of theGeorgia Baptist Foundation.


Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchasesof Equity Securities

PART II

ITEM 5. MARKET FORREGISTRANT’S COMMON EQUITY,RELATED STOCKHOLDER MATTERSAND ISSUER PURCHASES OFEQUITY SECURITIES.

Quarterly Common Stock Prices andDividends

Our common stock is listed for trading on theNew York Stock Exchange (“NYSE”) under thesymbol “PRI”. The quarterly high and low salesprices for our common stock, as reported onthe NYSE for the periods since our IPO onApril 1, 2010, as well as dividends paid perquarter were as follows:

High Low Dividend

2011

4th quarter $23.85 $20.36 $0.03

3rd quarter 22.45 18.72 0.03

2nd quarter 25.64 19.94 0.03

1st quarter 26.20 24.18 0.01

High Low Dividend

2010

4th quarter $25.48 $20.30 $0.01

3rd quarter 23.78 19.74 0.01

2nd quarter 25.89 18.61 n/a

Dividends

Following the IPO, we have paid quarterlydividends to our stockholders totalingapproximately $7.3 million in 2011 andapproximately $1.5 million in 2010. In 2010, wepaid dividends to Citi of approximately $3.49billion and we also distributed all of the issuedand outstanding capital stock of Prime Re toCiti, all in connection with our corporatereorganization.

We currently expect to continue to payquarterly cash dividends to holders of ourcommon stock. Our payment of cash dividendsis at the discretion of our board of directors inaccordance with applicable law after taking intoaccount various factors, including our financialcondition, operating results, current andanticipated cash needs and plans for growth.Under Delaware law, we can only pay dividendseither out of surplus or out of the current orthe immediately preceding year’s earnings.Therefore, no assurance is given that we willcontinue to pay any dividends to our commonstockholders, or as to the amount of any suchdividends.

We are a holding company and have nooperations. Our primary asset is the capitalstock of our operating subsidiaries and ourprimary liability is the Citi note. The states inwhich our U.S. insurance company subsidiariesare domiciled impose certain restrictions on ourinsurance subsidiaries’ ability to pay dividendsto us. Our Canadian subsidiary can paydividends subject to meeting regulatoryrequirements for capital adequacy and liquiditywith appropriate minimum notice to OSFI. Inaddition, in the future, we may become subjectto debt instruments or other agreements thatlimit our ability to pay dividends. See Note 15 toour consolidated and combined financialstatements.

Holders

As of January 31, 2012, we had 34 holders ofrecord of our common stock.



Issuer Purchases of Equity Securities

During the quarter ended December 31, 2011, we repurchased shares of our common stock as follows.

Period

Total numberof sharespurchased

Averageprice paidper share

Total number of sharespurchased as part ofpublicly announcedplans or programs

Maximum number ofshare that may yet bepurchased under theplans or programs

October 1—31, 2011 — $ — — —

November 1—30, 2011 (1) 8,920,606 22.42 — —

December 1—31, 2011 — — — —

Total 8,920,606 $22.42 — —

(1) Repurchased from Citi for a total purchase price of $200.0 million.

Securities Authorized for Issuanceunder Equity Compensation Plans

We have two compensation plans under which our equity securities are authorized for issuance. ThePrimerica, Inc. Amended and Restated 2010 Omnibus Incentive Plan was approved by ourstockholders in May 2011. The Primerica, Inc. Stock Purchase Plan for Agents and Employees wasapproved by our sole stockholder in March 2010. The following table sets forth certain informationrelating to these equity compensation plans at December 31, 2011.

Number of securitiesto be issued upon

exercise ofoutstanding options,warrants and rights

Weighted averageexercise price of

outstanding options,warrants and rights

Number of securitiesremaining availablefor future issuance

Equity compensation plans approved bystockholders:

Primerica, Inc. Amended and Restated2010 Omnibus Incentive Plan 3,185,602(1) — (2) 4,523,767(3)

Primerica, Inc. Stock Purchase Plan forAgents and Employees — — 2,312,707(4)

Total 3,185,602 — 6,836,474

Equity compensation plans notapproved by stockholders n/a n/a n/a

(1) Consists of shares to be issued in connection with outstanding restricted stock units (“RSUs”).(2) No options, warrants or rights have been issued or are outstanding under the plan.(3) The number of shares available for future issuance is 10,800,000 less the cumulative number of awards granted under

the plan plus the cumulative number of awards canceled under the plan.(4) The number of shares available for future issuance is 2,500,000 less the cumulative number of shares issued under the

plan.



Stock Performance Table

The following graph compares the performance of our common stock since the IPO to the Russell2000 Index and the Standard & Poor’s Insurance Index (S&P Insurance Index) by assuming $100 wasinvested in each investment option as of April 1, 2010, the date of the IPO. The Russell 2000 Indexmeasures the performance of the small-cap segment in the United States. The S&P Insurance Indexis a capitalization-weighted index of domestic equities traded on the NYSE and NASDAQ.

$80

$90

$100

$110

$120

$130

$140

$160

$150

$170

4/1

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/10

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/11

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/10

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/11

2/1

/11

3/1

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4/1

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/11

7/1

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11/1

/10

9/1

/11

10/1

/11

11/1

/11

12/1

/11

PRI TTR Russell 2000 S&P 500 Ins.


Item 6. Selected Financial Data

ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data should be read inconjunction with the section entitled“Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” andthe consolidated and combined financialstatements and accompanying notes includedelsewhere in this report.

The selected historical income statement data maynot be indicative of the revenues and expenses thatwould have existed or resulted if we had operatedindependently of Citi. Similarly, the selected historicalbalance sheet data as of and prior to December 31,2009 may not be indicative of the assets andliabilities that would have existed or resulted if wehad operated independently of Citi. The selectedhistorical financial data are not necessarily indicative

of the financial position or results of operations as ofany future date or for any future period.

Our corporate reorganization has resulted and willcontinue to result in financial performance that ismaterially different from that reflected in thehistorical financial data that appear elsewhere inthis report. Due to the timing of our corporatereorganization and its impact on our financialposition and results of operations, year-over-yearcomparisons of our financial position and resultsof operations will reflect significantnon-comparable accounting transactions andaccount balances. See “Management’s Discussionand Analysis of Financial Condition and Results ofOperations — The Transactions.”


2011 2010 2009 2008 (3) 2007

(In thousands, except per-share amounts)Statements of income dataRevenues:Direct premiums $2,229,467 $ 2,181,074 $ 2,112,781 $2,092,792 $2,003,595Ceded premiums (1,703,075) (1,450,367) (610,754) (629,074) (535,833)

Net premiums 526,392 730,707 1,502,027 1,463,718 1,467,762Commissions and fees 412,979 382,940 335,986 466,484 545,584Net investment income 108,601 165,111 351,326 314,035 328,609Realized investment gains (losses), including

other-than-temporary impairment losses 6,440 34,145 (21,970) (103,480) 6,527Other, net 48,681 48,960 53,032 56,187 41,856

Total revenues 1,103,093 1,361,863 2,220,401 2,196,944 2,390,338

Benefits and expenses:Benefits and claims 242,696 317,703 600,273 938,370 557,422Amortization of deferred policy acquisition

costs 119,348 168,035 381,291 144,490 321,060Sales commissions 191,306 179,924 162,756 248,020 296,521Insurance expenses 61,109 75,503 148,760 141,331 137,526Insurance commissions 19,297 19,904 34,388 23,932 28,003Interest expense 27,968 20,872 — — —Goodwill impairment — — — 194,992 —Other operating expenses 165,525 180,779 132,978 152,773 136,634

Total benefits and expenses 827,249 962,720 1,460,446 1,843,908 1,477,166

Income before income taxes 275,844 399,143 759,955 353,036 913,172Income taxes 97,568 141,365 265,366 185,354 319,538

Net income $ 178,276 $ 257,778 $ 494,589 $ 167,682 $ 593,634

Earnings per share — basic $ 2.39 $ 3.43(1) n/a n/a n/a

Earnings per share — diluted $ 2.36 $ 3.40(1) n/a n/a n/a

Dividends per common share $ 0.10 $ 0.02 n/a n/a n/a


Item 6. Selected Financial Data

December 31,

2011 2010 2009 (2) 2008 (2)(3) 2007 (2)

(In thousands)

Balance sheet data

Investments $ 2,021,504 $ 2,153,584 $ 6,471,448 $5,355,458 $5,494,495

Cash and cash equivalents 136,078 126,038 602,522 302,354 625,350

Due from reinsurers 3,855,890 3,731,634 867,242 838,906 831,942

Deferred policy acquisitioncosts, net 1,050,637 853,211 2,789,905 2,727,422 2,510,045

Total assets 9,998,544 9,884,306 13,715,144 11,515,027 13,015,411

Future policy benefits 4,614,860 4,409,183 4,197,454 4,023,009 3,650,192

Note payable 300,000 300,000 — — —

Total liabilities 8,575,903 8,452,814 8,771,371 7,403,041 8,235,446

Stockholders’ equity 1,422,641 1,431,492 4,943,773 4,111,986 4,779,965

(1) Calculated on a pro forma basis using weighted-average shares, including the shares issued or issuable upon lapse ofrestrictions following our April 1, 2010 corporate reorganization as though they had been issued and outstanding onJanuary 1, 2010.

(2) Total assets and liabilities have been adjusted to reflect the immaterial error correction relating to our securities lendingprogram.

(3) Includes a $191.7 million pre-tax charge due to a change in our DAC and reserve estimation approach implemented as ofDecember 31, 2008.

ITEM 7. MANAGEMENT’SDISCUSSION AND ANALYSIS OFFINANCIAL CONDITION ANDRESULTS OF OPERATIONS.

Management’s Discussion and Analysis ofFinancial Condition and Results of Operations(“MD&A”) is intended to inform the readerabout matters affecting the financial conditionand results of operations of Primerica, Inc. (the“Parent Company”) and its subsidiaries(collectively, “we” or the “Company”) for thethree-year period ended December 31, 2011. Asa result, the following discussion should be readin conjunction with the consolidated andcombined financial statements andaccompanying notes that are included herein.This discussion contains forward-lookingstatements that constitute our plans, estimatesand beliefs. These forward-looking statementsinvolve numerous risks and uncertainties,including, but not limited to, those discussed in“Risk Factors.” Actual results may differmaterially from those contained in any forward-looking statements.

This MD&A is divided into the followingsections:

• The Transactions

• Business Trends and Conditions

• Factors Affecting Our Results

• Critical Accounting Estimates

• Results of Operations

• Financial Condition

• Liquidity and Capital Resources

The Transactions

We refer to the corporate reorganization, thereinsurance transactions, the concurrenttransactions and the private sale describedbelow collectively as the “Transactions.”

The corporate reorganization. The ParentCompany was incorporated in Delaware inOctober 2009 by Citi to serve as a holdingcompany for the life insurance and financialproduct distribution businesses that we have


Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

operated for more than 30 years. At such time,we issued 100 shares of common stock to Citi.These businesses, which prior to April 1, 2010,were wholly owned indirect subsidiaries of Citi,were transferred to us in a reorganizationpursuant to which we issued to a wholly ownedsubsidiary of Citi: (i) 74,999,900 shares of ourcommon stock (of which 24,564,000 shares ofcommon stock were subsequently sold by Citi inour IPO; 16,412,440 shares of common stockwere subsequently sold by Citi in mid-April 2010to Warburg Pincus for a purchase price of$230.0 million (the “private sale”); and5,021,412 shares of common stock wereimmediately contributed back to us for equityawards granted to our employees and salesforce leaders in connection with our IPO),(ii) warrants to purchase from us an aggregateof 4,103,110 shares of our common stock (whichwere transferred by Citi to Warburg Pincuspursuant to the private sale), and (iii) the Citinote. Prior to April 1, 2010, we had no materialassets or liabilities. Upon completion of theTransactions, the Parent Company’s primaryasset was and continues to be the capital stockof its operating subsidiaries and its primaryliability was and continues to be the Citi note.

The reinsurance transactions. In March2010, we entered into coinsurance agreements(the “Citi reinsurance agreements”) with twoaffiliates of Citi and Prime Re, then a whollyowned subsidiary of Primerica Life (collectively,the “Citi reinsurers”). We refer to the executionof these agreements as the “Citi reinsurancetransactions.” Under these agreements, weceded between 80% and 90% of the risks andrewards of our term life insurance policies thatwere in force at year-end 2009. We alsotransferred to the Citi reinsurers the accountbalances in respect of the coinsured policiesand approximately $4.0 billion of assets tosupport the statutory liabilities assumed by theCiti reinsurers, and we distributed to Citi all ofthe issued and outstanding common stock ofPrime Re. As a result, the Citi reinsurancetransactions reduced the amount of our capitaland substantially reduced our insurance

exposure. We retained our operating platformand infrastructure and continue to administer allpolicies subject to these coinsurance agreements.

The concurrent transactions. During thefirst quarter of 2010, we declared distributionsto Citi of approximately $703 million. We alsorecognized the income attributable to thepolicies underlying the Citi reinsurancetransactions as well as the income earned onthe invested assets backing the reinsurancebalances and the extraordinary dividendsdeclared in the first quarter. These items werereflected in the statement of income for thethree months ended March 31, 2010.Furthermore, because the Citi reinsurancetransactions were given retroactive effect backto January 1, 2010, we recognized a return ofcapital on our balance sheet for the incomeearned on the reinsured policies during thethree months ended March 31, 2010.

In April 2010, we completed the followingadditional concurrent transactions:

• we completed the IPO pursuant to theSecurities Act of 1933, as amended, andour stock began trading under the tickersymbol “PRI” on the NYSE;

• we issued equity awards for 5,021,412shares of our common stock to certain ofour employees, including our officers, andcertain of our sales force leaders, including221,412 shares which were issued uponconversion of existing equity awards in Citishares that had not yet fully vested; and

• Citi accelerated vesting of certain existingCiti equity awards triggered by the IPO andthe private sale.

Additionally, we made elections with aneffective date of April 1, 2010 underSection 338(h)(10) of the Internal RevenueCode (the “Section 338(h)(10) elections”),which resulted in reductions to stockholders’equity of $174.7 million and correspondingadjustments to deferred tax balances.

During the first quarter of 2010, our federalincome tax return was included as part of Citi’s



consolidated federal income tax return. OnMarch 30, 2010, in anticipation of our corporatereorganization, we entered into a taxseparation agreement with Citi. In accordancewith the tax separation agreement, Citi isresponsible for, and shall indemnify and holdthe Company 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, 2010, theclosing date of the IPO.

The private sale. In February 2010, Citientered into a securities purchase agreementwith Warburg Pincus and us pursuant to which,in mid-April 2010, 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 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 statements of income for theyears ended December 31, 2011 and 2010 presentincome that is significantly lower than in 2009.

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, 2010 will not beindicative of or comparable to future actualresults. Furthermore, actual results for the year

ended December 31, 2010 will not becomparable to results in future years as theyare affected by the inclusion of three monthsof operations prior to the Transactions.

Business Trends and Conditions

The 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 investmentand spending decisions by middle incomeconsumers, our primary clients. Theseconditions and factors also impact prospectiverecruits’ perceptions of the businessopportunity that becoming a Primerica salesrepresentative offers, which can drive ordampen recruiting. Consumer spending andborrowing levels remain under pressure, asconsumers take a more conservative financialposture including reevaluating their savingsand debt management goals. As overall marketand economic conditions have improved andstabilized from the lows experienced during therecent economic downturn, sales and the valueof consumer investment products across a widespectrum of asset classes have improved.

Recruiting and Sales Representatives.Recruiting increased in 2011 to 244,756 newrecruits from 231,390 new recruits in 2010,benefiting from a surge in new recruitsfollowing our North American convention heldin June 2011 at the Georgia Dome in Atlanta. Webelieve that the surge resulted from both apromotion that lowered the IndependentBusiness Application (“IBA”) licensing feecharged to new recruits from $99 to $50through the end of July 2011 and new productand field technology initiatives announced atthe 2011 convention.

Our ability to increase the size of our salesforce is largely based on the success of our



recruiting efforts and our ability to train andmotivate recruits to get licensed. We believethat recruiting levels are an important advanceindicator of sales force trends, and growth inrecruiting is usually indicative of future growthin the overall size of the sales force. However,because new recruits do not always obtainlicenses, recruiting results do not always resultin commensurate increases in the size of ourlicensed sales force.

The size of our life-licensed sales force declinedto 91,176 sales representatives as ofDecember 31, 2011 from 94,850 salesrepresentatives at December 31, 2010 as newlife license growth lagged recruiting growthprimarily due to a reduction in the licensingpull-through rate and an increase interminations. Historically, our pull-through ratefollowing a recruiting surge has been lowerthan in other periods.

Term Life Insurance Product Sales and FaceAmount In Force. We issued 237,535 new lifeinsurance policies in 2011, compared with223,514 new policies in 2010. Sales of our termlife insurance products increased in 2011 largelyas a result of our June 2011 introduction ofTermNow, our new rapid issue term lifeinsurance product for face values of $250,000and below, and increased productivity comingout of our 2011 convention.

While our average issued face amount wasapproximately $248,400 in 2011 compared withapproximately $267,000 in 2010, total faceamount in force increased to approximately$664.96 billion as of December 31, 2011compared with approximately $656.79 billion ayear ago, largely due to persistency thatcontinued to improve relative to prior year andthe stronger Canadian dollar. These driverswere partially offset by the decline in theaverage face amount of our newly issuedpolicies, primarily as a result of TermNow sales.

Investment and Savings Product Sales andAsset Values. Investment and savingsproducts sales were higher in 2011, totaling$4.27 billion, compared with $3.62 billion in

2010. We believe the increase in sales reflectsthe impact of internal exchanges for variableannuities offering enhanced guarantee termsas well as increasing demand for our productsas a result of improving financial marketconditions.

The 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 increased to $34.87 billion in 2011,from $31.91 billion in 2010, while the period-endasset value declined to $33.66 billion atDecember 31, 2011, compared with $34.87billion a year ago. The 2011 decrease inperiod-end asset values relative to the 2011increase in average client asset values reflectsthe magnitude and timing of current and prior-year market movements.

Invested Asset Portfolio Size andYields. Our portfolio continues to reflectstrong market value gains as interest rates andspreads continue to remain low. As ofDecember 31, 2011, our invested assets,excluding policy loans and cash, had a cost oramortized cost basis of $1.83 billion and a netunrealized gain of $153.2 million, comparedwith $1.95 billion at cost or amortized cost andnet unrealized gain of $157.4 million atDecember 31, 2010.

Factors Affecting Our Results

Term Life Insurance Segment. Our TermLife Insurance segment results are primarilydriven by sales, accuracy of our pricingassumptions, terms and use of reinsurance,investment income and expenses.

Sales and policies in force. Sales of new termpolicies and the size and characteristics of ourin-force book of policies are vital to our resultsover the long term. Premium revenue isrecognized when due over the term of thepolicy and acquisition expenses are generallydeferred and amortized ratably with the levelpremiums of the underlying policies. However,because we incur significant cash outflows at or



about the time policies are issued, including thepayment of sales commissions andunderwriting costs, changes in life insurancesales volume will have a more immediate effecton our cash flows.

Historically, we have found that while salesvolume of term life insurance products mayvary between fiscal periods based on a varietyof factors, the productivity of our individualsales representatives remains within arelatively narrow range and, consequently, oursales volume over the longer term generallycorrelates to the size of our sales force. Theaverage number of life-licensed salesrepresentatives and the number of term lifeinsurance policies issued, as well as the averagemonthly rate of new policies issued per life-licensed sales representative, were as follows:


2011 2010 2009

Average number of life-licensed salesrepresentatives 91,855 96,840 100,569

Number of new policies issued 237,535 223,514 233,837Average monthly rate of new policies

issued per life-licensed salesrepresentative 0.22x(1) 0.19x 0.19x

(1) Our 2011 processing cycle provided five additional days of policy processing.Excluding the policies processed during these additional days, the average monthlyrate of new policies issued per life licensed sales representative would have been.21x for 2011.

During 2011, the increased productivity of ourindividual sales representatives was driven bythe post-convention recruiting surge discussedearlier and sales of our new TermNow product.The elevated level of new recruits generatedmore warm market referrals and salesopportunities as new recruits set appointmentswith their field trainers to begin the salestraining process. Further, our new TermNowproduct uses prescription databases to beginthe underwriting process in real time at thepoint of application so TermNow policies areissued faster than our prior products whichrequired oral fluid testing. This underwritingprocess has led to an increase in, andacceleration of, issued policies since theintroduction of TermNow in June 2011. As a

result of these two factors, productivity for 2011was at the high end of our historical range.

Pricing assumptions. Our pricing methodologyis intended to provide us with appropriate profitmargins for the risks we assume. We determinepricing classifications based on the coveragesought, such as the size and term of the policy,and certain policyholder attributes, such as ageand health. In addition, we utilize unisex ratesfor our term life insurance policies. The pricingassumptions that underlie our rates are basedupon our best estimates of mortality,persistency and investment yields at the timeof issuance, sales force commission rates, issueand underwriting expenses, operating expensesand the characteristics of the insureds,including sex, age, underwriting class, productand amount of coverage. Our results will be

affected to the extentthere is a variancebetween our pricingassumptions and actualexperience.

• Persistency. We usehistorical experience toestimate pricingassumptions forpersistency rates.Persistency is a measureof how long our

insurance policies stay in force. As ageneral matter, persistency that is lowerthan our pricing assumptions adverselyaffects our results over the long termbecause we lose the recurring revenuestream associated with the policies thatlapse. Determining the near-term effects ofchanges in persistency is morecomplicated. When persistency is lowerthan our pricing assumptions, we mustaccelerate the amortization of DAC. Theresultant increase in amortization expenseis offset by a corresponding release ofreserves associated with lapsed policies,which causes a reduction in benefits andclaims expense. The reserves associatedwith a given policy will change over theterm of such policy. As a general matter,



reserves are lowest at the inception of apolicy term and rise steadily to a peakbefore declining to zero at the expirationof the policy term. Accordingly, dependingon when the lapse occurs in relation to theoverall policy term, the reduction inbenefits and claims expense may begreater or less than the increase inamortization expense and, consequently,the effects on earnings for a given periodcould be positive or negative. Persistencylevels are meaningful to our results to theextent actual experience deviates from thepersistency assumptions used to price ourproducts.

• Mortality. We use historical experience toestimate pricing assumptions for mortality.Our profitability is affected to the extentactual mortality rates differ from thoseused in our pricing assumptions. Wemitigate a significant portion of ourmortality exposure through reinsurance.Variances between actual mortalityexperience and the assumptions andestimates used by our reinsurers affect thecost and, potentially, the availability ofreinsurance.

• Investment Yields. We generally use alevel investment yield rate which reflectsyields currently available. For 2011 and2010 new issues, we are using anincreasing interest rate assumption toreflect the historically low interest rateenvironment. Both the DAC asset and thereserve liability increase with the assumedinvestment yield rate. Since the DAC assetis higher than the reserve liability in theearly years of a policy, a lower assumedinvestment yield generally will result inlower profits. In the later years, when thereserve liability is higher than the DACasset, a lower assumed investment yieldgenerally will result in higher profits.Actual investment yields will impact the netinvestment income allocated to the TermLife Insurance segment, but will not impactthe DAC asset or reserve liability.

Reinsurance. We use reinsurance extensively,which has a significant effect on our results ofoperations. Since the mid-1990s, we havereinsured between 60% and 90% of themortality risk on our U.S. term life insurancepolicies on a quota share YRT basis. We havenot generally reinsured the mortality risk onCanadian term life insurance polices. YRTreinsurance permits us to fix future mortalityexposure at contractual rates by policy class.To the extent actual mortality experience ismore or less favorable than the contractualrate, the reinsurer will earn incremental profitsor bear the incremental cost, as applicable. Incontrast to coinsurance, which is intended toeliminate all risks (other than counterparty riskof the reinsurer) and rewards associated with aspecified percentage of the block of policiessubject to the reinsurance arrangement, theYRT reinsurance arrangements we enter intoare intended only to reduce volatilityassociated with variances between estimatedand actual mortality rates.

On March 31, 2010, we entered into variouscoinsurance agreements with the Citi reinsurersto cede between 80% and 90% of our term lifeinsurance policies that were in force at year-end2009 as part of our corporate reorganization.

The effect of our reinsurance arrangements onceded premiums and benefits and expenses onour statement of income follows:

• Ceded premiums. Ceded premiums arethe premiums we pay to reinsurers. Theseamounts are deducted from the directpremiums we earn to calculate our netpremium revenues. Similar to directpremium revenues, ceded coinsurancepremiums remain level over the initial termof the insurance policy. Ceded YRTpremiums increase over the period that thepolicy has been in force. Accordingly,ceded YRT premiums generally constitutean increasing percentage of directpremiums over the policy term.

• Benefits and claims. Benefits and claimsinclude incurred claim amounts andchanges in future policy benefit reserves.



Reinsurance reduces incurred claims indirect proportion to the percentage ceded.

• Amortization of DAC. Amortization ofDAC is reduced on a pro-rata basis for thebusiness coinsured with Citi. There is noimpact on amortization of DAC associatedwith our YRT contracts.

• Insurance expenses. Insurance expensesare reduced by the allowances receivedfrom coinsurance, including the businessreinsured with Citi.

We may alter our reinsurance practices at anytime due to the unavailability of YRTreinsurance at attractive rates or theavailability of alternatives to reduce our riskexposure. We presently intend to continueceding approximately 90% of our U.S. mortalityrisk on new business issued subsequent to theCiti reinsurance transactions.

Net investment income. Term Life Insurancesegment net investment income is composed oftwo elements: allocated net investment incomeand the market return associated with thedeposit asset underlying the 10% reinsuranceagreement we executed in connection with theTransactions. We allocate net investmentincome by applying the ratio of: (i) the bookvalue of the invested assets allocated to theTerm Life Insurance segment to the book valueof the Company’s total invested assets to(ii) total net investment income, net of theincome associated with the 10% reinsuranceagreement. Invested assets are allocated to theTerm Life Insurance segment based on thebook value of the invested assets necessary tomeet statutory reserve requirements and ourtargeted capital objectives. Net investmentincome is also impacted by the performance ofour invested asset portfolio and the marketreturn on the deposit asset which can beaffected by interest rates, credit spreads andthe mix of invested assets.

Expenses. Results are also affected byvariances in client acquisition, maintenance andadministration expense levels.

Investment and Savings Products Segment.Our Investment and Savings Products segmentresults are primarily driven by sales, the valueof assets in client accounts for which we earnongoing management, service and distributionfees and the number of fee generatingaccounts we administer.

Sales. We earn commissions and fees, such asdealer re-allowances, and marketing andsupport fees, based on sales of mutual fundproducts and annuities. Sales of investment andsavings products are influenced by the overalldemand for investment products in the UnitedStates and Canada, as well as by the size andproductivity of our sales force. We generallyexperience seasonality in our Investment andSavings Products segment results due to ourhigh concentration of sales of retirementaccount products. While we believe the size ofour sales force is a factor in driving salesvolume in this segment, there are a number ofother variables, such as economic and marketconditions, that may have a significantlygreater effect on sales volume in any givenfiscal period.

Asset values in client accounts. We earnmarketing and distribution fees (trailcommissions or, with respect to U.S. mutualfunds, 12b-1 fees) and management fees onmutual fund, annuity, managed account andsegregated funds products based on assetvalues in client accounts. Our investment andsavings products primarily consist of fundscomposed of equity securities. Asset values areinfluenced by new product sales, ongoingcontributions to existing accounts, redemptionsand changes in equity markets, net of expenses.

Accounts. We earn recordkeeping fees foradministrative functions we perform on behalfof several of our mutual fund providers andcustodial fees for services as a non-bankcustodian for certain of our mutual fund clients’retirement plan accounts.

Sales Mix. While our investment and savingsproducts all have similar long-term earningscharacteristics, our results in a given fiscalperiod will be affected by changes in the overallmix of products within these broad categories.



Examples of changes in the sales mix thatinfluence our results include the following:

• sales of a higher proportion of mutual fundproducts of the several mutual fundfamilies for which we act as recordkeeperwill generally increase our earningsbecause we are entitled to recordkeepingfees on these accounts;

• sales of variable annuity products in theUnited States will generate higherrevenues in the period such sales occurthan sales of other investment productsthat either generate lower upfrontrevenues or, in the case of segregatedfunds, no upfront revenues;

• sales and administration of a higherproportion of mutual funds that enable usto earn marketing and support fees willincrease our revenues and profitability;

• sales of a higher proportion of retirementproducts of several mutual fund familieswill tend to result in higher revenuegeneration due to our ability to earncustodial fees on these accounts; and

• sales of a higher proportion of managedaccounts products will generally extend thelength of time over which revenues can beearned because we are entitled torevenues based on assets undermanagement for these accounts.

Corporate and Other Distributed ProductsSegment. We earn revenues and paycommissions and referral fees for various otherinsurance products, prepaid legal services andother financial products, all of which are originatedby third parties. NBLIC, our New York life insurancesubsidiary, also underwrites a mail-order studentlife policy and a short-term disability benefit policy,neither of which is distributed by our sales force,and has in-force policies from several discontinuedlines of insurance.

The Corporate and Other Distributed Productssegment is affected by corporate income andexpenses not allocated to our other segments,net investment income (other than netinvestment income allocated to our Term Life

Insurance segment), general and administrativeexpenses (other than expenses that are allocatedto our Term Life Insurance or Investment andSavings Products segments), management equityawards, equity awards granted to our sales forceleaders at the time of our IPO, interest expenseon the Citi note and realized gains and losses onour invested asset portfolio.

Critical Accounting Estimates

We prepare our financial statements inaccordance with U.S. GAAP. These principles areestablished primarily by the FASB. Thepreparation of financial statements in conformitywith U.S. GAAP requires us to make estimatesand assumptions based on currently availableinformation when recording transactionsresulting from business operations. Oursignificant accounting policies are described inNote 1 to our consolidated and combined financialstatements. The most significant items on thebalance sheet are based on fair valuedeterminations, accounting estimates andactuarial determinations which are susceptible tochanges in future periods and which affect ourresults of operations and financial position.

The estimates that we deem to be most critical toan understanding of our results of operations andfinancial position are those related to thevaluation of investments, reinsurance, DAC, futurepolicy benefit reserves, and income taxes. Thepreparation and evaluation of these criticalaccounting estimates involve the use of variousassumptions developed from management’sanalyses and judgments. Subsequent experienceor use of other assumptions could producesignificantly different results.

Invested Assets

We hold primarily fixed-maturity securities, includingbonds and redeemable preferred stocks, and equitysecurities, including common and non-redeemablepreferred stock. We have classified these investedassets as available-for-sale, except for the securitiesof our U.S. broker-dealer subsidiary, which we haveclassified as trading securities. All of these securitiesare carried at fair value.



Fair value. Fair value is the price that wouldbe received upon the sale of an asset in anorderly transaction between marketparticipants at the measurement date. Fairvalue measurements are based uponobservable and unobservable inputs.Observable inputs reflect market data obtainedfrom independent sources, while unobservableinputs reflect our view of market assumptionsin the absence of observable marketinformation. We classify and disclose allinvested assets carried at fair value in one ofthe following three categories:

• Level 1. Quoted prices for identicalinstruments in active markets;

• Level 2. Quoted prices for similarinstruments in active markets; quotedprices for identical or similar instrumentsin markets that are not active; and model-derived valuations in which all significantinputs and significant value drivers areobservable in active markets; and

• Level 3. Valuations derived from valuationtechniques in which one or more significantinputs or significant value drivers areunobservable.

As of each reporting period, we classify allinvested assets in their entirety based on thelowest level of input that is significant to thefair value measurement. Significant levels ofestimation and judgment are required todetermine the fair value of certain of ourinvestments. The factors influencing theseestimations and judgments are subject tochange in subsequent reporting periods. Thefair value and hierarchy classifications of ourinvested asset portfolio were as follows:

December 31, 2011

Fair value % of total

(Dollars in thousands)Level 1 invested assets $ 18,325 *

Level 2 invested assets 1,970,246 99%

Level 3 invested assets 6,937 *

Total invested assets $1,995,508 100%

* Less than 1%

In assessing the fair value of our investments,we use a third-party pricing service forapproximately 94% of our securities. Theremaining securities are primarily privatesecurities valued using models based onobservable inputs on public corporate spreadshaving similar tenors (e.g., sector, average lifeand quality rating) and liquidity and yield basedon quality rating, average life and treasuryyields. All data inputs come from observabledata corroborated by independent third-partysources. In the absence of sufficient observableinputs, we utilize non-binding broker quotes,which are reflected in our Level 3 classification.

We perform internal reasonablenessassessments on fair value determinationswithin our portfolio throughout the month andat month-end, including pricing varianceanalyses and comparisons to alternative pricingsources and benchmark returns. If a fair valueappears unusual relative to these assessments,we will re-examine the inputs and maychallenge a fair value assessment made by thepricing service. If there is a known pricing error,we will request a reassessment by the pricingservice. If the pricing service is unable toperform the reassessment on a timely basis, wewill determine the appropriate price byrequesting a reassessment from an alternativepricing service or other qualified source asnecessary. We do not adjust quotes or pricesexcept in a rare circumstance to resolve aknown error.

For additional information, see Notes 1, 3 and 4to our consolidated and combined financialstatements.

Other-than-temporary impairments. Werecognize unrealized gains and losses on ouravailable-for-sale portfolio as a separatecomponent of accumulated other comprehensiveincome. The determination of whether a declinein fair value below amortized cost is other-than-temporary is both objective and subjective.Furthermore, this determination can involve avariety of assumptions and estimates, particularlyfor invested assets that are not actively traded inestablished markets. We evaluate a number offactors when determining the impairment status



of individual securities. These factors include theeconomic condition of various industry segmentsand geographic locations and other areas ofidentified risk.

For available-for-sale securities in an unrealizedloss position that we intend to sell or would more-likely-than-not be required to sell before theexpected recovery of the amortized cost basis,we recognize an impairment charge for thedifference between amortized cost and fair valueas a realized investment loss in our statements ofincome. For available-for-sale securities in anunrealized loss position for which we have nointent to sell and believe that it is more-likely-than-not that we will not be required to sellbefore the expected recovery of the amortizedcost basis, only the credit loss component of thedifference between cost and fair value isrecognized in earnings, while the remainder isrecognized in accumulated other comprehensiveincome. The credit loss component recognized inearnings is identified as the amount of principalcash flows not expected to be received over theremaining term of the security.

For certain securitized financial assets withcontractual cash flows, including asset-backedsecurities, we periodically update our bestestimate of cash flows over the life of thesecurity. Securities that are in an unrealizedloss position are reviewed at least quarterly forother-than-temporary impairment. If the fairvalue of a securitized financial asset is less thanits cost or amortized cost and there has been adecrease in the present value of the estimatedcash flows since the last revised estimate,considering both timing and amount, an other-than-temporary impairment charge isrecognized. Estimating future cash flows is aquantitative and qualitative process thatincorporates information receivedfrom third-party sources along withcertain assumptions and judgmentsregarding the future performance ofthe underlying collateral. Projectionsof expected future cash flows maychange based upon new informationregarding the performance of theunderlying collateral.

Other categories of fixed-income securities thatare in an unrealized loss position are alsoreviewed at least quarterly to determine if another-than-temporary impairment is presentbased on certain quantitative and qualitativefactors. We consider a number of factors indetermining whether the impairment is other-than-temporary. These include:

• actions taken by rating agencies;

• default by the issuer;

• the significance of the decline;

• the intent to sell and the ability to hold theinvestment until recovery of the amortizedcost basis, as noted above;

• the time period during which the declinehas occurred;

• an economic analysis of the issuer;

• the financial strength, liquidity, andrecoverability of the issuer; and

• an analysis of the underlying collateral.

Although no set formula is used in this process,the investment performance, collateralposition, and continued viability of the issuerare significant measures that are considered.

The other-than-temporary impairment analysisthat we perform on our equity securitiesprimarily focuses on the severity of theunrealized loss as well as the length of time thesecurity’s fair value has been below amortizedcost. The other-than-temporary impairmentsthat we recognized in realized investment gainsas a charge to earnings were as follows:

Year endedDecember 31, 2011

(In thousands)

Other-than-temporary impairments $(2,015)

Realized investment gains, including other-than-temporary impairments 6,440

For additional information, see Notes 1 and 3 toour consolidated and combined financialstatements.



Reinsurance

We use reinsurance extensively. We determineif a contract provides indemnification againstloss or liability in relation to the amount ofinsurance risk to which the reinsurer is subject.We review all contractual terms, particularlythose that may limit the amount of insurancerisk to which the reinsurer is subject that maydelay the timely reimbursement of claims. If wedetermine that the possibility of a significantloss from insurance risk will occur only underremote circumstances, we record the contractunder the deposit method of accounting withthe net amount receivable reflected in otherassets on our consolidated and combinedbalance sheets. The reinsurance contracts ineffect at December 31, 2011, including the Citireinsurance agreements, meet U.S. GAAP risktransfer provisions, except as noted below.Ceded policy reserves and claims liabilitiesrelating to insurance ceded under thesecontracts are shown as due from reinsurers inour balance sheets. We believe that one of theCiti reinsurance transactions (a 10% YRTtransaction with an experience refundprovision) will have limited transfer ofinsurance risk and that there will be only aremote chance of loss under the contract. Assuch, we have accounted for this agreementunder the deposit method of accounting.

Ceded premiums are treated as a reduction ofdirect premiums and are recognized when dueto the assuming company. Ceded claims aretreated as a reduction of direct benefits and arerecognized when the claim is incurred on adirect basis. Ceded policy reserve changes arealso treated as a reduction of benefits and arerecognized during the applicable financialreporting period. Under YRT arrangements, wedetermine the ceded reserve by recognizing thecost of reinsurance as a level percentage of thedirect premium collected. The expectedreinsurance cost is the expected reinsurancepremium paid less expected reinsurance claimsreceived. We determine ceded future policybenefit reserves for coinsurance in the samemanner as direct policy reserves.

We calculate claim liabilities and policy benefitsconsistently for all policies, regardless ofwhether or not the policy is reinsured. Once thedirect claim liabilities are estimated, weestimate the amounts attributable to thereinsurers. Liabilities for unpaid reinsuranceclaims are produced from claims andreinsurance system records, which contain therelevant terms of the individual reinsurancecontracts. We monitor claims due fromreinsurers to ensure that balances are settledon a timely basis. We review incurred but notreported claims to ensure that appropriateamounts are ceded. We analyze and monitorthe creditworthiness of each of our reinsurersto minimize collection issues.

For additional information on reinsurance, seeNotes 1 and 5 to our consolidated and combinedfinancial statements.

Deferred Policy Acquisition Costs

We defer the costs of acquiring new business tothe extent that they vary with, and areprimarily related to, the acquisition of such newbusiness. These costs mainly includecommissions and policy issue expenses. Therecovery of such costs is dependent on thefuture profitability of the related policies,which, in turn, is dependent principally uponmortality, persistency, the expense ofadministering the business and investmentreturns, as well as upon certain economicvariables, such as inflation. DAC is subject torecoverability testing on an annual basis orwhen circumstances indicate that recoverabilityis uncertain. We make certain assumptionsregarding persistency, expenses, interest ratesand claims. The assumptions for these types ofproducts may not be modified, or unlocked,unless recoverability testing deems them to beinadequate. We update assumptions for newbusiness to reflect the most recent experience.

Deferrable term life insurance policy acquisitioncosts are amortized over the premium-payingperiod of the related policies in proportion topremium income. If actual lapses orwithdrawals are different from pricing



assumptions for a particular period, DACamortization will be affected. If the number ofpolicies that lapse are 1% higher than thenumber of policies that we expected to lapse inour pricing assumptions, approximately 1%more of the existing DAC balance will beamortized, which would have been equal toapproximately $9.3 million as of December 31,2011 (assuming such lapses were distributedproportionately among policies of alldurations). We believe that a lapse rate in thenumber of policies that is 1% higher than therate assumed in our pricing assumptions is areasonably possible variation. Higher lapses inthe early durations would have a greater effecton DAC amortization since the DAC balancesare higher at the earlier durations. Differencesin actual mortality rates compared to ourpricing assumptions will not have a materialeffect on DAC amortization. Due to the inherentuncertainties in making assumptions aboutfuture events, materially different experiencefrom expected results in persistency ormortality could result in a material increase ordecrease of DAC amortization in a particularperiod.

Deferrable acquisition costs for Canadiansegregated funds are amortized over the life ofthe policies in relation to historical and futureestimated gross profits before amortization.The gross profits and resulting DACamortization will vary with actual fund returns,redemptions and expenses.

In October 2010, the FASB issued ASU 2010-26,Accounting for Costs Associated with Acquiringor Renewing Insurance Contracts. ASU 2010-26creates a more limited definition than thecurrent guidance, which defines DAC as thosecosts that vary with, and primarily relate to, theacquisition of insurance contracts. Under therevised definition, deferred acquisition costsinclude incremental direct costs of successfulcontract acquisitions that result directly fromand are essential to the contract transaction(s)and would not have been incurred had thecontract transaction(s) not occurred. All otheracquisition-related costs, includingunsuccessful acquisition and renewal efforts,

will be charged to expense as incurred.Administrative costs, rent, depreciation,occupancy, equipment, and all other generaloverhead costs are considered indirect costsand will be charged to expense as incurred. Theupdate allows either prospective orretrospective adoption and is required to beadopted for our fiscal year beginning January 1,2012.

We plan to retrospectively adopt ASU 2010-26.We are still evaluating the full impact ofimplementing this guidance. However, wecurrently estimate that adoption will reduce ourDAC balance by approximately 13% to 15% or inthe range of $140 million to $160 million as ofDecember 31, 2011. In connection with the Citireinsurance transactions, we cededapproximately $2.1 billion of our DAC balancesin March of 2010. As a result of ourretrospective adoption, DAC amortization willbe lower in periods following the Citireinsurance transactions. As we rebuild ourbase of life policies issued subsequent to theCiti reinsurance transactions, the concurrentincrease in non-deferred acquisition expenseslikely will exceed the reduction in DACamortization, thereby resulting in a netincrease in total benefits and expenses.

For additional information on DAC, see Notes 1and 6 to our consolidated and combinedfinancial statements.

Future Policy Benefits

We calculate and maintain reserves for theestimated future payment of claims to ourpolicyholders based on actuarial assumptionsand in accordance with industry practice andU.S. GAAP. Liabilities for future policy benefitson our term life insurance products have beencomputed using a net level method, includingassumptions as to investment yields, mortality,persistency, and other assumptions based onour experience. Many factors can affect thesereserves, including mortality trends, investmentyields and persistency. Similar to the DACdiscussion above, we cannot modify theassumptions used to establish reserves during



the policy term unless recoverability testingdeems them to be inadequate. Therefore, thereserves we establish are based on estimates,assumptions and our analysis of historicalexperience. Our results depend significantlyupon the extent to which our actual claimsexperience is consistent with the assumptionswe used in determining our reserves andpricing our products. Our reserve assumptionsand estimates require significant judgment and,therefore, are inherently uncertain. If actuallapses are different from pricing assumptionsfor a particular period, the change in the futurepolicy benefits, which is reflected in benefitsand claims in our statements of income, will beaffected.

If the number of policies that lapse are 1%higher than the number of policies that weexpected to lapse in our pricing assumptions,approximately 1% more of the future policybenefit reserves will be released, which wouldhave been equal to approximately $43.9 millionas of December 31, 2011 (assuming such lapseswere distributed proportionately amongpolicies of all durations). The future policybenefit reserves released from the additionallapses would have been offset by the release ofthe corresponding reinsurance reserves ofapproximately $36.0 million as of December 31,2011. Higher lapses in later durations wouldhave a greater effect on the release of futurepolicy benefit reserves since the future policybenefit reserves are higher at the laterdurations. Differences in actual mortality ratescompared to our pricing assumptions will nothave a material effect on future policy benefitreserves. We cannot determine with precisionthe ultimate amounts that we will pay for actualclaims or the timing of those payments.

For additional information on future policybenefits, see Notes 1 and 9 to our consolidatedand combined financial statements.

Income Taxes

We account for income taxes using the assetand liability method. We recognize deferred taxassets and liabilities for the future tax

consequences attributable to (i) differencesbetween the financial statement carryingamounts of existing assets and liabilities andtheir respective tax bases and (ii) operating lossand tax credit carryforwards. Deferred taxassets and liabilities are measured usingenacted tax rates expected to apply to taxableincome in the years in which those temporarydifferences are expected to be recovered orsettled. We recognize the effect on deferred taxassets and liabilities of a change in tax rates inincome in the period that includes theenactment date. Deferred tax assets arerecognized subject to management’s judgmentthat realization is more likely than notapplicable to the periods in which we expect thetemporary difference will reverse.

For additional information on income taxes, seeNotes 1 and 11 to our consolidated and combinedfinancial statements.

Results of Operations

Revenues. Our revenues consist of thefollowing:

• Net premiums. Reflects direct premiumspayable by our policyholders on ourin-force insurance policies, primarily termlife insurance, net of reinsurance premiumsthat we pay to reinsurers.

• Net investment income. Representsincome, net of investment-relatedexpenses, generated by our invested assetportfolio, which consists primarily ofinterest income earned on fixed-maturityinvestments. Investment income earned onassets supporting our statutory reservesand targeted capital is allocated to ourTerm Life Insurance segment, with thebalance included in our Corporate andOther Distributed Products segment.

• Commissions and fees. Consists primarilyof dealer re-allowances earned on the salesof investment and savings products, trailcommissions and management fees basedon the asset values of client accounts,marketing and support fees from productoriginators, custodial fees for services


Item 7. Management’s Discussion and Analysis Of Financial Condition and Results Of Operations

rendered in our capacity as nominee onclient retirement accounts funded bymutual funds on our servicing platform,recordkeeping fees for mutual funds on ourservicing platform and fees associated withthe sale of other distributed products.

• Realized investment gains (losses),including other-than-temporaryimpairments (“OTTI”). Reflects thedifference between amortized cost andamounts realized on the sale of investedassets, as well as OTTI charges.

• Other, net. Reflects revenues generatedfrom the fees charged for access to oursales force website, printing revenues fromthe sale of printed materials to salesrepresentatives, incentive fees andreimbursements from product originators,Canadian licensing fees, sales ofmerchandise to sales representatives,mutual fund customer service fees, feescharged to sales representatives related tolife insurance processing responsibilities,and interest charges received from or paidto reinsurers on late payments.

Benefits and Expenses. Our operatingexpenses consist of the following:

• Benefits and claims. Reflects the benefitsand claims payable on insurance policies,as well as changes in our reserves forfuture policy claims and reserves for otherbenefits payable, net of reinsurance.

• Amortization of DAC. Represents theamortization of capitalized costsassociated with the sale of an insurancepolicy or segregated fund, including salescommissions, medical examination andother underwriting costs, and otheracquisition-related costs.

• Insurance commissions. Reflects salescommissions in respect of insuranceproducts that are not eligible for deferral.

• Insurance expenses. Reflectsnon-capitalized insurance expenses,including staff compensation, technologyand communications, insurance salesforce-related costs, printing, postage anddistribution of insurance sales materials,outsourcing and professional fees,premium taxes, amortization of certainintangibles and other corporate andadministrative fees and expenses relatedto our insurance operations.

• Sales commissions. Representscommissions to our sales representativesin connection with the sale of investmentand savings products and products otherthan insurance products.

• Interest expense. Reflects interest on theCiti note as well as interest incurred inconnection with the Citi reinsurancetransactions.

• Other operating expenses. Consistsprimarily of expenses that are unrelated tothe distribution of insurance products,including staff compensation, technologyand communications, various sales force-related costs, printing, postage anddistribution of sales materials, outsourcingand professional fees, amortization ofcertain intangibles and other corporate andadministrative fees and expenses.

We allocate certain operating expensesassociated with our sales representatives,including supervision, training and legal, to ourtwo primary operating segments generallybased on the average number of licensedrepresentatives in each segment for a givenperiod. We also allocate technology andoccupancy costs based on usage. Costs that arenot allocated to our two primary segments areincluded in our Corporate and Other DistributedProducts segment.



2011 Compared to 2010

Primerica, Inc. and SubsidiariesResults. Our actual results of operations forthe years ended December 31, 2011 and 2010and our pro forma results of operations for theyear ended December 31, 2010 were as follows:

ActualActual 2011 v.

Actual 2010 Change Pro formaActual 2011 v.

Pro forma 2010 Change

2011 2010 $ % 2010 $ %

(Dollars in thousands)Revenues:Direct premiums $2,229,467 $ 2,181,074 $ 48,393 2% $ 2,181,074 $ 48,393 2%Ceded premiums (1,703,075) (1,450,367) (252,708) 17% (1,746,695) 43,620 (2)%

Net premiums 526,392 730,707 (204,315) (28)% 434,379 92,013 21%Commissions and fees 412,979 382,940 30,039 8% 382,940 30,039 8%Net investment income 108,601 165,111 (56,510) (34)% 110,376 (1,775) (2)%Realized investment gains,

including OTTI 6,440 34,145 (27,705) (81)% 34,145 (27,705) (81)%Other, net 48,681 48,960 (279) * 48,960 (279) *

Total revenues 1,103,093 1,361,863 (258,770) (19)% 1,010,800 92,293 9%

Benefits and expenses:Benefits and claims 242,696 317,703 (75,007) (24)% 189,499 53,197 28%Amortization of DAC 119,348 168,035 (48,687) (29)% 96,646 22,702 23%Sales commissions 191,306 179,924 11,382 6% 179,924 11,382 6%Insurance expenses 61,109 75,503 (14,394) (19)% 49,420 11,689 24%Insurance commissions 19,297 19,904 (607) (3)% 18,235 1,062 6%Interest expense 27,968 20,872 7,096 34% 27,809 159 *Other operating expenses 165,525 180,779 (15,254) (8)% 183,855 (18,330) (10)%

Total benefits andexpenses 827,249 962,720 (135,471) (14)% 745,388 81,861 11%

Income before incometaxes 275,844 399,143 (123,299) (31)% 265,412 10,432 4%

Income taxes 97,568 141,365 (43,797) (31)% 94,002 3,566 4%

Net income $ 178,276 $ 257,778 $ (79,502) (31)% $ 171,410 $ 6,866 4%

* Less than 1%

We entered into the Citi reinsurance andreorganization transactions during March andApril of 2010. As such, actual results for theyear ended December 31, 2010 include threemonths of operations prior to the Citireinsurance and reorganization transactions.Actual results for the year ended December 31,2010 also include income attributable to theunderlying policies that were reinsured to Cition March 31, 2010 as well as net investmentincome earned on the invested assets backingthe reinsurance balances transferred to the Citireinsurers and a portion of the distributions to

Citi made as part of our corporatereorganization. Due to the April 2010 issuanceof the Citi note, interest expense only reflectsnine months of interest expense in 2010. TheCiti reinsurance transaction impacted the TermLife Insurance segment, while thereorganization transactions impacted both theTerm Life Insurance and Corporate and OtherDistributed Products segments, with the largerimpact on the latter segment. The pro formaresults presented above give effect to the Citireinsurance and reorganization transactions,which are described more fully in Notes 2 and 3



to our pro forma statement of income includedin “Results of Operations – 2010 Compared to2009 – Primerica, Inc. and Subsidiaries ProForma Results.” We believe that the 2010 proforma results provide additional meaningfulinformation necessary to evaluate our resultsof operations.

Total revenues. Total revenues declined in2011 primarily as a result of the Transactions.Excluding approximately $351.1 million ofrevenues in 2010 that would have beenrecognized by Citi had the Transactions beeneffected on January 1, 2010, total revenueswould have increased approximately $92.3million, or 9%, compared with pro forma basis2010. This increase primarily reflectsincremental premiums on New Term policiesissued subsequent to the Citi reinsurancetransactions (“New Term”) and an increase incommissions and fees, largely driven byincreased sales of variable annuities in ourInvestment and Savings Product segment. Theincrease in total revenues relative to pro formabasis 2010 was partially offset by the decline inrealized investment gains relative to 2010.Realized investment gains in 2010 were largelydriven by sales of invested assets inanticipation of our corporate reorganization.

Total benefits and expenses. Total benefitsand expenses were lower primarily as a resultof the Transactions. Excluding approximately$217.3 million of benefits and expenses in 2010

that would have been recognized by Citi hadthe Transactions been effected on January 1,2010, total benefits and expenses would haveincreased approximately $81.9 million, or 11%,compared with pro forma basis 2010. Theincrease in total benefits and expenses wasprimarily a result of the growth in our Term Lifeand Investment and Savings Productsbusinesses and higher overall operatingexpenses, including the build out of incrementalfunctions, processes and expenses associatedwith becoming a public company. The increasein benefits and claims and amortization of DAC,after giving effect to the Transactions, waslargely a result of the continued growth in ourTerm Life business following the Citireinsurance transactions. Sales commissionswere higher consistent with the increase incommission and fee revenue noted in totalrevenues above. Insurance expenses and otheroperating expenses increased primarily as aresult of initiatives announced at our 2011convention, higher premium taxes, lowerexpense allowances due to continued run-off inthe block of business ceded to Citi and build outof our expenses post-IPO.

Income taxes. Our effective income tax ratewas 35.4% in both 2011 and 2010.

For additional information on the effect of theTransactions as well as the significant driversof revenues and expenses, see the segmentresults discussions below.



Term Life Insurance Segment. Our actualresults for the Term Life Insurance segment forthe years ended December 31, 2011 and 2010and our pro forma results of operations for theyear ended December 31, 2010 were as follows:




2011 2010 $ % 2010 $ %

(Dollars in thousands)Revenues:Direct premiums $ 2,149,594 $2,100,709 $ 48,885 2% $ 2,100,709 $48,885 2%Ceded premiums (1,688,953) (1,436,041) (252,912) 18% (1,732,369) 43,416 (3)%

Net premiums 460,641 664,668 (204,027) (31)% 368,340 92,301 25%Allocated net investment income 62,688 110,633 (47,945) (43)% 62,294 394 *Other, net 31,666 33,267 (1,601) (5)% 33,267 (1,601) (5)%

Total revenues 554,995 808,568 (253,573) (31)% 463,901 91,094 20%Benefits and expenses:Benefits and claims 197,159 277,653 (80,494) (29)% 149,449 47,710 32%Amortization of DAC 103,553 156,312 (52,759) (34)% 84,923 18,630 22%Insurance expenses 47,088 63,885 (16,797) (26)% 37,802 9,286 25%Insurance commissions 1,118 3,177 (2,059) (65)% 1,508 (390) (26)%Interest expense 11,468 8,497 2,971 35% 11,309 159 1%

Total benefits and expenses 360,386 509,524 (149,138) (29)% 284,991 75,395 26%

Income before income taxes $ 194,609 $ 299,044 $ (104,435) (35)% $ 178,910 $ 15,699 9%

* Less than 1%

We entered into the Citi reinsurance andreorganization transactions during March andApril of 2010. As such, results for the yearended December 31, 2010 include three monthsof operations prior to the Citi reinsurance andreorganization transactions. Results for theyear ended December 31, 2010 also includeincome attributable to the underlying policiesthat were reinsured to Citi on March 31, 2010 aswell as net investment income earned on theinvested assets backing the reinsurancebalances transferred to the Citi reinsurers anda portion of the distributions to Citi made aspart of our corporate reorganization. From astatement of income perspective, thesetransactions impacted ceded premiums, netpremiums, allocated net investment income,benefits and claims, amortization of DAC,insurance commissions, insurance expensesand interest expense. The 2010 Term LifeInsurance segment pro forma results presentedabove give effect to the Citi reinsurance andreorganization transactions, which are

described more fully in Notes 2 and 3 to our proforma statement of income included in “Resultsof Operations – 2010 Compared to 2009 –Primerica, Inc. and Subsidiaries Pro FormaResults.” We believe that the 2010 pro formasegment results provide additional meaningfulinformation necessary to evaluate the resultsof operations for this segment.

Direct premiums. Direct premiums increasedin 2011 primarily as a result of growth in NewTerm business and premium increases forpolicies reaching the end of their initial levelpremium period. The growth in direct premiumswas consistent with the growth in face amountin force.

Ceded premiums. The increase in cededpremiums primarily reflects the impact of theCiti reinsurance transactions and the netimpact of the ceded premium recoveriesdiscussed in Note 5 to our consolidated andcombined financial statements. Adjusting forapproximately $296.3 million of additional



premiums that would have been ceded to Citi in2010 had the Citi reinsurance transactions beeneffected on January 1, 2010, ceded premiumwould have decreased approximately $43.4million, or 3%, reflecting continued run-off ofthe business ceded to Citi, partially offset byage-based increases in YRT reinsurancepremiums.

Net premiums. The decline in net premiumsprimarily reflects the impact on ceded premiumof the Citi reinsurance transactions and the netimpact of the ceded premium recoveriesdiscussed in ceded premiums above. Excludingthe premiums that would have been ceded toCiti in 2010 had the transactions been effectedon January 1, 2010, net premiums would haveincreased approximately $92.3 million, or 25%,reflecting New Term premium growth.

Allocated net investment income. Thedecrease in allocated net investment incomewas largely attributable to the Citi reinsuranceand reorganization transactions. Excludingapproximately $48.3 million of income earnedin 2010 on assets that were transferred to Citiin connection with the reinsurance andreorganization transactions, allocated netinvestment income would have increasedapproximately $394,000, primarily reflecting ahigher allocation as a result of the growth inNew Term, substantially offset by the effect oflower asset returns in 2011.

Benefits and claims. The decrease in benefitsand claims was largely attributable to the Citireinsurance and reorganization transactions.Excluding approximately $128.2 million ofexpenses that would have been recognized bythe Citi reinsurers in 2010 had the Citireinsurance transactions been effected onJanuary 1, 2010, benefits and claims would haveincreased approximately $47.7 million, or 32%,reflecting growth in the business and a chargeof approximately $4 million to recordcumulative potential claims related to cross-checking public death records to identifydeceased policyholders for whom claims havenot been filed and of which we were unaware.

Excluding the impact of this charge, the growthin benefits and claims outpaced net premiumgrowth primarily as a result of slightly highermortality experience.

Amortization of DAC. The decrease inamortization of DAC was largely attributable tothe Citi reinsurance and reorganizationtransactions. Excluding approximately $71.4million of DAC amortization that would havebeen recognized by the Citi reinsurers in 2010had the Citi reinsurance transactions beeneffected on January 1, 2010, DAC amortizationwould have increased approximately $18.6million, or 22%. The growth in DACamortization was lower than the growth in netpremiums primarily due to the inclusion of aDAC adjustment of approximately $2.2 millionin the first quarter of 2011 largely related toin-force business ceded to the Citi reinsurers.

Insurance expenses. Insurance expensesdecreased largely as a result of the Citireinsurance transactions. Excludingapproximately $26.1 million of expenseallowances that would have been recognized in2010 had the transactions been effected onJanuary 1, 2010, insurance expenses wouldhave increased approximately $9.3 million, or25%. This increase in insurance expenseslargely reflects the impact of premium-relatedtaxes, licenses and fees growth, expenseallowance run-off in the block of business cededto Citi, expenses associated with conventioninitiatives, including the $50 IBA fee promotionand the write-off of medical testing materials,and build out of management compensationand benefits expense post-IPO. These itemswere partially offset by the 2011 release ofmanagement incentive compensation accrualsfor compensation earned in 2010 but paid in2011 at a lower rate than had been anticipated.

Product sales and face amount in force. Weissued 237,535 new life insurance policies in2011, compared with 223,514 new policies in2010, primarily as a result of recruiting growthfollowing our 2011 convention and strongdemand for our TermNow product.



The changes in the face amount of our in-forcebook of term life insurance policies were asfollows:

Year endedDecember 31, Change

2011 2010 $ %

(Dollars in millions)Face amount in force, beginning of period $ 656,791 $650,195 $6,596 1 %Issued face amount 73,146 74,401 (1,256) (2)%Terminations (66,951) (70,964) 4,012 (6)%Foreign currency 1,970 3,158 (1,188) (38)%

Face amount in force, end of period (1) $664,955 $656,791 $ 8,164 1 %

(1) Totals may not add due to rounding.

Issued face amount declined slightly in 2011reflecting lower average face amounts,primarily as a result of the introduction ofTermNow in June 2011. The impact on issuedface amount of lower average size was partiallyoffset by the increase in policy sales. Thedecrease in terminations resulted frompersistency that, while remaining belowhistorical norms, has continued to improve.

Investment and Savings ProductSegment. Our results of operations for theInvestment and Savings Products segment forthe years ended December 31, 2011 and 2010were as follows:


Actual 2010 Change

2011 2010 $ %

(Dollars in thousands)Revenues:Commissions and fees:

Sales-based revenues $ 170,362 $ 142,606 $ 27,756 19%Asset-based revenues 173,059 167,473 5,586 3%Account-based revenues 41,997 41,690 307 *

Other, net 11,285 10,038 1,247 12%

Total revenues 396,703 361,807 34,896 10%

Expenses:Amortization of DAC 12,482 9,330 3,152 34%Insurance commissions 8,851 7,854 997 13%Sales commissions:

Sales-based 118,344 100,993 17,351 17%Asset-based 57,901 58,129 (228) *

Other operating expenses 82,049 71,971 10,078 14%

Total expenses 279,627 248,277 31,350 13%

Income before income taxes $ 117,076 $ 113,530 $ 3,546 3%

* Less than 1%



The Citi reinsurance and reorganizationtransactions had no impact on the Investmentand Savings Products segment.

Supplemental information on the underlyingmetrics that drove results follows.


2011 2010 $ %

(Dollars in millions and accounts inthousands)

Product sales:Retail mutual funds $ 2,230 $ 2,141 $ 89 4%Annuities and other 1,674 1,169 505 43%

Total sales-based revenue generatingproduct sales (1) 3,904 3,310 594 18%

Segregated funds 332 314 19 6%Managed accounts 29 — 29 *

Total product sales (1) $ 4,265 $ 3,624 $ 641 18%

Average client asset values:Retail mutual funds $ 24,105 $22,614 $ 1,491 7%Annuities and other 8,276 7,095 1,181 17%Segregated funds 2,489 2,199 290 13%

Total average asset values in clientaccounts (1) $34,870 $31,908 $2,962 9%

Average number of fee-generating accounts:Recordkeeping accounts 2,627 2,728 (101) (4)%Custodial accounts 1,956 1,990 (34) (2)%

* Not meaningful(1) Totals may not add due to rounding.

Commissions and fees. Commissions and feesincreased primarily as a result of economic andmarket trends and client demand. The increasein sales-based revenues reflect the impact ofinternal exchanges for the variable annuityproducts we offer. These internal exchangeswere primarily driven by client redemptions ofolder variable annuity contracts to purchasethe current Prime Elite IV variable annuity,which offers an attractive guaranteed incomeliving benefit. Asset-based revenues weredriven by higher average asset values during2011 even though end-of-period asset valueswere slightly lower than 2010. Account-basedrevenues were relatively flat compared with2010 as the impact of a 2011 recordkeeping feestructure change on certain accounts, whichhad no net effect on income before incometaxes, was largely offset by a decline in thenumber of accounts for which we providerecord-keeping services.

Amortization of DAC. The increase in the rateof DAC amortization was primarily driven bythe impact of lower investment returns on ourCanadian segregated funds products. Growth inaccount values also led to higher DACamortization.

Salescommissions. Theincrease in sales-based commissionswas primarily drivenby the increases incommissions andfees noted above.Sales-basedcommission expenselagged the growth insales-basedcommission and feesrevenue largely as aresult of internalexchanges forvariable annuities.While thecommissions that wereceive and then payto our sales

representatives for internal exchangetransactions are proportionately lower thanthose paid for a new sale, sales-relatedmarketing and support fees from internalexchanges are received in full with noassociated impact on sales commissionsexpense.

Other operating expenses. Other operatingexpenses increased primarily as a result ofgrowth in the business, expenses related to newproduct introductions, various governmentrelations efforts and the recordkeeping feestructure change noted above in Commissionsand fees. The impact of these items waspartially offset by the 2011 release ofmanagement incentive compensation accrualsearned in 2010 but paid in 2011 at a lower ratethan had been anticipated.

Product sales. Investment and savingsproducts sales were higher in 2011 largelyreflecting the impact of internal exchangesof variable annuities.



Asset values in client accounts. Changes inasset values in client accounts were as follows:


2011 2010 $ %

(Dollars in millions)Asset values, beginning of period $34,869 $ 31,303 $3,566 11%

Inflows 4,265 3,624 641 18%

Redemptions (4,275) (3,691) (584) 16%

Change in market value, net andother (1,195) 3,633 (4,828) *

Asset values, end of period (1) $33,664 $34,869 $(1,205) (3)%

* Not meaningful(1) Totals may not add due to rounding.

The assets in our clients’ accounts are investedin diversified funds composed mainly of U.S.and Canadian equity and fixed-incomesecurities. Inflows increased consistent with theincrease in sales volume. The amount ofredemptions also increased reflecting theincrease in average assets under management,

while actual redemption rates were relativelylevel as a percent of average assets under

management for both2011 and 2010. Themarket return onassets undermanagement in 2011and 2010 reflectsgeneral market valuetrends. A largeportion of therevenues in ourInvestment andSavings Products

segment are derived from commission and feerevenues that are based on the asset values inclients’ accounts. While asset values at the endof 2011 declined relative to 2010, we have seenan increase in our asset-based commission andfee revenues and expenses largely as a resultof the increase in average client asset valuesnoted previously.



Corporate and Other Distributed ProductsSegment. Our actual results of operations forthe Corporate and Other Distributed Productssegment for the years ended December 31, 2011and 2010 and our pro forma results ofoperations for the year ended December 31,2010, were as follows:




2011 2010 $ % 2010 $ %

(Dollars in thousands)

Revenues:Direct premiums $ 79,873 $ 80,365 $ (492) * $ 80,365 $ (492) *Ceded premiums (14,122) (14,325) 203 (1)% (14,325) 203 (1)%

Net premiums 65,751 66,040 (289) * 66,040 (289) *Commissions and fees 27,560 31,172 (3,612) (12)% 31,172 (3,612) (12)%Allocated net investment

income 45,914 54,477 (8,563) (16)% 48,081 (2,167) (5)%Realized investment gains,

including OTTI 6,440 34,146 (27,706) (81)% 34,146 (27,706) (81)%Other, net 5,730 5,653 77 1 % 5,653 77 1%

Total revenues 151,395 191,488 (40,093) (21)% 185,092 (33,697) (18)%

Benefits and expenses:Benefits and claims 45,537 40,052 5,485 14% 40,052 5,485 14%Amortization of DAC 3,313 2,392 921 39% 2,392 921 39%Sales commissions 15,061 20,800 (5,739) (28)% 20,800 (5,739) (28)%Insurance expenses 14,020 11,615 2,405 21% 11,615 2,405 21%Insurance commissions 9,329 8,875 454 5% 8,875 454 5%Interest expense 16,500 12,375 4,125 33% 16,500 — — %Other operating expenses 83,476 108,810 (25,334) (23)% 111,886 (28,410) (25)%

Total benefits andexpenses 187,236 204,919 (17,683) (9)% 212,120 (24,884) (12)%

Loss before incometaxes $ (35,841) $ (13,431) $ (22,410) 167% $(27,028) $ (8,813) 33%

* Less than 1%

We entered into the reorganizationtransactions during March and April of 2010. Assuch, actual results for the year endedDecember 31, 2010 include three months ofoperations prior to the reorganizationtransactions. Actual results for the year endedDecember 31, 2010 include net investmentincome earned on the invested assets backingthe distributions to Citi made as part of ourcorporate reorganization. Actual interestexpense reflects nine months of expense due tothe April 2010 issuance of the Citi note. From a

statement of income perspective, thesetransactions impacted net investment income,interest expense and other operating expenses.The 2010 Corporate and Other DistributedProducts segment pro forma results presentedabove give effect to the reorganizationtransactions, which are described more fully inNote 3 to our pro forma statement of incomeincluded in “Results of Operations — 2010Compared to 2009 — Primerica, Inc. andSubsidiaries Pro Forma Results.” We believethat the 2010 pro forma segment results



provide additional meaningful informationnecessary to evaluate the results of operationsfor this segment.

Total revenues. Total revenues were lower in2011 largely due to investment gains realized inthe first quarter of 2010 in anticipation of ourcorporate reorganization, lower commissionsand fees due to the decline in our lendingbusiness and lower allocated net investmentincome in 2011. Excluding approximately $6.4million of allocated net investment income thatwould not have been earned in 2010 had thereorganization transactions been effected onJanuary 1, 2010, allocated net investmentincome would have decreased approximately$2.2 million, or 5%, primarily as a result of ahigher allocation to the Term Life Insurancesegment and lower asset returns in 2011.Realized investment gains included $2.0 millionof OTTI in 2011, compared with $12.2 million ofOTTI in 2010.

Benefits and claims. Benefits and claims werehigher due to adverse morbidity experienced inthe short-term disability line and adverseclaims in various run-off blocks of insuranceproducts, all of which were underwritten byNBLIC, our New York insurance subsidiary.Benefits and claims were also higher due to theimpact of a charge of approximately $1.1 millionto record cumulative potential claims related tocross-checking public death records to identifydeceased policyholders for whom claims havenot been filed and of which we were unaware.

Insurance expenses. Insurance expenses werehigher in 2011 primarily as a result of a chargefor our estimated share of the liquidation planfor Executive Life Insurance Company of NewYork, an unaffiliated life insurance company,filed by the NYSDFS.

Interest expense. Interest expense for 2010reflects only nine months of expense due to theApril 1, 2010 issuance date of the Citi note.

Other operating expenses. Other operatingexpenses were lower in 2011 largely due to therecognition of approximately $22.4 million ofexpenses associated with our IPO-relatedequity awards granted in the second quarter of2010. Excluding the impact of this IPO-relatedexpense, other operating expenses would havedeclined by $3.0 million, or 3%, primarilyreflecting a decline in Citi expense allocationsand other 2010 expenses related to our IPO.These items were partially offset by costsassociated with various capital initiatives in2011, charges associated with thediscontinuation of our lending business, and a$2.7 million charge for the elimination of printinventories as the materials we produce arenow predominantly used for internalconsumption.



2010 Compared to 2009

Primerica, Inc. and Subsidiaries ActualResults. We executed the Transactions inMarch and April of 2010. As such, actual resultswill not be comparable due to the initial andongoing effects and recognition of the Citireinsurance and reorganization transactions.

We believe the pro forma results presented inthe next section provide meaningful additionalinformation for the evaluation of our financialresults. Our statements of income were asfollows:

Year ended December 31, Change

2010 2009 $ %


Revenues:Direct premiums $ 2,181,074 $ 2,112,781 $ 68,293 3%Ceded premiums (1,450,367) (610,754) (839,613) 137%

Net premiums 730,707 1,502,027 (771,320) (51)%Commissions and fees 382,940 335,986 46,954 14%Net investment income 165,111 351,326 (186,215) (53)%Realized investment (losses) gains, including OTTI 34,145 (21,970) 56,115 *Other, net 48,960 53,032 (4,072) (8)%

Total revenues 1,361,863 2,220,401 (858,538) (39)%

Benefits and expenses:Benefits and claims 317,703 600,273 (282,570) (47)%Amortization of DAC 168,035 381,291 (213,256) (56)%Sales commissions 179,924 162,756 17,168 11%Insurance expenses 75,503 148,760 (73,257) (49)%Insurance commissions 19,904 34,388 (14,484) (42)%Interest expense 20,872 — 20,872 *Other operating expenses 180,779 132,978 47,801 36%

Total benefits and expenses 962,720 1,460,446 (497,726) (34)%

Income before income taxes 399,143 759,955 (360,812) (47)%Income taxes 141,365 265,366 (124,001) (47)%

Net income $ 257,778 $ 494,589 $ (236,811) (48)%

* Not meaningful

Net premiums. Net premiums were lower in2010 primarily as a result of the significantincrease in ceded premiums associated with theCiti reinsurance agreements executed onMarch 31, 2010. The effect of these agreementson net premiums is reflected in the Term LifeInsurance segment.

Net investment income. Net investmentincome declined during 2010 primarily as aresult of the impact on our invested asset baseof the asset transfers that we executed inconnection with our corporate reorganization in2010. On March 31, 2010, we transferred

approximately $4.0 billion of assets to supportthe statutory liabilities assumed by the Citireinsurers and in April 2010, we paid dividendsto Citi of approximately $675.7 million. Loweryields on invested assets also negativelyimpacted net investment income during 2010.

Commissions and fees. The increase incommissions and fees in 2010 was primarilydriven by activity in our Investment andSavings Product segment as a result ofimproved market conditions and increaseddemand for our products, partially offset bydeclines in our lending business as reflected in



our Corporate and Other Distributed Productssegment results.

Total benefits and expenses. The decrease intotal benefits and expenses in 2010 primarilyreflects lower benefits and claims, loweramortization of DAC and lower insuranceexpenses largely as a result of the Citireinsurance agreements. These declines werepartially offset by an increase in interestexpense as a result of the Citi note and other

operating expenses as a result of initial andone-time expenses incurred in connection withthe IPO, including equity award expenses. Thechanges associated with the Citi reinsuranceagreements impacted the Term Life Insurancesegment, while the changes in interest andother operating expenses primarily impactedthe Corporate and Other Distributed Productssegment.

Income taxes. Our effective income tax ratewas 35.4% in 2010 and 34.9% in 2009.



Primerica, Inc. and Subsidiaries Pro FormaResults. The following pro forma statementof income is intended to provide informationabout how the Transactions would haveaffected our financial statements if they hadbeen consummated as of January 1, 2010.Because the Transactions were concludedduring 2010, pro forma adjustment to ourbalance sheet was not necessary as ofDecember 31, 2010. Based on the timing of theTransactions, pro forma adjustments to our

statement of income were necessary for thefirst three months of 2010. The pro formastatement of income does not necessarilyreflect the results of operations that wouldhave resulted had the Transactions occurred asof January 1, 2010, nor should it be taken asindicative of our future results of operations.Our unaudited pro forma statement of incomefor the year ended December 31, 2010 is setforth below.

Year endedDecember 31,

2010Actual (1)

Adjustmentsfor the Citireinsurance

transactions (2)

Adjustmentsfor the

reorganizationand other

concurrenttransactions (3)


2010Pro forma

(In thousands, except per-share amounts)Revenues:Direct premiums $ 2,181,074 $ — $ — $ 2,181,074Ceded premiums (1,450,367) (296,328)(A) — (1,746,695)

Net premiums 730,707 (296,328) — 434,379Commissions and fees 382,940 — — 382,940Net investment income 165,111 (47,566)(B) (7,169)(H) 110,376Realized investment (losses) gains,

including OTTI 34,145 — — 34,145Other, net 48,960 — — 48,960

Total revenues 1,361,863 (343,894) (7,169) 1,010,800

Benefits and expenses:Benefits and claims 317,703 (128,204)(C) — 189,499Amortization of DAC 168,035 (71,389)(D) — 96,646Sales commissions 179,924 — — 179,924Insurance expenses 75,503 (26,083)(E) — 49,420Insurance commissions 19,904 (1,669)(E) — 18,235Interest expense 20,872 2,812(F) 4,125(I) 27,809Other operating expenses 180,779 — 3,076(J) 183,855

Total benefits and expenses 962,720 (224,533) 7,201 745,388

Income before income taxes 399,143 (119,361) (14,370) 265,412Income taxes 141,365 (42,274)(G) (5,089)(G) 94,002

Net income $ 257,778 $ (77,087) $ (9,281) $ 171,410

Earnings per share:Basic $ 3.43 $ 2.28Diluted $ 3.40 $ 2.26

Weighted-average shares:Basic 72,099 72,099Diluted 72,882 72,882

See accompanying notes to the pro forma statement of income.



Notes to the Pro Forma Statement ofIncome — Unaudited

(1) The actual statement of income includedincome attributable to the underlying policiesthat were reinsured to Citi on March 31, 2010 aswell as net investment income earned on theinvested assets backing the reinsurancebalances and the distributions to Citi made aspart of our corporate reorganization.

(2) Adjustments for the Citi reinsurancetransactions.

Concurrent with the reorganization of ourbusiness and prior to completion of the IPO, weformed a new subsidiary, Prime Re, and wemade an initial capital contribution to it. Wealso entered into a series of coinsuranceagreements with Prime Re and with other Citisubsidiaries. Under these agreements, weceded between 80% and 90% of the risks andrewards of our term life insurance policies thatwere in force at December 31, 2009.Concurrent with signing these agreements, wetransferred the corresponding accountbalances in respect of the coinsured policiesalong with the assets to support the statutoryliabilities assumed by Prime Re and the otherCiti subsidiaries.

We believe that three of the Citi coinsuranceagreements, which we refer to as the risktransfer agreements, satisfy U.S. GAAP risktransfer rules. Under the risk transferagreements, we ceded between 80% and 90%of our term life future policy benefit reserves,and we transferred a corresponding amount ofinvested assets to the Citi reinsurers. Thesetransactions did not and will not impact ourfuture policy benefit reserves, and we recordedan asset for the same amount of risktransferred in due from reinsurers. We alsoreduced deferred acquisition costs by between80% and 90%, which will reduce futureamortization expenses. In addition, we willtransfer between 80% and 90% of all futurepremiums and benefits and claims associatedwith these policies to the correspondingreinsurance entities. We will receive ongoing

ceding allowances as a reduction to insuranceexpenses to cover policy and claimsadministration expenses under each of thesereinsurance contracts. One coinsuranceagreement, which we refer to as the depositagreement, relates to a 10% reinsurancetransaction that includes an experience refundprovision and does not satisfy U.S. GAAP risktransfer rules. We account for this contractunder the deposit method. Under depositmethod accounting, the amount we pay to thereinsurer will be treated as a deposit and isreported on the balance sheet as an asset inother assets. The Citi coinsurance agreementsdid not generate any deferred gain or loss upontheir execution because these transactionswere part of a business reorganization amongentities under common control. The net impactof these transactions was reflected as anincrease in paid-in capital. Prior to thecompletion of the IPO, we effected areorganization in which we transferred all ofthe issued and outstanding capital stock ofPrime Re to Citi. Each of the assets andliabilities, including the invested assets and thedistribution of Prime Re, was transferred atbook value with no gain or loss recorded on ourincome statement.

For the year ended December 31, 2010, the proforma statement of income assumes thereinsurance transactions were effected as ofJanuary 1, 2010 for policies in force as ofyear-end 2009.

(A) Reflects premiums ceded to the Citireinsurers for the specific policies coveredunder the risk transfer agreements.

(B) Reflects net investment income on apro-rata share of invested assets transferred tothe Citi reinsurers. The net investment incomewas estimated by multiplying the actualinvestment income by the ratio of the amountof assets transferred to our total portfolio ofinvested assets. The amount also includes thechange in fair value of the deposit asset relatedto the 10% reinsurance agreement beingaccounted for under the deposit method.



(C) Reflects benefits and claims ceded to theCiti reinsurers for the specific policies coveredunder the risk transfer agreements.

(D) Reflects the DAC amortization ceded to theCiti reinsurers for the specific policies coveredunder the risk transfer agreements.

(E) Reflects the non-deferred expenseallowance received from the Citi reinsurersunder the risk transfer agreements.

(F) Reflects a finance charge payable to the Citireinsurer in respect of the deposit agreement.The annual finance charge is 3% of our excessreserves. Excess reserves are equal to thedifference between our required statutoryreserves and our economic reserves, which isthe amount we determine is necessary tosatisfy obligations under our in-force policies.

(G) Reflects income tax at the respectiveperiod’s effective tax rate.

(3) Adjustments for the reorganization andother concurrent transactions.

The pro forma statement ofincome for the year endedDecember 31, 2010 assumesthe reorganizationtransactions were executedas of January 1, 2010.

(H) Reflects a pro-ratareduction of net investmentincome on assets distributedto Citi as an extraordinarydistribution.

(I) Reflects interest expenseon a $300.0 million, 5.5%interest note payable issuedto Citi.

(J) Reflects expenseassociated with equityawards granted on April 1,2010 in connection with theIPO. The $3.1 million expensereflects one quarter ofvesting related tomanagement awards that

continue to vest over three years. Theseexpenses are reflected in actual results forperiods following the IPO.

For more detailed commentary on the driversof our revenues and expenses, see thediscussion of results of operations by segmentbelow.

Term Life Insurance Segment ActualResults. We entered into the Citi reinsuranceand reorganization transactions, which aredescribed more fully in Notes 2 and 3 to our proforma statement of income above, duringMarch and April of 2010. As such, actual resultsfor the year ended December 31, 2010 includeapproximately three months of operations thatdo not reflect the Citi reinsurance andreorganization transactions, and actual resultsfor the year ended December 31, 2009 do notreflect the effects of the Citi reinsurance andreorganization transactions. Term LifeInsurance segment actual results were asfollows:


2010 2009 $ %

(Dollars in thousands)Revenues:Direct premiums $2,100,709 $2,030,988 $ 69,721 3%Ceded premiums (1,436,041) (596,791) (839,250) 141%

Net premiums 664,668 1,434,197 (769,529) (54)%Allocated net investment

income 110,633 274,212 (163,579) (60)%Other, net 33,267 33,656 (389) (1)%

Total revenues 808,568 1,742,065 (933,497) (54)%

Benefits and expenses:Benefits and claims 277,653 559,038 (281,385) (50)%Amortization of DAC 156,312 371,663 (215,351) (58)%Insurance commissions 3,177 17,614 (14,437) (82)%Insurance expenses 63,885 134,738 (70,853) (53)%Interest expense 8,497 — 8,497 *

Total benefits andexpenses 509,524 1,083,053 (573,529) (53)%

Income before incometaxes $ 299,044 $ 659,012 $(359,968) (55)%

* Not meaningful



We believe that the pro forma results presentedbelow provide meaningful additionalinformation necessary to evaluate our segmentfinancial results.

Term Life Insurance Segment Pro FormaResults. Term Life Insurance segment proforma results give effect to the Citi reinsuranceand reorganization transactions, which aredescribed more fully in Notes 2 and 3 to our proforma statement of income. On a pro formabasis, Term Life Insurance segment resultswere as follows:


2010 2009 $ %

(Dollars in thousands)Revenues:Direct premiums $2,100,709 $2,030,988 $69,721 3%Ceded premiums (1,732,369) (1,680,827) (51,542) 3%

Net premiums 368,340 350,161 18,179 5%Allocated net

investment income 62,294 68,303 (6,009) (9)%Other, net 33,267 33,656 (389) (1)%

Total revenues 463,901 452,120 11,781 3%

Benefits andexpenses:

Benefits and claims 149,449 135,052 14,397 11%Amortization of DAC 84,923 91,932 (7,009) (8)%Insurance

commissions 1,508 12,091 (10,583) (88)%Insurance expenses 37,802 38,123 (321) *Interest expense 11,309 10,993 316 3%

Total benefits andexpenses 284,991 288,191 (3,200) (1)%

Income beforeincome taxes $ 178,910 $ 163,929 $ 14,981 9%

* Less than 1%

Direct premiums for 2010 increased mainly dueto improved persistency, a stronger Canadiandollar and premium increases for policiesreaching the end of their initial level premiumperiod, partially offset by the decline in thesales volume. Ceded premiums, which arehighly influenced by the business reinsuredwith Citi, grew consistent with direct premiums.

Additionally, in 2010, we reduced cededpremiums by approximately $13.1 million relatedto agreements obtained with certain reinsurersto recover ceded premiums for post-issueunderwriting class upgrades. The most commonreason for such an upgrade occurs whensomeone who was originally issued a term lifepolicy as a tobacco user subsequently quitsusing tobacco. Historically, we have reducedpolicyholder premiums for such upgrades, buthave not reduced ceded premiums to reflect thenew underwriting class. We were uncertain ofour ability to recover past ceded premiums, butin the fourth quarter of 2010, we approached

our reinsurers and reachedagreements to recover certainof these past ceded premiums.The $13.1 million of recoveriesrecognized in 2010 reflectsthe agreements signed in thefourth quarter of 2010. Werecovered $18.8 million of pastceded premiums, whichincluded $5.7 million ofrecoveries passed on to theCiti reinsurers in accordancewith the terms of theassociated reinsuranceagreements. We receivedapproximately $8.7 million ofadditional recoveries in thefirst quarter of 2011 for theremaining agreements whichwere signed in January 2011.

Allocated net investmentincome decreased during2010, primarily due to loweryield on invested assets andslightly lower averageallocated invested assets,partially offset by lowerinvestment-related expenses.



The increase in benefits and claims in 2010 wasprimarily due to higher reserve increases as aresult of improvements in policy persistencyand premium growth. Claims were slightlyhigher during 2010 due to favorable claimsexperience in the first quarter of 2009.

In 2010, amortization of DAC decreased largelydue to improved policy persistency, partiallyoffset by higher amortization from a lower DACinterest rate assumed for new business. Welowered the interest rate assumption during thethird quarter of 2010 to reflect rates availablein the current interest rate environment. Thenew lower DAC interest rate assumption willincrease DAC amortization in the near term.

The decline in insurance commissions expensein 2010 was largely due to the $8.2 millionspecial sales force payment made in 2009.

Insurance expenses were relatively flatprimarily reflecting the offsetting effects of adecline in compensation-related items in 2010;payments made in 2009 for contract buyoutsassociated with our canceled convention; andan increase in taxes, licenses and fees expensein 2010. The increase in taxes, licenses and feesin 2010 was primarily driven by accrualsrecognized in the fourth quarter as a result ofrecognizing these items on the accrual basis ofaccounting.

The changes in the face amount of our in-forcebook of term life insurance policies were asfollows:


2010 2009 $ %

(Dollars in millions)

Face amount in force, beginning ofperiod $650,195 $633,467 $ 16,728 3%

Issued face amount 74,401 80,497 (6,096) (8)%

Terminations (70,964) (74,642) 3,678 (5)%

Foreign currency 3,158 10,873 (7,715) (71)%

Face amount in force, end ofperiod (1) $656,791 $ 650,195 $ 6,596 1%


The in-force book increased $6.60 billion, or1%, during 2010. Issued face amount decreased$6.10 billion, or approximately 8%, due to alower average issued policy size and the effecton production of a slightly smaller base of salesrepresentatives. Terminations decreased by$3.68 billion in 2010, primarily as a result ofimproved persistency relative to 2009. Thedecrease in the effect of foreign currency onthe end-of-period face amount in force waslargely due to the significant strengthening inthe Canadian dollar experienced during 2009.The increase in face in force in 2010 did notkeep pace with the increase in premiumsprimarily due to the effect of increasedpremiums with no corresponding change in faceamount and unchanged face amounts onpolicies reaching the end of their initial levelpremium period.



Investments and Savings Products SegmentActual Results. The Transactions had noimpact on the Investments and SavingsProducts segment. On an actual basis,Investments and Savings Products segmentresults were as follows:


2010 2009 $ %


Revenues:

Commissions and fees:

Sales-based revenues $ 142,606 $ 118,798 $23,808 20%

Asset-basedrevenues 167,473 127,581 39,892 31%

Account-basedrevenues 41,690 43,247 (1,557) (4)%

Other, net 10,038 10,514 (476) (5)%

Total revenues 361,807 300,140 61,667 21%

Expenses:

Amortization of DAC 9,330 7,254 2,076 29%

Insurance commissions 7,854 6,831 1,023 15%

Sales commissions:

Sales-based 100,993 86,912 14,081 16%

Asset-based 58,129 42,003 16,126 38%

Other operating expenses 71,971 63,736 8,235 13%

Total expenses 248,277 206,736 41,541 20%

Income beforeincome taxes $ 113,530 $ 93,404 $ 20,126 22%

Supplemental information on the underlyingmetrics that drove results was as follows:


2010 2009 $ %

(Dollars in millions and accounts inthousands)

Revenue Metric:

Product sales $3,623.6 $3,006.6 $ 617.0 21%

Average of aggregate clientaccount values $ 31,908 $ 26,845 $5,063 19%

Average number of fee-generating accounts 2,728 2,838 (110) (4)%

Commissions and fees revenue increased in2010 primarily as a result of improvingeconomic and market trends and clientdemand. Sales-based commission revenuesprimarily grew as a result of demand, whileasset-based commission revenues were driven

by demand and improvedequity valuations. As a result,sales-based and asset-basedcommission expense grew aswell. Asset-based revenues andcommission expense in 2010also reflect the impact ofaccruing certain items that hadpreviously been accounted foron a cash basis. Excluding theimpact of these cash-to-accrualadjustments, asset-basedrevenues and commissionswould have increased 22%,consistent with the 19% growthin aggregate client accountvalues.

Amortization of DAC andinsurance commissionsincreased in 2010 consistentwith the growth in oursegregated funds business.Additionally, increases inclient account values drivenby improving marketconditions acceleratedamortization of DAC in 2010.

Other operating expensesincreased in 2010, largely dueto higher administrative costsas a result of growth in thebusiness.



Changes in asset values in client accounts wereas follows:


2010 2009 $ %

(Dollars in millions)

Asset values, beginning of period $ 31,303 $24,677 $ 6,626 27%

Inflows 3,624 3,007 617 21%

Redemptions (3,691) (2,997) (694) 23%Change in market value, net and other 3,633 6,617 (2,984) (45)%

Asset values, end of period (1) $34,869 $ 31,303 $ 3,565 11%


Inflows increased consistent with the increasein sales volume. The amount of redemptionsalso increased reflecting the year-over-yearincrease in assets under management. Actualredemption rates were level as a percent ofaverage assets under management for both2010 and 2009. The market return on assetsunder management in 2010 and 2009 reflectedgeneral market value trends.

Corporate and Other Distributed ProductsSegment Actual Results. We entered into

the reorganizationtransactions,which aredescribed morefully in Note 3 toour pro formastatement ofincome, duringMarch and April of2010. As such,actual results for

the year ended December 31, 2010 includeapproximately three months of operations thatdo not reflect the reorganization transactions,while actual results for the year endedDecember 31, 2009 do not reflect the effects ofthe reorganization transactions. Corporate andOther Distributed Products segment actualresults were as follows:


2010 2009 $ %

(Dollars in thousands)Revenues:Direct premiums $ 80,365 $ 81,793 $ (1,428) (2)%Ceded premiums (14,325) (13,963) (362) 3%

Net premiums 66,040 67,830 (1,790) (3)%Commissions and fees 31,172 46,360 (15,188) (33)%Allocated net investment income 54,477 77,114 (22,637) (29)%Realized investment gains (losses), including OTTI 34,146 (21,970) 56,116 *Other, net 5,653 8,862 (3,209) (36)%

Total revenues 191,488 178,196 13,292 7%

Benefits and expenses:Benefits and claims 40,052 41,235 (1,183) (3)%Amortization of DAC 2,392 2,374 18 *Sales commissions 20,800 33,841 (13,041) (39)%Insurance expenses 11,615 14,022 (2,407) (17)%Insurance commissions 8,875 9,943 (1,068) (11)%Interest expense 12,375 — 12,375 *Other operating expenses 108,810 69,242 39,568 57%

Total benefits and expenses 204,919 170,657 34,262 20%

(Loss) income before income taxes $ (13,431) $ 7,539 $(20,970) *

* Less than 1% or not meaningful



We believe that the pro forma results presentedbelow provide meaningful additionalinformation necessary to evaluate our segmentfinancial results.

Corporate and Other Distributed ProductsSegment Pro Forma Results. Corporate andOther Distributed Products segment pro formaresults give effect to the reorganizationtransactions, which are described more fully inNote 3 to our pro forma statement of income.On a pro forma basis, Corporate and OtherDistributed Products segment results were asfollows:


2010 2009 $ %


Revenues:Direct premiums $ 80,365 $ 81,793 $ (1,428) (2)%Ceded premiums (14,325) (13,963) (362) 3%

Net premiums 66,040 67,830 (1,790) (3)%Commissions and fees 31,172 46,360 (15,188) (33)%Allocated net investment income 48,081 50,043 (1,962) (4)%Realized investment (losses)

gains, including OTTI 34,146 (21,970) 56,116 *Other, net 5,653 8,862 (3,209) (36)%

Total revenues 185,092 151,125 33,967 22%

Benefits and expenses:Benefits and claims 40,052 41,235 (1,183) (3)%Amortization of DAC 2,392 2,374 18 1 %Sales commissions 20,800 33,841 (13,041) (39)%Insurance expenses 11,615 14,022 (2,407) (17)%Insurance commissions 8,875 9,943 (1,068) (11)%Interest expense 16,500 16,500 — *Other operating expenses 111,886 104,012 7,874 8%

Total benefits and expenses 212,120 221,927 (9,807) (4)%

Loss before income taxes $(27,028) $(70,802) $43,774 (62)%

* Not meaningful

Total revenues increased in 2010 primarily as aresult of recognizing realized investment gainsin 2010 versus impairment losses in 2009. Thisgrowth was partially offset by lowercommissions and fees as a result of thecontinuing decline in our lending business. Theincrease in total revenues was also partiallyoffset by lower net investment income and a

decline in our print business as reflected inother, net. Realized investment gains (losses)included $12.2 million of OTTI in 2010,compared with $61.4 million of OTTI in 2009.

Total benefits and expenses were lower in 2010primarily as a result of lower sales commissionspartially offset by an increase in other operatingexpenses. Sales commissions expense was lowerin 2010 consistent with the decline incommissions and fees revenue noted above.Other operating expenses increased primarily asa result of public company and IPO-relatedexpenses incurred in 2010.

For additionalsegmentinformation, seeNote 2 to ourconsolidated andcombined financialstatements.

FinancialCondition

Investments. Wehave an investmentcommittee composedof members of oursenior managementteam that isresponsible forestablishing andmaintaining ourinvestment guidelinesand supervising ourinvestment activity.Our investmentcommittee regularly

monitors our overall investment results and ourcompliance with our investment objectives andguidelines. We use a third-party investmentadviser to manage our investing activities. Ourinvestment adviser reports to our investmentcommittee.

We follow a conservative investment strategydesigned to emphasize the preservation of ourinvested assets and provide adequate liquidity.



In an effort to meet business needs and mitigaterisks, our investment guidelines providerestrictions on our portfolio’s composition,including limits on asset type, sector limits,credit quality limits, portfolio duration, limits onthe amount of investments in approvedcountries and permissible security types. Wemay also direct our investment managers toinvest some of our invested asset portfolio incurrencies other than the U.S. dollar. Forexample, a portion of our portfolio is invested inassets denominated in Canadian dollars which,at minimum, would equal our reserves forpolicies denominated in Canadian dollars.Additionally, to help ensure adequate liquidityfor payment of claims, we take into account thematurity and duration of our invested assetportfolio and our general liability profile.

Our invested asset portfolio is subject to avariety of risks, including risks related togeneral economic conditions, market volatility,interest rate fluctuations, liquidity risk andcredit and default risk. Investment guidelinerestrictions have been established to minimizethe effect of these risks but may not always beeffective due to factors beyond our control.Interest rates are highly sensitive to manyfactors, including governmental monetarypolicies, domestic and international economicand political conditionsand other factors beyondour control. A significantincrease in interest ratescould result in significantlosses, realized orunrealized, in the valueof our invested asset

portfolio. Additionally, with respect to some ofour investments, we are subject to prepaymentand, therefore, reinvestment risk.

In November 2011, we executed an agreementwith Citi to repurchase approximately8.9 million shares of our common stock for atotal purchase price of approximately $200.0million (the “repurchase transaction”). Therepurchase transaction, which was funded withthe proceeds from a dividend paid by PrimericaLife, was completed in November 2011. Thedividend from Primerica Life to the ParentCompany was funded through sales ofinvestments and available cash. The changes toasset mix, duration and overall credit quality ofour invested asset portfolio were notmeaningful. However, with the reduction in ourconsolidated cash and invested assets as aresult of the repurchase transaction, we expectnet investment income to decline. Our averagebook yield at December 31, 2011 increasedmodestly, as the investments sold to fund thedividend generally had yields that were lowerthan the average book yield on the pre-dividendinvested assets portfolio.

Details on asset mix were as follows:

December 31,2011

December 31,2010

Fairvalue

AmortizedCost

Fairvalue

AmortizedCost

U.S. government and agencies 1% 1% 1% 1%

Foreign government 5% 5% 4% 4%

States and political subdivisions 1% 1% 1% 1%

Corporates 64% 63% 62% 61%

Mortgage- and asset-backed securities 21% 21% 24% 25%

Equity securities 1% 1% 1% 1%

Trading securities 1% 1% 1% 1%

Cash and cash equivalents 6% 7% 6% 6%

Total 100% 100% 100% 100%



The composition and duration of our portfoliowill vary depending on several factors,including the yield curve and our opinion of therelative value among various asset classes. Theyear-end average rating, duration and bookyield of our fixed-maturity portfolio were asfollows:

December 31,

2011 2010

Average rating of our fixed-maturity portfolio A AAverage duration of our fixed-maturity portfolio 3.5 years 3.6 yearsAverage book yield of our fixed-maturity

portfolio 5.52% 5.48%

The distribution by rating of our investments infixed-maturity securities follows.

December 31, 2011 December 31, 2010

Amortizedcost %

Amortizedcost %


AAA $ 428,748 24% $ 521,615 27%AA 150,894 8% 176,947 9%A 431,175 24% 426,658 22%BBB 683,818 38% 694,884 36%Below investment grade 125,594 7% 130,080 7%Not rated 770 * 2,340 *

Total (1) $1,820,999 100% $1,952,524 100%

* Less than 1%(1) Totals may not add due to rounding.



The ten largest issuers in our invested assetportfolio were as follows:

December 31, 2011

Issuer

Cost oramortized

cost Fair valueUnrealizedgain (loss)

Creditrating

(Dollars in thousands)Government of Canada $ 35,374 $ 38,890 $ 3,516 AAANational Rural Utilities

Cooperative 10,570 13,719 3,149 A+Verizon Communications Inc 11,493 13,161 1,668 A-Bank of America Corp 12,720 12,844 124 A-ProLogis Inc 11,745 12,354 609 BBB-General Electric Co 10,236 11,468 1,232 AA+Province of Ontario Canada 8,466 10,570 2,104 AA-ConocoPhillips 8,827 10,369 1,542 AEdison International 9,790 9,936 146 B+Enel SpA 10,544 9,734 (810) A-

Total – ten largest issuers $ 129,765 $ 143,045 $13,280

Total – fixed-maturity andequity securities $1,832,688 $1,985,868

Percent of total fixed-maturityand equity securities 7% 7%

For additional information on our investedasset portfolio, see Notes 3 and 4 to ourconsolidated and combined financialstatements.

Other Significant Assets andLiabilities. The balances of and changes inother significant assets and liabilities were asfollows:

December 31, Change

2011 2010 $ %


Due from reinsurers $3,855,890 $ 3,731,634 $ 124,256 3%Deferred policy acquisition

costs, net 1,050,637 853,211 197,426 23%Future policy benefits (4,614,860) (4,409,183) (205,677) 5%Current income tax payable (33,177) (43,224) 10,047 (23)%Deferred income taxes (98,300) (93,002) (5,298) 6%

Due from reinsurers. Due from reinsurersreflects future policy benefit reserves due fromthird-party reinsurers, including the Citi

reinsurers. Such amounts are reported as duefrom reinsurers rather than offsetting future

policy benefits.The increase indue fromreinsurers waslargely driven bygrowth in ourNew Termbusiness partiallyoffset by therun-off in theblock of businessceded to Citi.

Deferred policyacquisition costs,net. Theincrease in DACwas primarily aresult of growthin commissionsand expensesdeferred as aresult of newbusiness.

Future policy benefits. The increase in futurepolicy benefits was primarily a result of theaging of and growth in our in-force book ofbusiness.

Current income tax payable and deferredincome taxes. Our 2011 effective tax rate wasrelatively flat compared with 2010. As such,current income tax payable declined largely

due to thedecrease inearningssubsequent toour corporatereorganization.

For additionalinformation, seethe notes to ourconsolidated andcombinedfinancialstatements.



Off-balance sheet arrangements. We haveno off-balance sheet arrangements, as definedin the rules and regulations of the SEC, thathave or are reasonably likely to have a materialcurrent or future effect on our financialcondition, changes in financial condition,revenues or expenses, results of operations,liquidity, capital expenditures or capitalresources that would be material to investors.

Liquidity and Capital Resources

Dividends and other payments to us from oursubsidiaries are our principal sources of cash.The primary uses of funds by the ParentCompany include the payment of generaloperating expenses, the payment of dividendsand the payment of principal and interest to Citiunder the Citi note.

The liquidity requirements of our subsidiariesprincipally relate to the liabilities associatedwith their distribution and underwriting ofinsurance products (including the payment ofclaims), distribution of investment and savingsproducts, operating expenses, income taxesand the payment of dividends. Historically, ourinsurance subsidiaries have used cash flowfrom operations associated with our in-forcebook of term life insurance to fund theirliquidity requirements. Our insurancesubsidiaries’ principal cash inflows fromoperating activities are derived frompolicyholder premiums and investment incomeearned on invested assets that support ourstatutory capital and reserves. We also derivecash inflows from the distribution of investmentand savings products and other products. Ourprincipal outflows relate to payments for cededpremiums and benefits and claims. Theprincipal cash inflows from investmentactivities result from repayments of principaland investment income, while the principaloutflows relate to purchases of fixed-maturitysecurities. We typically hold cash sufficient tofund operating flows, and invest any excesscash.

Our distribution and underwriting of term lifeinsurance place significant demands on our

liquidity, particularly when we experiencegrowth. We pay a substantial majority of thesales commission during the first year followingthe sale of a policy. Our underwriting activitiesalso require significant cash outflows at theinception of a policy’s term. Following and as aresult of the Citi reinsurance transactions(without giving effect to any other factors), thecash flows from our retained in-force book ofterm life insurance policies were significantlylower. This has reduced our operating cashflows for the near to intermediate term;however, we anticipate that cash flows fromour businesses, including our existing block ofpolicies and our investment and savingsproducts, will continue to provide us withsufficient liquidity to meet our operatingrequirements. Over the next few years, weexpect our growing premium revenue basefrom policies issued after the Citi reinsurancetransactions to increase operating cash flows.

Significant Transactions. In April 2011, wefiled a shelf registration statement with the SECthat enables us to offer and sell to the publicour equity and debt securities from time to timeas we may determine and enables certain ofour significant stockholders to resell our sharesof common stock held by them. Specificinformation regarding the terms and securitieswhich may be offered pursuant to thisregistration statement will be provided at thetime of such offering. Net proceeds of anyoffering of securities by us pursuant to thisregistration statement may be used for workingcapital and other general corporate purposes,which may include the repayment orrefinancing of outstanding indebtedness orrepurchases of shares of our outstandingcommon stock. Pursuant to this registrationstatement, Citi sold an aggregate ofapproximately 20.1 million shares of ourcommon stock in the open market in April andDecember 2011, which significantly increasedthe public float of our common stock.

In October 2011, we received notification thatthe Massachusetts DOI had approved PrimericaLife’s request to pay a $200.0 million cash



dividend to the Parent Company. The dividendwas paid in November 2011 and funded via salesof invested assets and available cash.

In November 2011, we repurchasedapproximately 8.9 million shares of ourcommon stock at a price of $22.42 per share,for a total purchase price of approximately$200.0 million. The per-share purchase pricewas determined based on the volume-weightedaverage price per share of Primerica commonstock during the seven-day period prior toexecution of the repurchase agreement. Wefunded the repurchase transaction with thefunds from Primerica Life’s dividend to theParent Company.

We may seek to enhance our liquidity positionor capital structure through borrowings fromthird-party sources, sales of debt or equitysecurities, reserve financing or somecombination of these sources. The ModelRegulation entitled Valuation of Life InsurancePolicies, commonly known as Regulation XXX,requires insurers tocarry statutory reservesfor term life insurancepolicies with long-termpremium guaranteeswhich are oftensignificantly in excessof the reserves thatinsurers deemnecessary to satisfyclaim obligations.Accordingly, manyinsurance companieshave sought ways toreduce their capitalneeds by financing these excess reservesthrough bank financing, reinsurancearrangements and other financing transactions.We have completed a substantial amount of thework necessary to execute a XXX redundantreserve financing that could generate statutorycapital for distribution to the Parent Company.

We are continuing to work on a XXX redundantreserve financing transaction and to evaluatehow other capital options may fit into our

capital strategy. As a result, no assurance isgiven as to whether such a transaction will beexecuted and, if executed, the structure, timing,and amount of any such transaction.

Cash Flows. Cash flows from operatingactivities are affected primarily by the timingof premiums received, commissions and feesreceived, benefits paid, commissions paid tosales representatives, administrative andselling expenses, investment income, and cashtaxes. Our principal source of cash historicallyhas been premiums received on term lifeinsurance policies in force.

We typically generate positive cash flows fromoperating activities, as premiums, netinvestment income, commissions and feescollected from our insurance and investmentand savings products exceed benefits,commissions and operating expenses paid, andwe invest the excess. The components of thechanges in cash and cash equivalents were asfollows:


2011 2010 2009

(In thousands)

Net cash provided by operatingactivities $ 87,902 $ 41,057 $716,344

Net cash provided by (used in)investing activities 128,699 739,574 (357,855)

Net cash used in financing activities (207,312) (1,289,893) (56,427)

Effect of foreign exchange ratechanges on cash 751 32,778 (1,894)

Change in cash and cashequivalents $ 10,040 $ (476,484) $300,168

Operating activities. Net cash provided byoperating activities was higher in 2011 largelydue to higher 2010 income tax payments andother intercompany settlements paid to Citi in2010 in connection with the Transactions. Theeffect of these 2010 items were partially offsetby lower net investment income in 2011,primarily as a result of the Transactions. Netcash provided by operating activities for 2011also reflects approximately $3.6 million of netpurchases of trading securities by our broker-



dealer subsidiary, compared with approximately$6.0 million of net sales and maturities in 2010.

The decrease in cash provided by operatingactivities for 2010, compared with 2009 wasprimarily the result of lower net cash flows onour term life insurance business and lower netinvestment income, both of which weresubstantially impacted by the Citi reinsurancetransactions and our corporate reorganization.Additionally, there was an increase in incometaxes paid in connection with the Citireinsurance transactions. These cash outflowswere partially offset by an increase in cashprovided by our investment and savingsproducts due to improved sales and highervalues of client accounts on which we earnfees.

Investing activities. The decline in cashprovided by investing activities in 2011 primarilyreflects the impact of securities sales duringthe first quarter of 2010 as we increased ourcash position to fund distributions to Citi inconnection with the Transactions.

The increase in cash provided by investingactivities for 2010, compared with 2009 wasprimarily the result of significant securitiessales activity and lower securities purchases aswe increased our cash position in anticipationof the Transactions.

Financing activities. The decrease in net cashused in financing activities in 2011 was primarilydue to the impact of the 2010 distributions paidto Citi in connection with the Transactions aswell as the first quarter of 2010 payment of the2009 dividend declared to Citi. Net cash used infinancing activities in 2011 also reflects therepurchase of our common stock from Citi inNovember 2011.

The increase in cash used in financing activitiesfor 2010, compared with 2009 represents thecash payment of dividends paid to Citi as partof the Transactions, the cash portion of the Citidividend declared in December 2009 and paidin January 2010, and the dividends to

stockholders declared and paid in the third andfourth quarters of 2010.

Citi Note. In April 2010, we issued the $300.0million Citi note as part of our corporatereorganization. Prior to the issuance of the Citinote, we had no outstanding debt. The Citi notebears interest at an annual rate of 5.5%,payable semi-annually in arrears on January 15and July 15, and matures March 31, 2015.

We have the option to redeem the Citi note inwhole or in part at a redemption price equal to100% of the principal amount to be redeemedplus accrued and unpaid interest to the date ofredemption. The terms of the Citi note alsorequire us to use our commercially reasonableefforts to arrange and consummate an offeringof investment-grade debt securities, trustpreferred securities, surplus notes, hybridsecurities or convertible debt that generatessufficient net cash proceeds to repay the Citinote in full at certain mutually agreeable dates,based on certain conditions.

We were in compliance with all of the covenantsof the Citi note at December 31, 2011. No eventsof default or defaults occurred during the yearended December 31, 2011.

We calculate our debt-to-capital ratio bydividing total long-term debt by the sum ofstockholders’ equity and total long-term debt.As of December 31, 2011, our debt-to-capitalratio was 17.4%.

Rating Agencies. As of December 31, 2011,the Parent Company’s investment grade creditratings for the senior unsecured debt, which itmay elect to offer pursuant to its existing shelfregistration statement at some time in thefuture, were as follows:

Agency Senior debt rating

Moody’s Baa2, stable outlook

Standard & Poor’s A-, stable outlook

A.M. Best Company a-, stable outlook



As of December 31, 2011, Primerica Life’sfinancial strength ratings were as follows:

Agency Financial strength rating

Moody’s A2, stable outlook

Standard & Poor’s AA-, stable outlook

A.M. Best Company A+, stable outlook

Fitch A+, stable outlook

Risk-Based Capital. The NAIC hasestablished RBC standards for U.S. life insurers,as well as a risk-based capital model act (the“RBC Model Act”) that has been adopted by theinsurance regulatory authorities. The RBCModel Act requires that life insurers annuallysubmit a report to state regulators regardingtheir RBC based upon four categories of risk:asset risk; insurance risk; interest rate risk andbusiness risk. The capital requirement for eachis determined by applying factors that varybased upon the degree of risk to various asset,premiums and reserve items. The formula is anearly warning tool to identify possible weaklycapitalized companies for purposes of initiatingfurther regulatory action.

As of December 31, 2011, our U.S. life insurancesubsidiaries had statutory capital substantiallyin excess of the applicable statutoryrequirements to support existing operations

and to fund future growth. Following theNovember 2011 $200.0 million dividend fromPrimerica Life to the Parent Company,Primerica Life’s RBC ratio remained wellpositioned to support existing operations andfund future growth.

In Canada, an insurer’s minimum capitalrequirement is overseen by OSFI anddetermined as the sum of the capitalrequirements for five categories of risk: assetdefault risk; mortality/morbidity/lapse risks;changes in interest rate environment risk;segregated funds risk and foreign exchangerisk. As of December 31, 2011, Primerica LifeCanada was in compliance with Canada’sminimum capital requirements as determinedby OSFI.

Securities Lending. We participate insecurities lending transactions with brokers toincrease investment income with minimal risk.See Notes 1 and 3 to our consolidated andcombined financial statements for additionalinformation.

Short-term Borrowings. We had no short-term borrowings as of or during the year endedDecember 31, 2011.

Contractual Obligations. Our contractualobligations, including payments due by period,were as follows:

December 31, 2011

TotalLiability

TotalPayments

Lessthan 1year

1-3years

3-5years

Morethan 5years

(In millions)

Future policy benefits $ 4,615 $16,624 $ 1,014 $ 1,991 $1,956 $11,663

Policy claims and other benefits payable 242 242 242 — — —

Other policyholder funds 341 341 341 — — —

Citi note 300 359 17 34 308 —

Commissions 18 255 114 41 33 67

Purchase obligations 5 29 17 11 1 —

Operating lease obligations n/a 93 7 13 12 61

Current income tax payable 33 33 33 — — —

Total contractual obligations $5,554 $17,976 $1,785 $2,090 $2,310 $ 11,791



Our liability for future policy benefitsrepresents the present value of estimatedfuture policy benefits to be paid, less thepresent value of estimated future net premiumsto be collected. Net premiums represent theportion of gross premiums required to providefor all benefits and associated expenses. Thesebenefit payments are contingent onpolicyholders continuing to renew their policiesand make their premium payments. Ourcontractual obligations table discloses theimpact of benefit payments that will be dueassuming the underlying policy renewals andpremium payments continue as expected in ouractuarial models. The future policy benefitsrepresented in the table are presented on anundiscounted basis, gross of any amountsrecoverable through reinsurance agreementsand gross of any premiums to be collected. Weexpect to fully fund the obligations for futurepolicy benefits from cash flows from generalaccount invested assets and from futurepremiums. These estimations are based onmortality and lapse assumptions comparablewith our historical experience. Due to thesignificance of the assumptions used, theamounts presented could materially differ fromactual results.

Policy claims and other benefits payablerepresents claims and benefits currently owedto policyholders.

Other policyholders’ funds primarily representclaim payments left on deposit with us.

Commissions represent gross, undiscountedcommissions that we expect to incur,contingent on the policyholders continuing torenew their policies and make their premiumpayments as noted above.

Purchase obligations include agreements topurchase goods or services that areenforceable and legally binding and that specifyall significant terms. These obligations consistprimarily of accounts payable and certainaccrued liabilities, including committed fundsrelated to meetings and conventions for ourindependent sales force, plus a variety ofvendor commitments funding our ongoingbusiness operations.

Our operating lease obligations primarily relateto office and warehouse space and officeequipment. In September 2011, we signed anagreement to lease a new build-to-suit facilitywhich will replace and consolidate substantiallyall of our existing Duluth, Georgia-basedexecutive and home office operations. Weexpect the building to be complete and readyfor occupancy in the second quarter of 2013.The initial lease term will be 15 years withestimated minimum annual rental paymentsranging from approximately $4.5 million atinception to approximately $5.6 million in year15. The leases covering our existing Duluth,Georgia-based executive and home officeoperations will terminate in the second quarterof 2013. As such, we do not expect a materialincrease in our operating lease expenditures,however the period over which we arecontractually obligated for the executive andhome office lease will extend to 2028.

For additional information concerning ourcommitments and contingencies, see Note 16 toour consolidated and combined financialstatements.

ITEM 7A. QUANTITATIVE ANDQUALITATIVE DISCLOSURESABOUT MARKET RISK.

Market risk is the risk of the loss of fair valueresulting from adverse changes in market ratesand prices, such as interest rates and foreigncurrency exchange rates. Market risk is directlyinfluenced by the volatility and liquidity in themarkets in which the related underlyingfinancial instruments are traded. Sensitivityanalysis measures the impact of hypotheticalchanges in interest rates, foreign exchangerates and other market rates or prices on theprofitability of market-sensitive financialinstruments.

The following discussion about the potentialeffects of changes in interest rates andCanadian currency exchange rates is based onshock-tests, which model the effects of interestrate and Canadian exchange rate shifts on ourfinancial condition and results of operations.


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Although we believe shock tests provide themost meaningful analysis permitted by therules and regulations of the SEC, they areconstrained by several factors, including thenecessity to conduct the analysis based on asingle point in time and by their inability toinclude the extraordinarily complex marketreactions that normally would arise from themarket shifts modeled. Although the followingresults of shock tests for changes in interestrates and Canadian currency exchange ratesmay have some limited use as benchmarks,they should not be viewed as forecasts. Thesedisclosures also are selective in nature andaddress, in the case of interest rates, only thepotential direct impact on our financialinstruments, and in the case of Canadiancurrency exchange rates, the potentialtranslation impact on net income from ourCanadian subsidiaries. They do not include avariety of other potential factors that couldaffect our business as a result of these changesin interest rates and Canadian currencyexchange rates.

Interest Rate Risk

The fair value of the fixed-maturity securities inour invested asset portfolio as of December 31,2011 was $1.97 billion. The primary market riskfor this portion of our invested asset portfolio isinterest rate risk. One means of assessing theexposure of our fixed-maturity securitiesportfolios to interest rate changes is a duration-based analysis that measures the potentialchanges in market value resulting from ahypothetical change in interest rates of 100basis points across all maturities. This model issometimes referred to as a parallel shift in theyield curve.

Under this model, with all other factorsconstant and assuming no offsetting change inthe value of our liabilities, we estimated thatsuch an increase in interest rates would causethe market value of our fixed-maturitysecurities portfolios to decline byapproximately $61.6 million, or 3%. based onour actual securities positions as ofDecember 31, 2011.

Canadian Currency Risk

We also have exposure to foreign currencyexchange risk to the extent we conductbusiness in Canada. For the year endedDecember 31, 2011, 19% of our revenues fromoperations, excluding realized investmentgains, were generated by our Canadianoperations. A strong Canadian dollar relative tothe U.S. dollar results in higher levels ofreported revenues, expenses, net income,assets, liabilities and accumulated othercomprehensive income (loss) in our U.S. dollarfinancial statements and a weaker Canadiandollar has the opposite effect. Historically, wehave not hedged this exposure, although wemay elect to do so in future periods.

One means of assessing exposure to changes inCanadian currency exchange rates is to modelthe effects on reported income using asensitivity analysis. We analyzed our Canadiancurrency exposure for the year endedDecember 31, 2011. Net exposure was measuredassuming a 10% decrease in Canadian currencyexchange rates compared to the U.S. dollar. Weestimated that such a decrease would decreaseour net income before income taxes for theyear ended December 31, 2011 by approximately$6.6 million.


Item 8. Financial Statements and Supplementary Data

ITEM 8. FINANCIAL STATEMENTSAND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The stockholders and board of directors of Primerica, Inc.:

We have audited the accompanying consolidated balance sheets of Primerica, Inc. and subsidiaries(the Company) as of December 31, 2011 and 2010, and the related consolidated and combinedstatements of income, stockholders’ equity, comprehensive income, and cash flows for each of theyears in the three-year period ended December 31, 2011. These consolidated and combined financialstatements are the responsibility of the Company’s management. Our responsibility is to express anopinion on these consolidated and combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated and combined financial statements referred to above present fairly,in all material respects, the financial position of Primerica, Inc. and subsidiaries as of December 31,2011 and 2010, and the results of their operations and their cash flows for each of the years in thethree-year period ended December 31, 2011, in conformity with U.S. generally accepted accountingprinciples.

As discussed in Note 1 to the consolidated and combined financial statements, in April 2010 theCompany completed its initial public offering and a series of related transactions. Also as discussedin Note 1 to the consolidated and combined financial statements, the Company adopted theprovisions of FASB Staff Position Financial Accounting Standard No. 115-2 and Financial AccountingStandard No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (includedin FASB ASC Topic 320, Investments — Debt and Equity Securities) as of January 1, 2009.

We also have audited, in accordance with the standards of the Public Company Accounting OversightBoard (United States), Primerica, Inc.’s internal control over financial reporting as of December 31,2011, based on criteria established in Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO), and our report datedFebruary 28, 2012 expressed an unqualified opinion on the effectiveness of the Company’s internalcontrol over financial reporting.

/s/ KPMG LLP

Atlanta, GeorgiaFebruary 28, 2012



PRIMERICA, INC. AND SUBSIDIARIESConsolidated Balance Sheets

December 31,

2011 2010

(In thousands)Assets

Investments:Fixed-maturity securities available for sale, at fair value (amortized cost: $1,811,359 in

2011 and $1,929,757 in 2010) $ 1,959,156 $ 2,081,361Equity securities available for sale, at fair value (cost: $21,329 in 2011 and $17,394 in

2010) 26,712 23,213Trading securities, at fair value (cost: $9,793 in 2011 and $22,619 in 2010) 9,640 22,767Policy loans 25,982 26,229Other invested assets 14 14

Total investments 2,021,504 2,153,584Cash and cash equivalents 136,078 126,038Accrued investment income 21,579 22,328Due from reinsurers 3,855,890 3,731,634Deferred policy acquisition costs, net 1,050,637 853,211Premiums and other receivables 163,845 168,026Intangible assets 71,928 75,357Other assets 268,485 307,342Separate account assets 2,408,598 2,446,786

Total assets $9,998,544 $9,884,306

Liabilities and Stockholders’ Equity

Liabilities:Future policy benefits $ 4,614,860 $ 4,409,183Unearned premiums 7,022 5,563Policy claims and other benefits payable 241,754 229,895Other policyholders’ funds 340,766 357,253Note payable 300,000 300,000Current income tax payable 33,177 43,224Deferred income taxes 98,300 93,002Other liabilities 382,068 386,182Payable under securities lending 149,358 181,726Separate account liabilities 2,408,598 2,446,786Commitments and contingent liabilities (see Note 16)

Total liabilities 8,575,903 8,452,814

Stockholders’ equity:Common stock ($.01 par value, authorized 500,000 in 2011 and 2010 and issued 64,883

shares in 2011 and 72,843 shares in 2010) 649 728Paid-in capital 707,912 883,168Retained earnings 566,021 395,057Accumulated other comprehensive income, net of income tax:Unrealized foreign currency translation gains 52,642 56,492Net unrealized investment gains (losses):

Net unrealized investment gains not other-than-temporarily impaired 97,082 98,322Net unrealized investment losses other-than-temporarily impaired (1,665) (2,275)

Total stockholders’ equity 1,422,641 1,431,492

Total liabilities and stockholders’ equity $9,998,544 $9,884,306

See accompanying notes to consolidated and combined financial statements.



PRIMERICA, INC. AND SUBSIDIARIESConsolidated and Combined Statements of Income


2011 2010 2009

(In thousands, except per-shareamounts)

Revenues:Direct premiums $2,229,467 $ 2,181,074 $ 2,112,781Ceded premiums (1,703,075) (1,450,367) (610,754)

Net premiums 526,392 730,707 1,502,027Commissions and fees 412,979 382,940 335,986Net investment income 108,601 165,111 351,326Realized investment gains (losses), including other-than-temporary

impairment losses 6,440 34,145 (21,970)Other, net 48,681 48,960 53,032

Total revenues 1,103,093 1,361,863 2,220,401

Benefits and expenses:Benefits and claims 242,696 317,703 600,273Amortization of deferred policy acquisition costs 119,348 168,035 381,291Sales commissions 191,306 179,924 162,756Insurance expenses 61,109 75,503 148,760Insurance commissions 19,297 19,904 34,388Interest expense 27,968 20,872 —Other operating expenses 165,525 180,779 132,978

Total benefits and expenses 827,249 962,720 1,460,446

Income before income taxes 275,844 399,143 759,955Income taxes 97,568 141,365 265,366

Net income $ 178,276 $ 257,778 $494,589

Earnings per share:Basic $ 2.39 $ 3.43(1)

Diluted $ 2.36 $ 3.40(1)

Weighted-average shares used in computing earnings per share:Basic 72,283 72,099(1)

Diluted 73,107 72,882(1)

(1) Pro forma basis using weighted-average shares, including the shares issued or issuable upon lapse of restrictionsfollowing our April 1, 2010 corporate reorganization as though they had been issued and outstanding onJanuary 1, 2010.

Supplemental disclosures:Total impairment losses $ (2,198) $ (12,711) $ (74,967)Impairment losses recognized in other comprehensive income before

income taxes 183 553 13,573

Net impairment losses recognized in earnings (2,015) (12,158) (61,394)Other net realized investment gains 8,455 46,303 39,424

Realized investment gains (losses), including other-than-temporaryimpairment losses $ 6,440 $ 34,145 $ (21,970)




PRIMERICA, INC. AND SUBSIDIARIESConsolidated and Combined Statements of Stockholders’ Equity


2011 2010 2009

(In thousands, except per-shareamounts)

Common stock:Balance, beginning of period $ 728 $ — $ —Repurchase of shares held by Citi (89) — —Net issuance of common stock 10 728 —

Balance, end of period 649 728 —Paid-in capital:Balance, beginning of period 883,168 1,124,096 1,095,062Share-based compensation 25,335 46,094 (1,836)Net issuance of common stock (10) (727) —Repurchase of shares held by Citi (199,911) — —Net capital contributed by Citi 1,573 167,701 30,870Issuance of warrants to Citi — 18,464 —Issuance of note payable to Citi — (300,000) —Tax election under Section 338(h)(10) of the Internal Revenue Code (2,243) (172,460) —

Balance, end of period 707,912 883,168 1,124,096

Treasury Stock:Balance, beginning of period — — —Treasury stock acquired — (75,420) —Treasury stock issued, at cost — 41,056 —Treasury stock retired — 34,364 —

Balance, end of period — — —

Retained earnings:Balance, beginning of period 395,057 3,648,801 3,340,841Adoption of FSP SFAS No. 115-2 (included in ASC 320), net of income tax

expense of $3,929 — — 7,298Net income 178,276 257,778 494,589Dividends ($0.10 per share in 2011 and $0.02 per share in 2010) (7,312) (1,502) —Distributions of warrants to Citi — (18,464) —Distributions to Citi — (3,491,556) (193,927)

Balance, end of period 566,021 395,057 3,648,801

Accumulated other comprehensive income:Balance, beginning of period 152,539 170,876 (323,917)Adoption of FSP SFAS No. 115-2 (included in ASC 320), net of income tax

expense of $(3,929) — — (7,298)Change in foreign currency translation adjustment, net of income tax expense of

$0 in 2011, $4,630 in 2010, and $27,125 in 2009 (3,850) 15,601 49,715Change in net unrealized investment gains (losses) during the period, net of

income taxes:Change in net unrealized investment gains (losses) not-other-than

temporarily impaired, net of income tax expense (benefit) of $(1,785) in2011, $(24,848) in 2010, and $245,060 in 2009 (1,240) (47,783) 461,198

Change in net unrealized investment gains (losses) other-than-temporarilyimpaired, net of income tax expense of $328 in 2011, $7,455 in 2010, and$(4,751) in 2009 610 13,845 (8,822)

Balance, end of period 148,059 152,539 170,876

Total stockholders’ equity $1,422,641 $ 1,431,492 $4,943,773




PRIMERICA, INC. AND SUBSIDIARIESConsolidated and Combined Statements of Comprehensive Income


2011 2010 2009

(In thousands)Net income $178,276 $ 257,778 $494,589

Other comprehensive (loss) income before income taxes:Unrealized investment gains (losses):

Change in unrealized gains on investment securities 3,839 114,867 663,458Reclassification adjustment for realized investment gains (losses) included in

net income (5,926) (33,510) 21,929Reclassification adjustment for unrealized gains on investment securities

transferred — (132,688) —Foreign currency translation adjustments:

Change in unrealized foreign currency translation gains (3,850) 20,231 76,840

Total other comprehensive (loss) income before income taxes (5,937) (31,100) 762,227

Income tax (benefit) expense related to items of other comprehensive (loss)income (1,457) (12,763) 267,434

Other comprehensive (loss) income, net of income taxes (4,480) (18,337) 494,793

Total comprehensive income $173,796 $ 239,441 $989,382




PRIMERICA, INC. AND SUBSIDIARIESConsolidated and Combined Statements of Cash Flows


2011 2010 2009

(In thousands)Cash flows from operating activities:Net income $ 178,276 $ 257,778 $494,589

Adjustments to reconcile net income to cash provided by operatingactivities:

Change in future policy benefits and other policy liabilities 85,464 71,037 148,775Deferral of policy acquisition costs (309,028) (304,754) (391,079)Amortization of deferred policy acquisition costs 119,348 168,035 381,291Deferred tax provision 7,426 32,030 (19,815)Change in income taxes (11,936) (40,701) 75,738Realized investment gains (losses), including other-than-temporary

impairments (6,440) (34,145) 21,970Accretion and amortization of investments (2,818) (1,878) (8,226)Depreciation and amortization 10,731 10,063 10,342Change in due from reinsurers (4,232) (57,197) (3,403)Change in due to/from affiliates — (44,012) 55,460Change in premiums and other receivables 3,464 (7,129) (2,975)Trading securities acquired (sold), net 3,597 (5,994) (4,553)Share-based compensation 11,588 33,301 (1,794)Other, net 2,462 (35,377) (39,976)

Net cash provided by operating activities 87,902 41,057 716,344Cash flows from investing activities:

Available-for-sale investments sold, matured or called:Fixed-maturity securities — sold 214,807 993,278 713,805Fixed-maturity securities — matured or called 375,124 514,132 878,215Equity securities 3,037 36,566 667

Available-for-sale investments acquired:Fixed-maturity securities (460,459) (787,683) (1,945,887)Equity securities (144) (7,560) (1,115)

Change in policy loans 247 705 1,354Purchases of furniture and equipment, net (3,913) (9,864) (4,894)Cash collateral (returned) received on loaned securities, net (32,368) (328,375) 156,207Sales (purchases) of short-term investments using securities lending collateral,

net 32,368 328,375 (156,207)

Net cash provided by (used in) investing activities 128,699 739,574 (357,855)

Cash flows from financing activities:Repurchase of shares held by Citi (200,000) — —Dividends (7,312) (1,502) —Net distributions to Citi — (1,288,391) (56,427)

Net cash used in financing activities (207,312) (1,289,893) (56,427)Effect of foreign exchange rate changes on cash 751 32,778 (1,894)

Change in cash and cash equivalents 10,040 (476,484) 300,168Cash and cash equivalents, beginning of period 126,038 602,522 302,354

Cash and cash equivalents, end of period $ 136,078 $ 126,038 $ 602,522

Supplemental disclosures of cash flow information:Income taxes paid $ 96,305 $ 260,275 $220,988Interest paid 27,555 13,695 639Impairment losses included in realized investment gains (losses), including

other-than-temporary impairments 2,015 12,158 61,394

Non-cash activities:Share-based compensation $ 29,445 $ 46,094 $ (1,836)Net contributions from (distributions to) Citi 1,573 (2,035,464) 42,370




PRIMERICA, INC. ANDSUBSIDIARIESNotes to Consolidated and CombinedFinancial Statements

(1) Summary of SignificantAccounting Policies

Description of Business. Primerica, Inc.(the Parent Company) together with itssubsidiaries (collectively, we or the Company) isa leading distributor of financial products tomiddle income households in the United Statesand Canada. We assist our clients in meetingtheir needs for term life insurance, which weunderwrite, and mutual funds, annuities andother financial products, which we distributeprimarily on behalf of third parties. Our primarysubsidiaries include the following entities:Primerica Financial Services, Inc., a generalagency and marketing company; Primerica LifeInsurance Company (Primerica Life), ourprincipal life insurance company; PrimericaFinancial Services (Canada) Ltd., a holdingcompany for our Canadian operations, whichincludes Primerica Life Insurance Company ofCanada (Primerica Life Canada); and PFSInvestments Inc., an investment productscompany and broker-dealer. Primerica Life,domiciled in Massachusetts, owns NationalBenefit Life Insurance Company (NBLIC), a NewYork life insurance company. Each of theseentities was indirectly wholly owned byCitigroup Inc. (together with its non-Primericaaffiliates, Citi) through March 31, 2010.

On March 31, 2010, Primerica Life, PrimericaLife Canada and NBLIC entered into significantcoinsurance transactions with PrimeReinsurance Company, Inc. (Prime Re) and twoaffiliates of Citi (collectively, the Citireinsurers). In April 2010, Citi transferred thelegal entities that comprise our business to usand we completed a series of transactionsincluding the distribution of Prime Re to Citiand an initial public offering of our commonstock by Citi pursuant to the Securities Act of1933, as amended (the IPO).

We were incorporated in Delaware in 2009 byCiti to serve as a holding company for the lifeinsurance and financial product distributionbusinesses that we have operated for morethan 30 years. At such time, we issued 100shares of common stock to Citi. Thesebusinesses, which prior to April 1, 2010 werewholly owned indirect subsidiaries of Citi, weretransferred to us on April 1, 2010. In conjunctionwith our reorganization, we issued to a whollyowned subsidiary of Citi (i) 74,999,900 sharesof our common stock (of which 24,564,000shares of common stock were subsequentlysold by Citi in the IPO; 16,412,440 shares ofcommon stock were subsequently sold by Citi inApril 2010 to certain private equity fundsmanaged by Warburg Pincus LLC (WarburgPincus) (the private sale); and 5,021,412 sharesof common stock were immediately contributedback to us for equity awards granted to ouremployees and sales force leaders inconnection with the IPO, (ii) warrants topurchase from us an aggregate of 4,103,110shares of our common stock (which weresubsequently transferred by Citi to WarburgPincus pursuant to the private sale), and (iii) a$300.0 million note payable due on March 31,2015 bearing interest at an annual rate of 5.5%(the Citi note). Prior to our corporatereorganization, we had no material assets orliabilities. Upon completion of the corporatereorganization, we became a holding companywith our primary asset being the capital stockof our operating subsidiaries and our primaryliability being the Citi note.

Basis of Presentation. We prepare ourfinancial statements in accordance with U.S.generally accepted accounting principles(GAAP). These principles are establishedprimarily by the Financial AccountingStandards Board (FASB). The preparation offinancial statements in conformity with GAAPrequires us to make estimates and assumptionsthat affect financial statement balances,revenues and expenses and cash flows as wellas the disclosure of contingent assets andliabilities. Management considers availablefacts and knowledge of existing circumstances



when establishing the estimates included in ourfinancial statements.

The most significant items that involve a greaterdegree of accounting estimates and actuarialdeterminations subject to change in the futureare the valuation of investments, deferred policyacquisition costs (DAC), and liabilities for futurepolicy benefits and unpaid policy claims.Estimates for these and other items are subjectto change and are reassessed by management inaccordance with GAAP. Actual results coulddiffer from those estimates.

The accompanying consolidated and combinedfinancial statements include the accounts of theCompany and those entities required to beconsolidated or combined under applicableaccounting standards. All materialintercompany profits, transactions, andbalances among the consolidated or combinedentities have been eliminated. Financialstatements for 2011 and 2010 have beenconsolidated and include those assets,liabilities, revenues, and expenses directlyattributable to the Company’s operations.Financial statements for 2009 have beencombined and include those assets, liabilities,revenues, and expenses directly attributable tothe Company’s operations. All materialintercompany profits, transactions, andbalances among the consolidated or combinedentities have been eliminated.

Reclassifications. Certain reclassificationshave been made to prior-period amounts toconform to current-period reportingclassifications. These reclassifications had noimpact on net income or total stockholders’equity.

Foreign Currency Translation. Assets andliabilities denominated in Canadian dollars aretranslated into U.S. dollars using year-endexchange rates. Revenues and expenses aretranslated monthly at amounts thatapproximate weighted-average exchange rates,with resulting gains and losses included instockholders’ equity. We may use currencyswap and forward contracts to mitigate foreigncurrency exposures.

Investments. Investments are reported onthe following bases:

• Available-for-sale fixed-maturity securities,including bonds and redeemable preferredstocks not classified as trading securities,are carried at fair value. When quotedmarket values are unavailable, we obtainestimates from independent pricingservices or estimate fair value based upona comparison to quoted issues of the sameissuer or of other issuers with similarcharacteristics.

• Equity securities, including common andnonredeemable preferred stocks, areclassified as available for sale and arecarried at fair value. When quoted marketvalues are unavailable, we obtain estimatesfrom independent pricing services orestimates fair value based upon acomparison to quoted issues of the sameissuer or of other issuers with similarcharacteristics.

• Trading securities, which primarily consistof bonds, are carried at fair value. Changesin fair value of trading securities areincluded in net investment income in theperiod in which the change occurred.

• Policy loans are carried at unpaid principalbalances, which approximate fair value.

Investment transactions are recorded on atrade-date basis. We use the specific-identification method to determine the realizedgains or losses from securities transactions andreport the realized gains or losses in theaccompanying consolidated and combinedstatements of income.

Unrealized gains and losses on available-for-sale securities are included as a separatecomponent of accumulated othercomprehensive income except for the creditloss components of other-than-temporarydeclines in fair value, which are recorded asrealized losses in the accompanyingconsolidated and combined statements ofincome.



Investments are reviewed on a quarterly basisfor other-than-temporary impairments (OTTI).Credit risk, interest rate risk, duration of theunrealized loss, actions taken by ratingsagencies, and other factors are considered indetermining whether an unrealized loss isother-than-temporary. Our consolidated andcombined statements of income for the threeyears ended December 31, 2011 reflect theimpairment on debt securities that we intend tosell or would more-likely than-not be requiredto sell before the expected recovery of theamortized cost basis. For available-for-sale(AFS) debt securities that we have no intent tosell and believe that it more-likely than-not wewill not be required to sell prior to recovery,only the credit loss component of theimpairment is recognized in earnings, while theremainder is recognized in accumulated othercomprehensive income (AOCI) in theaccompanying consolidated and combinedfinancial statements. The credit loss componentrecognized in earnings is identified as theamount of principal cash flows not expected tobe received over the remaining term of thesecurity. Any subsequent changes in fair valueof the security related to non-credit factorsrecognized in other comprehensive income arepresented as an adjustment to the amountpreviously presented in the net unrealizedinvestment gains (losses) other-than-temporarily impaired category of accumulatedother comprehensive income.

We participate in securities lendingtransactions with broker-dealers and otherfinancial institutions to increase investmentincome with minimal risk. We require minimumcollateral on securities loaned equal to 102% ofthe fair value of the loaned securities. Weaccept collateral in the form of securities, whichwe are not able to sell or encumber, and to theextent the collateral declines in value below100%, we require additional collateral from theborrower. Any securities collateral received isnot reflected on our balance sheet. We alsoaccept collateral in the form of cash, all ofwhich we reinvest. For loans involvingunrestricted cash collateral, the collateral is

reported as an asset with a correspondingliability representing our obligation to returnthe collateral. We continue to carry the lentsecurities as investment assets on our balancesheet during the terms of the loans, and we donot report them as sales.

Interest income on fixed-maturity securities isrecorded when earned using the effective-yieldmethod, which gives consideration toamortization of premiums and accretion ofdiscounts. Dividend income on equity securitiesis recorded when declared. These amounts areincluded in net investment income in theaccompanying consolidated and combinedstatements of income.

Included within fixed-maturity securities areloan-backed and asset-backed securities.Amortization of the premium or accretion ofthe discount uses the retrospective method.The effective yield used to determineamortization/accretion is calculated based onactual and historical projected future cashflows, which are obtained from a widelyaccepted data provider and updated quarterly.

Derivative instruments are stated at fair valuebased on market prices. Gains and lossesarising from forward contracts are acomponent of realized gains and losses in theaccompanying consolidated and combinedstatements of income. Gains and losses arisingfrom foreign currency swaps are reflected inother comprehensive income as theyeffectively hedge the variability in cash flowsfrom our investments in foreign currency-denominated debt securities.

Embedded conversion options associated withfixed-maturity securities are bifurcated fromthe fixed-maturity security host contracts andseparately recognized as equity securities. Thechange in fair value of these bifurcatedconversion options is reflected in realizedinvestment gains, including OTTI losses.

Cash and Cash Equivalents. Cash and cashequivalents include cash on hand, moneymarket instruments, and all other highly liquidinvestments purchased with an original or



remaining maturity of three months or less atthe date of acquisition.

Reinsurance. We use reinsurance extensively,utilizing yearly renewable term (YRT) andcoinsurance agreements. Under YRTagreements, we reinsure only the mortality risk,while under coinsurance, we reinsure aproportionate part of all risks arising under thereinsured policy. Under coinsurance, thereinsurer receives a proportionate part of thepremiums, less commission allowances, and isliable for a corresponding part of all benefitpayments.

All reinsurance contracts in effect for 2011 and2010 transfer a reasonable possibility ofsubstantial loss to the reinsurer or are accountedfor under the deposit method of accounting.

Ceded premiums are treated as a reduction todirect premiums and are recognized when dueto the assuming company. Ceded claims aretreated as a reduction to direct benefits andare recognized when the claim is incurred on adirect basis. Ceded policy reserve changes arealso treated as a reduction to benefits expenseand are recognized during the applicablefinancial reporting period.

Reinsurance premiums, commissions, expensereimbursements, benefits, and reserves relatedto reinsured long-duration contracts areaccounted for over the life of the underlyingcontracts using assumptions consistent withthose used to account for the underlyingpolicies. Amounts recoverable from reinsurers,for both short- and long-duration reinsurancearrangements, are estimated in a mannerconsistent with the claim liabilities and policybenefits associated with reinsured policies.Ceded policy reserves and claims liabilitiesrelating to insurance ceded are shown as duefrom reinsurers on the accompanyingconsolidated and combined balance sheets.

We analyze and monitor the credit-worthinessof each of our reinsurance partners to minimizecollection issues. For reinsurance contractswith unauthorized reinsurers, we requirecollateral such as letters of credit.

To the extent we receive ceding allowances tocover policy and claims administration underreinsurance contracts, these allowances aretreated as a reduction to insurancecommissions and expenses and are recognizedwhen due from the assuming company. To theextent we receive ceding allowancesreimbursing commissions that would otherwisebe deferred; the amount of commissionsdeferrable will be reduced. The correspondingDAC balances are reduced on a pro rata basisby the portion of the business reinsured withreinsurance agreements that meet risk transferprovisions. The reduced DAC will result in acorresponding reduction of amortizationexpense.

Deferred Policy Acquisition Costs(DAC). The costs of acquiring new businessare deferred to the extent that they vary withand are primarily related to the acquisition ofsuch new business. These costs mainly includecommissions and policy issue expenses. Therecovery of such costs is dependent on thefuture profitability of the related policies,which, in turn, is dependent principally uponmortality, persistency, investment returns, andthe expense of administering the business, aswell as upon certain economic variables, suchas inflation. Deferred policy acquisition costsare subject to annual recoverability testing andwhen impairment indicators exist. We makecertain assumptions regarding persistency,expenses, interest rates and claims. Theassumptions for these types of products maynot be modified, or unlocked, unlessrecoverability testing deems them to beinadequate. Assumptions are updated for newbusiness to reflect the most recent experience.Deferrable insurance policy acquisition costsare amortized over the premium-paying periodof the related policies in proportion to annualpremium income. Acquisition costs forCanadian segregated funds are amortized overthe life of the policies in relation to historicaland future estimated gross profits beforeamortization. The gross profits and resultingDAC amortization will vary with actual fundreturns, redemptions and expenses. Due to the



inherent uncertainties in making assumptionsabout future events, materially differentexperience from expected results in persistencycould result in a material increase or decreaseof deferred acquisition cost amortization in aparticular period.

Intangible Assets. Intangible assets areamortized over their estimated useful lives. Anyintangible asset that was deemed to have anindefinite useful life is not amortized but issubject to an annual impairment test. Animpairment exists if the carrying value of theindefinite-lived intangible asset exceeds its fairvalue. For the other intangible assets, which aresubject to amortization, an impairment isrecognized if the carrying amount is notrecoverable and exceeds the fair value of theintangible asset.

Property, Plant, and Equipment. Equipmentand leasehold improvements, which areincluded in other assets, are stated at cost, lessaccumulated depreciation and amortization.Leasehold improvements are amortized overthe remaining life of the lease. Computerhardware, software, and other equipment aredepreciated over three to five years. Furnitureis depreciated over seven years. Property, plantand equipment were as follows:

December 31,

2011 2010

(In thousands)

Data processing equipment and software $ 53,388 $55,793

Leasehold improvements 14,223 14,148

Other, principally furniture and equipment 24,120 22,437

91,731 92,378

Accumulated depreciation (78,794) (76,055)

Net property, plant, and equipment $ 12,937 $ 16,323

Depreciation expense was as follows:


2011 2010 2009

(In thousands)

Depreciation expense $7,302 $6,895 $6,803

Depreciation expense is included in otheroperating expenses in the accompanyingconsolidated and combined statements ofincome.

Separate Accounts. The separate accountsare primarily comprised of contracts issued bythe Company through its subsidiary, PrimericaLife Canada, pursuant to the InsuranceCompanies Act (Canada). The InsuranceCompanies Act authorizes Primerica LifeCanada to establish the separate accounts.

The separate accounts are represented byindividual variable insurance contracts.Purchasers of variable insurance contractsissued by Primerica Life Canada have a directclaim to the benefits of the contract thatentitles the holder to units in one or moreinvestment funds (the Funds) maintained byPrimerica Life Canada. The Funds invest inassets that are held for the benefit of theowners of the contracts. The benefits providedvary in amount depending on the market valueof the Funds’ assets. The Funds’ assets areadministered by Primerica Life Canada and areheld separate and apart from the generalassets of the Company. The liabilities reflectthe variable insurance contract holders’interests in variable insurance assets based

upon actual investmentperformance of the respectiveFunds. Separate accountoperating results relating tocontract holders’ interests areexcluded from our consolidatedand combined statements ofincome.

Primerica Life Canada’scontract offerings guaranteethe maturity value at the dateof maturity (or upon death,whichever occurs first), to beequal to 75% of the sum of allcontributions made, net ofwithdrawals, on a first-infirst-out basis. Otherwise, thematurity value or death benefitwill be the accumulated valueof units allocated to the



contract at the specified valuation date. Theamount of this value is not guaranteed, but willfluctuate with the fair value of the Funds.

Policyholder Liabilities. Future policy benefitsare accrued over the current and expectedrenewal periods of the contracts. Liabilities forfuture policy benefits on traditional lifeinsurance products have been computed using anet level method, including assumptions as toinvestment yields, mortality, persistency, andother assumptions based on our experience,modified as necessary to reflect anticipatedtrends and to include provisions for possibleadverse deviation. The underlying mortalitytables are the Society of Actuaries (SOA) 65-70,SOA 75-80, SOA 85-90, and the 91 Bragg,modified to reflect various underwritingclassifications and assumptions. Investmentyield reserve assumptions at December 31, 2011and 2010 range from approximately 3.5% to7.0%. The liability for future policy benefits andclaims on traditional life, health, and creditinsurance products includes estimated unpaidclaims that have been reported to us and claimsincurred but not yet reported.

The reserves we establish are necessarilybased on estimates, assumptions and ouranalysis of historical experience. Our resultsdepend significantly upon the extent to whichour actual claims experience is consistent withthe assumptions we used in determining ourreserves and pricing our products. Our reserveassumptions and estimates require significantjudgment and, therefore, are inherentlyuncertain. We cannot determine with precisionthe ultimate amounts that we will pay for actualclaims or the timing of those payments.

Other Policyholders’ Funds. Otherpolicyholders’ funds primarily represent claimpayments left on deposit with us.

Income Taxes. We are subject to the incometax laws of the United States, its states,municipalities, and certain unincorporatedterritories, and those of Canada. These tax lawsare complex and subject to differentinterpretations by the taxpayer and the

relevant governmental taxing authorities. Inestablishing a provision for income tax expense,we must make judgments and interpretationsabout the applicability of these inherentlycomplex tax laws. We also must make estimatesabout the future impact certain items will haveon taxable income in the various taxjurisdictions, both domestic and foreign.

Income taxes are accounted for under the assetand liability method. Deferred tax assets andliabilities are recognized for the future taxconsequences attributable to (i) differencesbetween the financial statement carryingamounts of existing assets and liabilities andtheir respective tax bases and (ii) operating lossand tax credit carryforwards. Deferred taxassets and liabilities are measured usingenacted tax rates expected to apply to taxableincome in the years in which those temporarydifferences are expected to be recovered orsettled. The effect on deferred tax assets andliabilities of a change in tax rates is recognizedin income in the period that includes theenactment date. Deferred tax assets arerecognized subject to management’s judgmentthat realization is more likely than notapplicable to the periods in which we expect thetemporary difference will reverse.

During the first quarter of 2010, our federalincome tax return was included as part of Citi’sconsolidated federal income tax return. OnMarch 30, 2010, in anticipation of our corporatereorganization, we entered into a taxseparation agreement with Citi. In accordancewith the tax separation agreement, Citi will beresponsible 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, 2010, theclosing date of the IPO. After the closing date,the Company was no longer part of Citi’sconsolidated federal income tax return. As aresult of the separation from Citi, the Companywill be required to file two consolidated incometax returns for five tax years, which is expected



to cover the tax years ending December 31,2010 through December 31, 2014. Primerica Lifeand NBLIC will comprise one of the U.S.consolidated tax groups while the ParentCompany and the remaining U.S. subsidiarieswill comprise the second U.S. consolidated taxgroup. The method of allocation betweencompanies is pursuant to a written agreement.Allocation is based upon separate returncalculations with credit for net losses asutilized. Allocations are calculated and settledquarterly.

Premium Revenues. Traditional lifeinsurance products consist principally of thoseproducts with fixed and guaranteed premiumsand benefits, and are primarily related to termproducts. Premiums are recognized asrevenues when due.

Commissions and Fees. We receivecommission revenues from the sale of variousnon-life insurance products on a monthly basis.Commissions are received primarily on sales ofmutual funds and annuities. We primarilyreceive trail commission revenues from mutualfund and annuity products on a monthly basisbased on the daily net asset value of sharessold by us. We, in turn, pay certain commissionsto our sales force. We also receive marketingand support fees from product originators. Wealso receive management fees based on theaverage daily net asset value of managedaccounts and contracts related to separateaccount assets issued by Primerica LifeCanada.

We earn recordkeeping fees for administrativefunctions that we perform on behalf of severalof our mutual fund providers and custodial feesfor services performed as a non-bank custodianof our clients’ retirement plan accounts. Thesefees are recognized as income during theperiod in which they are earned.

We also receive record-keeping fees monthlyfrom mutual fund accounts on our servicingplatform and in turn pay a third-party providerfor its servicing of certain of these accounts.

Benefits and Expenses. Benefit and expenseitems are charged to income in the period inwhich they are incurred. Both the change inpolicyholder liabilities, which is included inbenefits and claims, and the amortization ofdeferred policy acquisition costs, will vary withpolicyholder persistency.

Share-Based Transactions. For employeeshare-based compensation, we determine agrant date fair value and recognize the relatedcompensation expense, adjusted for expectedforfeitures, in the statement of income over thevesting period of the respective awards. Fornon-employee share-based compensation, werecognize the impact throughout the vestingperiod and the fair value of the award is basedon the vesting date. To the extent that a share-based award contains sale restrictionsextending beyond the vesting date, we reducethe recognized fair value of the award to reflectthe corresponding liquidity discount. Certainnon-employee share-based compensationvaries with and primarily relates to theacquisition or renewal of life insurance policies.We defer these expenses and amortize theimpact over the life of the underlying lifeinsurance policies acquired.

Earnings Per Share (EPS). Primerica hasoutstanding common stock, warrants, andequity awards. Both the vested and unvestedequity awards maintain non-forfeitable dividendrights that result in dividend paymentobligations on a one-to-one ratio with commonshares for any future dividend declarations.These equity awards are deemed participatingsecurities for purposes of calculating EPS.

As a result of issuing equity awards that aredeemed participating securities, we calculateEPS using the two-class method. Under thetwo-class method, we allocate earnings tocommon shares and to fully vested equityawards. Earnings attributable to unvestedequity awards, along with the correspondingshare counts, are excluded from EPS asreflected in our consolidated statements ofincome.



In calculating basic EPS, we deduct anydividends and undistributed earnings allocatedto unvested equity awards from net income andthen divide the result by the weighted-averagenumber of common shares and fully vestedequity awards outstanding for the period.

We determine the potential dilutive effect ofwarrants on EPS using the treasury-stockmethod. Under this method, we utilize theexercise price to determine the amount of cashthat would be available to repurchase shares ifthe warrants were exercised. We then use theaverage market price of our common sharesduring the reporting period to determine howmany shares we could repurchase with the cashraised from the exercise. The net incrementalshare count issued represents the potentialdilutive securities. We then reallocate earningsto common shares and fully vested equityawards incorporating the increased, fullydiluted share count to determine diluted EPS.

Discontinued Operations. Primerica FinancialServices Home Mortgages, Inc. (PrimericaMortgages), our U.S. loan brokering company,ceased its loan brokering activities in all statesin which it held licenses effective December 31,2011. As of January 1, 2012, PrimericaMortgages no longer accepts loan requestsfrom U.S. clients. As the pending loan requestsare processed by our lender, which weanticipate should be completed by the end ofthe first quarter of 2012, Primerica Mortgagesis commencing the process of surrendering itsstate licenses and completely exiting the loanbrokering business in the United States. Therelated financial impact is immaterial to ourfinancial statements and will not have amaterial impact on our business.

New Accounting Principles

Other-Than-Temporary Impairments onInvestment Securities. In April 2009, theFASB issued FSP SFAS No. 115-2 and SFASNo. 124-2, Recognition and Presentation ofOther-Than-Temporary Impairments (ASC320-10/FSP SFAS 115-2), which amends therecognition guidance for OTTI of debt securities

and expands the financial statementdisclosures for OTTI on debt and equitysecurities. The Company adopted the FSP in thefirst quarter of 2009.

As a result of this FSP, the Company’sconsolidated and combined statements ofincome reflect the full impairment (that is, thedifference between the security’s amortizedcost basis and fair value) on debt securities thatthe Company intends to sell or would more-likely than-not be required to sell before theexpected recovery of the amortized cost basis.For AFS debt securities that management hasno intent to sell and believes that it is more-likely than-not will not be required to be soldprior to recovery, only the credit losscomponent of the impairment is recognized inearnings, while the remainder is recognized inAOCI in the accompanying consolidated andcombined balance sheets. The credit losscomponent recognized in earnings is identifiedas the amount of principal and interest cashflows not expected to be received over theremaining term of the security. As a result ofthe adoption of the FSP, we recorded thecumulative effect of the change as an increaseto the opening balance of retained earnings atJanuary 1, 2009 of $11.2 million on a pretaxbasis ($7.3 million after-tax).

Future Application of AccountingStandards

Accounting for Deferred Policy AcquisitionCosts. In October 2010, the FASB issued ASU2010-26, Accounting for Costs Associated withAcquiring or Renewing Insurance Contracts(ASU 2010-26). ASU 2010-26 defines deferredacquisition costs as incremental direct costs ofsuccessful contract acquisitions that resultdirectly from and are essential to the contracttransaction(s) and would not have beenincurred had the contract transaction(s) notoccurred. All other acquisition-related costs,including unsuccessful acquisition and renewalefforts, will be charged to expense as incurred.Administrative costs, rent, depreciation,occupancy, equipment, and all other general



overhead costs are considered indirect costs andwill be charged to expense as incurred. Theupdate allows either prospective or retrospectiveadoption and is required to be adopted for ourfiscal year beginning January 1, 2012.

We plan to retrospectively adopt ASU 2010-26.We are currently evaluating the full impact ofimplementing this guidance. However, weestimate that the adoption will result in areduction to our DAC asset in the range ofapproximately $140 million to $160 million as ofDecember 31, 2011. For the year endedDecember 31, 2011, we estimate that it willreduce income before income taxes in therange of approximately $27 million to $33million. The related analysis andimplementation of this accounting change isongoing and may result in a different impacthigher or lower than these anticipated ranges.

Fair Value Measurement Amendments. InMay 2011, the FASB issued ASU 2011-04, FairValue Measurement (ASU 2011-04). The mainprovisions of ASU 2011-04 result in common fairvalue measurement and disclosuresrequirements for U.S. GAAP and InternationalFinancial Reporting Standards (“IFRS”). ASU2011-04 changes the wording used to describethe requirements for measuring fair value andfor disclosing information about fair valuemeasurement, including requiring quantitativedisclosures about the unobservable inputs usedin fair value measurements. The amendmentsin the update are to be applied prospectivelyfor our fiscal year beginning January 1, 2012.We do not anticipate a material impact on ourfinancial position or results of operations as aresult of this update.

Recent accounting guidance not discussedabove is not applicable, is immaterial to ourfinancial statements, or did not or will not havean impact on our business.

(2) Segment Information

We have two primary operating segments —Term Life Insurance and Investment andSavings Products. The Term Life Insurance

segment includes underwriting profits on ourin-force book of term life insurance policies, netof reinsurance, which are underwritten by ourlife insurance company subsidiaries. TheInvestment and Savings Products segmentincludes mutual funds and variable annuitiesdistributed through licensed broker-dealersubsidiaries and includes segregated funds, anindividual annuity savings product that weunderwrite in Canada through Primerica LifeCanada. In the United States, we distributemutual fund and annuity products of severalthird-party companies. We also earn fees foraccount servicing on a subset of the mutualfunds we distribute. In Canada, we offer aPrimerica-branded fund-of-funds mutual fundproduct, as well as mutual funds of well knownmutual fund companies. These two operatingsegments are managed separately becausetheir products serve different needs—term lifeinsurance protection versus wealth-buildingsavings products.

We also have a Corporate and Other DistributedProducts segment, which consists primarily ofrevenues and expenses related to thedistribution of non-core products, prepaid legalservices and various insurance products otherthan our core term life insurance products.With the exception of certain life and disabilityinsurance products, which we underwrite, theseproducts are distributed pursuant toarrangements with third parties.

Assets specifically related to a segment areheld in that segment. We allocate investedassets to the Term Life Insurance segmentbased on the book value of invested assetsnecessary to meet statutory reserverequirements and our targeted capitalobjectives. Remaining invested assets and allunrealized gains and losses are allocated to theCorporate and Other Distributed Productssegment. In connection with our corporatereorganization in 2010, we signed a reinsuranceagreement subject to deposit accounting (the10% Reinsurance Agreement) and haverecognized the deposit asset in the Term LifeInsurance segment. DAC is recognized in a



particular segment based on the product towhich it relates. Separate account assetssupporting the segregated funds product inCanada are held in the Investment and SavingsProducts segment. Any remaining unallocatedassets are reported in the Corporate and OtherDistributed Products segment. Informationregarding assets by segment follows:

December 31,

2011 2010

(In thousands)

Assets:Term life insurance segment $ 6,137,033 $ 5,738,219Investment and savings products

segment 2,591,137 2,615,916Corporate and other distributed

products segment 1,270,374 1,530,171

Total assets $9,998,544 $9,884,306

The Investment and Savings Products segmentalso includes assets held in separate accounts.Excluding separate accounts, the Investmentand Savings Product segment assets were asfollows:

December 31,

2011 2010

(In thousands)

Investment and savings products segmentassets, excluding separate accounts $183,622 $170,326

Although we do not view our business in termsof geographic segmentation, our Canadianbusinesses’ percentage of total assets were asfollows:

December 31,

2011 2010

Canadian assets as a percent of total assets 31% 31%Canadian assets as a percent of total assets,

excluding separate accounts 9% 9%

The deposit asset recognized in connectionwith the 10% Reinsurance Agreementgenerates an effective yield, which is reportedin the Term Life Insurance segment andreflected in net investment income in ourstatement of income. We then allocate theremaining net investment income based on the

book value of the invested assets allocated tothe Term Life Insurance segment compared tothe book value of total invested assets.



Realized investment gains and losses arereported in the Corporate and OtherDistributed Products segment. We allocatecertain operating expenses associated with oursales representatives, including supervision,training and legal support, to our two primaryoperating segments based on the averagenumber of licensed representatives in eachsegment for a given period. We also allocatetechnology and occupancy costs based onusage. Any remaining unallocated revenue andexpense items are reported in the Corporateand Other Distributed Products segment. Wemeasure income and loss for the segments onan income before income taxes basis.Information regarding operations by segmentfollows:


2011 2010 2009

(In thousands)

Revenues:

Term life insurance segment $ 554,995 $808,568 $1,742,065

Investment and savings products segment 396,703 361,807 300,140

Corporate and other distributed products segment 151,395 191,488 178,196

Total revenues $1,103,093 $1,361,863 $2,220,401

Income (loss) before income taxes:

Term life insurance segment $ 194,609 $ 299,044 $ 659,012

Investment and savings products segment 117,076 113,530 93,404

Corporate and other distributed products segment (35,841) (13,431) 7,539


The decline in revenues and income beforeincome taxes primarily reflects the impact ofthe reinsurance and reorganizationtransactions executed in the first and secondquarters of 2010.



Information regarding operations by countryfollows:


2011 2010 2009

(In thousands)

Revenues by country:

United States $ 895,067 $ 1,136,414 $1,922,047

Canada 208,026 225,449 298,354

Total revenues $1,103,093 $1,361,863 $2,220,401

Income before income taxes by country:

United States $ 209,685 $ 317,195 $ 637,355

Canada 66,159 81,948 122,600


The contribution to results of operations by ourCanadian businesses were as follows:


2011 2010 2009

Canadian revenues as a percent of total revenues 19% 17% 13%

Canadian income before income taxes as a percent of total income beforeincome taxes 24% 21% 16%

The increase in the Canadian contribution tototal revenues and total income before incometaxes largely reflects the dynamic of a smallerU.S. block of business subsequent to thereinsurance transactions as well as growth inour Canadian investments and savings productsbusiness.



(3) Investments

The period-end cost or amortized cost, grossunrealized gains and losses, and fair value offixed-maturity and equity securities follow:

December 31, 2011

Cost oramortized

cost

Grossunrealized

gains

Grossunrealized

losses Fair value

(In thousands)

Securities available for sale, carried at fair value:

Fixed-maturity securities:

U.S. government and agencies $ 10,050 $ 935 $ — $ 10,985

Foreign government 97,206 14,818 (179) 111,845

States and political subdivisions 28,264 2,671 — 30,935

Corporates (1) 1,250,702 111,346 (7,847) 1,354,201

Mortgage- and asset-backed securities 425,137 29,398 (3,345) 451,190

Total fixed-maturity securities 1,811,359 159,168 (11,371) 1,959,156

Equity securities 21,329 5,689 (306) 26,712

Total fixed-maturity and equitysecurities $1,832,688 $164,857 $(11,677) $1,985,868

(1) Includes $2.6 million of other-than-temporary impairment losses recognized in AOCI.

December 31, 2010

Cost oramortized

cost

Grossunrealized

gains

Grossunrealized

losses Fair value

(In thousands)

Securities available for sale, carried at fair value:


U.S. government and agencies $ 21,596 $ 667 $ (61) $ 22,202

Foreign government 81,367 13,182 (8) 94,541

States and political subdivisions 26,758 754 (293) 27,219

Corporates (1) 1,276,906 112,821 (3,806) 1,385,921

Mortgage- and asset-backed securities 523,130 31,366 (3,018) 551,478

Total fixed-maturity securities 1,929,757 158,790 (7,186) 2,081,361

Equity securities 17,394 5,826 (7) 23,213

Total fixed-maturity and equitysecurities $ 1,947,151 $ 164,616 $ (7,193) $2,104,574

(1) Includes $3.5 million of other-than-temporary impairment losses recognized in AOCI.



In November 2011, we repurchasedapproximately $200.0 million of our commonstock from Citi and funded the repurchase withthe proceeds from a dividend paid by PrimericaLife. The dividend from Primerica Life to theParent Company was funded via sales ofinvestments and available cash. The decreasein invested assets as of December 31, 2011 wasprimarily the result of securities sold to fundthe dividend.

The net effect on stockholders’ equity ofunrealized gains and losses on available-for-sale securities was as follows:

December 31,

2011 2010

(In thousands)Net unrealized investment gains including foreign currency translation

adjustment and other-than-temporary impairments:Fixed-maturity and equity securities $ 153,180 $157,423Currency swaps 96 1,059

Less foreign currency translation adjustment (6,481) (9,600)Other-than-temporary impairments 2,562 3,500

Net unrealized investment gains excluding foreign currencytranslation adjustment and other-than-temporary impairments 149,357 152,382

Less deferred income taxes 52,275 54,060

Net unrealized investment gains excluding foreign currencytranslation adjustment and other-than-temporary impairments,net of tax $ 97,082 $ 98,322

We also maintain a portfolio of fixed-maturitysecurities that are classified as tradingsecurities. The carrying value of thesesecurities was as follows:

December 31,

2011 2010

(In thousands)

Fixed-maturity securities classified as trading, carriedat fair value $9,640 $22,767

During 2011, we transferred approximately $8.9million of securities from the trading portfolioto the available-for-sale portfolio. Because thesecurities were transferred at fair value, nogain or loss was recognized.



All of our available-for-sale mortgage- and asset-backed securities represent variable interests invariable interest entities (VIEs). We are not theprimary beneficiary of these VIEs, because wedo not have the power to direct the activitiesthat most significantly impact the entities’economic performance. The maximum exposureto loss as a result of our involvement in theseVIEs equals the carrying value of the securities.

As required by law, the Company hasinvestments on deposit with governmentalauthorities and banks for the protection ofpolicyholders. The fair values of investments ondeposit were as follows:

December 31,

2011 2010

(In thousands)

Fair value of investments on deposit withgovernmental authorities $19,100 $18,984

We participate in securities lendingtransactions with broker-dealers and otherfinancial institutions to increase investmentincome with minimal risk. Cash collateralreceived and reinvested was as follows:

December 31,

2011 2010

(In thousands)

Securities lending collateral $149,358 $181,726

The scheduled maturity distribution of theavailable-for-sale fixed-maturity portfoliofollows.

December 31, 2011

Amortized cost Fair value

(In thousands)

Due in one year or less $ 129,440 $ 132,660

Due after one year through five years 622,321 663,968

Due after five years through 10 years 583,762 653,078

Due after 10 years 50,699 58,260

1,386,222 1,507,966

Mortgage- and asset-backedsecurities 425,137 451,190

Total fixed-maturity securities $ 1,811,359 $ 1,959,156

Expected maturities may differ from scheduledcontractual maturities because issuers of

securities may have the right to call or prepayobligations with or without call or prepaymentpenalties.



Investment Income. On March 31, 2010, wetransferred a significant portion of our investedasset portfolio to the Citi reinsurers inconnection with our corporate reorganization.As such, comparisons of net investment incometo prior years will reflect the effects of thesetransfers and result in significant variances.The components of net investment incomewere as follows:


2011 2010 2009

(In thousands)Fixed-maturity securities $109,907 $ 168,051 $352,753Equity securities 717 1,822 6,923Policy loans and other invested assets 1,414 1,403 1,549Cash and cash equivalents 307 562 2,887Market return on deposit asset underlying 10% reinsurance

agreement 2,020 1,471 299

Gross investment income 114,365 173,309 364,411Investment expenses 5,764 8,198 13,085

Net investment income $ 108,601 $ 165,111 $ 351,326

The components of net realized investmentgains (losses) as well as details on gross realizedinvestment gains and losses and proceeds fromsales or other redemptions were as follows:


2011 2010 2009

(In thousands)Gross realized investment gains (losses):

Gains from sales $ 8,382 $ 47,925 $ 42,983Losses from sales (441) (2,257) (3,518)Other-than-temporary impairment losses (2,015) (12,158) (61,394)Gains (losses) from bifurcated options 514 635 (41)

Net realized investment gains (losses) $ 6,440 $ 34,145 $ (21,970)

Gross realized investment gains reclassified fromaccumulated other comprehensive income $ 5,926 $ 33,510 $ (21,929)

Proceeds from sales or other redemptions $592,968 $1,543,976 $1,592,687

Other-Than-Temporary Impairment. Weconduct a review each quarter to identify andevaluate impaired investments that haveindications of possible other-than-temporaryimpairment (OTTI). An investment in a debt orequity security is impaired if its fair value fallsbelow its cost. Factors considered in determining

whether an unrealized loss is temporary includethe length of time and extent to which fair valuehas been below cost, the financial condition andnear-term prospects for the issue, and our abilityand intent to hold the investment for a period oftime sufficient to allow for any anticipatedrecovery, which may be maturity.



Our review for other-than-temporaryimpairment generally entails:

• Analysis of individual investments thathave fair values less than a pre-definedpercentage of amortized cost, includingconsideration of the length of time theinvestment has been in an unrealized lossposition;

• Analysis of corporate fixed-maturitysecurities by reviewing the issuer’s mostrecent performance to date, includinganalyst reviews, analyst outlooks andrating agency information;

• Analysis of commercial mortgage-backedsecurities based on an assessment ofperformance to date,credit enhancement, riskanalytics and outlook,underlying collateral, lossprojections, rating agency

information and available third-partyreviews and analytics;

• Analysis of residential mortgage-backedsecurities based on loss projectionsprovided by models compared to currentcredit enhancement levels;

• Analysis of our other fixed-maturity andequity security investments, as requiredbased on the type of investment; and

• Analysis of downward credit migrationsthat occurred during the quarter.

Investments in fixed-maturity and equitysecurities with a cost basis in excess of theirfair values were as follows:

December 31,

2011 2010

(In thousands)

Fixed-maturity and equity securityinvestments with cost basis in excess offair value $286,718 $258,947



The following tables summarize, for allsecurities in an unrealized loss position, theaggregate fair value and the gross unrealizedloss by length of time such securities havecontinuously been in an unrealized lossposition:

December 31, 2011

Less than 12 months 12 months or longer

Fair valueUnrealized

losses

Numberof

securities Fair valueUnrealized

losses

Numberof

securities



U.S. government and agencies $ — $ — — $ — $ — —

Foreign government 7,150 (179) 10 — — —

States and politicalsubdivisions — — — — — —

Corporates 188,643 (6,979) 185 4,092 (868) 11

Mortgage- and asset-backedsecurities 49,026 (478) 60 25,280 (2,867) 30

Total fixed-maturitysecurities 244,819 (7,636) 29,372 (3,735)

Equity securities 850 (306) 78 — — —

Total fixed-maturity andequity securities $245,669 $(7,942) $ 29,372 $(3,735)

December 31, 2010

Less than 12 months 12 months or longer

Fair valueUnrealized

losses

Numberof

securities Fair valueUnrealized

losses

Numberof

securities



U.S. government and agencies $ 6,350 $ (61) 2 $ — $ — —

Foreign government 2,478 (8) 1 — — —

States and politicalsubdivisions 11,015 (293) 29 — — —

Corporates 151,291 (2,961) 104 12,690 (845) 14

Mortgage- and asset-backedsecurities 30,685 (365) 25 37,215 (2,653) 20

Total fixed-maturitysecurities 201,819 (3,688) 49,905 (3,498)

Equity securities — — — 30 (7) 2

Total fixed-maturity andequity securities $201,819 $(3,688) $49,935 $(3,505)



The amortized cost and fair value ofavailable-for-sale fixed-maturity securities indefault were as follows:


Amortizedcost

Fairvalue

Amortizedcost

Fairvalue

(In thousands)

Fixed-maturity securitiesin default $3,983 $5,168 $970 $1,558

Impairment charges recognized in earnings onavailable-for-sale securities were as follows:


2011 2010 2009

(In thousands)

Impairments on fixed-maturitysecurities in default $ 179 $ 39 $20,275

Impairments on fixed-maturitysecurities not in default 1,831 11,855 38,765

Impairments on equity securities 5 264 2,354

Total impairment charges $2,015 $12,158 $ 61,394

The fixed-maturity and equity securities notedabove were considered to be other-than-temporarily impaired due to adverse creditevents, such as news of an impending filing forbankruptcy; analyses of the issuer’s mostrecent financial statements or otherinformation in which liquidity deficiencies,significant losses and large declines incapitalization were evident; and analyses ofrating agency information for issuances withsevere ratings downgrades that indicated asignificant increase in the possibility of default.

During 2011, we recognized impairment chargesprimarily as a result of further declines in thefair value of previously impaired corporate and

mortgage-backed securities.During 2010 and 2009, werecognized impairmentsprimarily as a result of ourintent to sell certain corporateand mortgage-backedsecurities in anticipation of thereinsurance and reorganizationtransactions.

As of December 31, 2011, theunrealized losses on ourinvested asset portfolio werelargely caused by interest ratesensitivity and changes incredit spreads. We believe thatfluctuations caused by interestrate movement have littlebearing on the recoverability ofour investment. Because thedecline in fair value is

attributable to changes in interest rates andnot credit quality, and because we have theability to hold these investments until a marketprice recovery or maturity as well as no presentintention to dispose of them, we do notconsider these investments to be other-than-temporarily impaired.



Net impairment losses recognized in earningswere as follows:


2011 2010 2009

(In thousands)Impairment losses related to securities which the Company does not intend

to sell or is more-likely-than-not that it will not be required to sell:Total OTTI losses recognized $ 1,109 $ 1,402 $34,616Less portion of OTTI loss recognized in accumulated other

comprehensive income (loss) (183) (553) (13,573)

Net impairment losses recognized in earnings for securities that theCompany does not intend to sell or is more-likely-than-not that it willnot be required to sell before recovery 926 849 21,043

OTTI losses recognized in earnings for securities that the Companyintends to sell or more-likely-than-not will be required to sell beforerecovery 1,089 11,309 40,351

Net impairment losses recognized in earnings $2,015 $12,158 $61,394

The roll-forward of the credit-related lossesrecognized in income for all fixed-maturitysecurities still held follows.


2011 2010

(In thousands)Cumulative OTTI credit losses recognized for securities still held, beginning of

period $ 41,129 $98,528Additions for OTTI securities where no credit losses were recognized prior to

the beginning of the period 830 9,842Additions for OTTI securities where credit losses have been recognized prior to

the beginning of the period 1,180 2,052Reductions due to sales, maturities or calls of credit impaired securities (9,067) (69,293)

Cumulative OTTI credit losses recognized for securities still held, end ofperiod $34,072 $ 41,129

Derivatives. We use foreign currency swapsto reduce our foreign exchange risk due todirect investment in foreign currency-denominated debt securities. The aggregatenotional balance and fair value of thesecurrency swaps follow.

December 31,

2011 2010

(In thousands)Aggregate notional balance of currency swaps $ 5,878 $5,878Aggregate fair value of currency swaps (2,032) (2,228)



The change in fair value of these currencyswaps is reflected in other comprehensiveincome as they effectively hedge the variabilityin cash flows from these foreign currency-denominated debt securities.

The embedded conversion options associatedwith fixed-maturity securities are bifurcatedfrom the fixed-maturity security host contractsand separately recognized as equity securities.The change in fair value of these bifurcatedconversion options is reflected in realizedinvestment gains, including OTTI losses. Thefair value of these bifurcated options follows.

December 31,

2011 2010

(In thousands)

Aggregate fair value of embedded conversionoptions $8,583 $3,269

We have a deferred loss related to closedforward contracts that were used to mitigateour exposure to foreign currency exchangerates that resulted from the net investmentin our Canadian operations. The amount ofdeferred loss included in accumulated othercomprehensive income was as follows:

December 31,

2011 2010

(In thousands)

Deferred loss related to closed forwardcontracts $26,385 $26,385

While we have no current intention to do so,these deferred losses will not be recognizeduntil such time as we sell or substantiallyliquidate our Canadian operations.

(4) Fair Value of FinancialInstruments

Fair value is the price that would be receivedupon the sale of an asset in an orderlytransaction between market participants at themeasurement date. Fair value measurementsare based upon observable and unobservableinputs. Observable inputs reflect market dataobtained from independent sources, while

unobservable inputs reflect our view of marketassumptions in the absence of observablemarket information. We classify and disclose allinvested assets carried at fair value in one ofthe following three categories:

• Level 1. Quoted prices for identicalinstruments in active markets. Level 1primarily consists of financial instrumentswhose value is based on quoted marketprices in active markets, such as exchange-traded common stocks and actively tradedmutual fund investments;

• Level 2. Quoted prices forsimilar instruments in activemarkets; quoted prices foridentical or similarinstruments in markets thatare not active; and model-derived valuations in whichall significant inputs andsignificant value drivers areobservable in active markets.Level 2 includes thosefinancial instruments thatare valued using industry-standard pricingmethodologies, models orother valuationmethodologies. Variousinputs are considered inderiving the fair value of theunderlying financial

instrument, including interest rate, creditspread, and foreign exchange rates. Allsignificant inputs are observable, orderived from observable information in themarketplace or are supported byobservable levels at which transactions areexecuted in the marketplace. Financialinstruments in this category primarilyinclude: certain public and privatecorporate fixed-maturity and equitysecurities; government or agencysecurities; certain mortgage- and asset-backed securities and certain non-exchange-traded derivatives, such ascurrency swaps and forwards; and



• Level 3. Valuations derived from valuationtechniques in which one or more significantinputs or significant value drivers areunobservable. Level 3 consists of financialinstruments whose fair value is estimatedbased on industry-standard pricingmethodologies and models usingsignificant inputs not based on, norcorroborated by, readily available marketinformation. Valuations for this categoryprimarily consist of non-binding brokerquotes. Financial instruments in thiscategory primarily include less liquid fixed-maturity corporate securities.

As of each reporting period, all assets andliabilities recorded at fair value are classified intheir entirety based on the lowest level of input(level 3 being the lowest) that is significant tothe fair value measurement. Significant levelsof estimation and judgment are required todetermine the fair value of certain of ourinvestments. The factors influencing theseestimations and judgments are subject tochange in subsequent reporting periods.

The estimated fair value and hierarchyclassifications were as follows:

December 31, 2011

Level 1 Level 2 Level 3 Fair value

(In thousands)

Fair value assets:


U.S. government and agencies $ — $ 10,985 $ — $ 10,985

Foreign government — 111,845 — 111,845

States and political subdivisions — 30,935 — 30,935

Corporates 256 1,349,021 4,924 1,354,201

Mortgage-and asset-backed securities — 449,228 1,962 451,190

Total fixed-maturity securities 256 1,952,014 6,886 1,959,156

Equity securities 18,069 8,592 51 26,712

Trading securities — 9,640 — 9,640

Separate accounts — 2,408,598 — 2,408,598

Total fair value assets $ 18,325 $4,378,844 $ 6,937 $ 4,404,106

Fair value liabilities:

Currency swaps $ — $ 2,032 $ — $ 2,032

Separate accounts — 2,408,598 — 2,408,598

Total fair value liabilities $ — $ 2,410,630 $ — $ 2,410,630



December 31, 2010

Level 1 Level 2 Level 3 Fair value

(In thousands)

Fair value assets:Fixed-maturity securities:

U.S. government and agencies $ — $ 22,202 $ — $ 22,202Foreign government — 94,541 — 94,541States and political subdivisions — 27,219 — 27,219Corporates — 1,366,774 19,147 1,385,921Mortgage- and asset-backed securities — 549,188 2,290 551,478

Total fixed-maturity securities — 2,059,924 21,437 2,081,361Equity securities 15,110 4,542 3,561 23,213Trading securities — 22,767 — 22,767Separate accounts — 2,446,786 — 2,446,786

Total fair value assets $15,110 $ 4,534,019 $24,998 $ 4,574,127

Fair value liabilities:Currency swaps $ — $ 2,228 $ — $ 2,228Separate accounts — 2,446,786 — 2,446,786

Total fair value liabilities $ — $ 2,449,014 $ — $ 2,449,014

In assessing fair value of our investments, weuse a third-party pricing service forapproximately 94% of our securities. Theremaining securities are primarily thinly tradedsecurities valued using models based onobservable inputs on public corporate spreadshaving similar tenors (e.g., sector, average lifeand quality rating) and liquidity and yield basedon quality rating, average life and treasuryyields. All observable data inputs arecorroborated by independent third-party data.In the absence of sufficient observable inputs,we utilize non-binding broker quotes, which arereflected in our Level 3 classification as we areunable to evaluate the valuation technique(s)or significant inputs used to develop the quote.

We corroborate pricing information provided byour third-party pricing servicing by performing areview of selected securities. Our reviewactivities include obtaining detailed informationabout the assumptions, inputs andmethodologies used in pricing the security;documenting this information; and corroboratingit by comparison to independently obtainedprices and or independently developed pricingmethodologies.

We perform internal reasonablenessassessments on fair value determinationswithin our portfolio throughout the month andat month-end, including pricing varianceanalyses and comparisons to alternative pricingsources and benchmark returns. If a fair valueappears unusual relative to these assessments,we will re-examine the inputs and maychallenge a fair value assessment made by thepricing service. If there is a known pricing error,we will request a reassessment by the pricingservice. If the pricing service is unable toperform the reassessment on a timely basis, wewill determine the appropriate price byrequesting a reassessment from an alternativepricing service or other qualified source asnecessary. We do not adjust quotes or pricesexcept in a rare circumstance to resolve aknown error.

Because many fixed-maturity securities do nottrade on a daily basis, fair value is determinedusing industry-standard methodologies byapplying available market information throughprocesses such as U.S. Treasury curves,benchmarking of similar securities, sectorgroupings, quotes from market participants and



matrix pricing. Observable information iscompiled and integrates relevant creditinformation, perceived marketmovements and sector news.Additionally, security prices areperiodically back-tested tovalidate and/or refine modelsas conditions warrant. Marketindicators and industry andeconomic events are alsomonitored as triggers to obtainadditional data. For certainstructured securities withlimited trading activity,industry-standard pricingmethodologies use adjustedmarket information, such asindex prices or discountingexpected future cash flows, toestimate fair value. If thesemeasures are not deemedobservable for a particularsecurity, the security will be classified asLevel 3 in the fair value hierarchy.

Where specific market information isunavailable for certain securities, pricingmodels produce estimates of fair valueprimarily using Level 2 inputs along with certainLevel 3 inputs. These models include matrixpricing. The pricing matrix uses currenttreasury rates and credit spreads received fromthird-party sources to estimate fair value. Thecredit spreads incorporate the issuer’sindustry- or issuer-specific creditcharacteristics and the security’s time tomaturity, if warranted. Remaining un-pricedsecurities are valued using an estimate of fairvalue based on indicative market prices thatinclude significant unobservable inputs notbased on, nor corroborated by, marketinformation, including the utilization ofnon-binding broker quotes.

The roll-forward of the Level 3 asset categorywas as follows:


2011 2010

(In thousands)Level 3 assets, beginning of period $24,998 $ 771,271

Net unrealized losses through othercomprehensive income (169) (2,904)

Net realized gains (losses) throughrealized investment gains, includingOTTI 1,446 (28)

Purchases — 11,250Sales (4,770) (24,049)Settlements (2,747) (16,105)Transfers into level 3 9 44,522Transfers out of level 3 (11,830) (236,587)Transfers due to funding of reinsurance

transactions — (522,372)

Level 3 assets, end of period $ 6,937 $24,998

We obtain independent pricing quotes based onobservable inputs as of the end of the reportingperiod for all securities in Level 2. Those inputsinclude benchmark yields, reported trades,broker/dealer quotes, issuer spreads, two-sidedmarkets, benchmark securities, market bids/offers, quoted prices for similar instruments inmarkets that are not active, and other relevantdata. We monitor these inputs for marketindicators, industry and economic events. Werecognize transfers into new levels and out ofprevious levels as of the end of the reportingperiod, including interim reporting periods, asapplicable. There were no transfers betweenLevel 1 and Level 2 during 2011 and 2010.

Invested assets included in the transfer fromLevel 2 to Level 3 in both 2011 and 2010primarily were fixed-maturity investments forwhich we were unable to corroborateindependent broker quotes with observablemarket data. Invested assets included in the



transfer from Level 3 to Level 2 in 2011primarily were fixed-maturity investments forwhich we were able to corroborate independentbroker quotes with observable market data.Invested assets included in the transfer fromLevel 3 to Level 2 during 2011 primarily werefixed-maturity investments with embeddedoptions for which we were able to obtainindependent pricing quotes based onobservable inputs. Invested assets included inthe transfer from Level 3 to Level 2 during2010 primarily were non-agency mortgage-backed securities. There were no significanttransfers between Level 1 and Level 3 during2011 and 2010.

The carrying values and estimated fair valuesof our financial instruments were as follows:


Carryingvalue

Estimatedfair value

Carryingvalue

Estimatedfair value

(In thousands)Assets:

Fixed-maturity securities $ 1,959,156 $ 1,959,156 $ 2,081,361 $ 2,081,361Equity securities 26,712 26,712 23,213 23,213Trading securities 9,640 9,640 22,767 22,767Policy loans 25,982 25,982 26,229 26,229Other invested assets 14 14 14 14Deposit asset underlying 10%

reinsurance agreement 59,975 59,975 50,099 50,099Separate accounts 2,408,598 2,408,598 2,446,786 2,446,786

Liabilities:Note payable $ 300,000 $ 329,779 $ 300,000 $ 323,670Currency swaps and forwards 2,032 2,032 2,228 2,228Separate accounts 2,408,598 2,408,598 2,446,786 2,446,786

The fair values of financial instrumentspresented above are estimates of the fairvalues at a specific point in time using varioussources and methods, including marketquotations and a complex matrix system thattakes into account issuer sector, quality, andspreads in the current marketplace.

Estimated fair values of investments in fixed-maturity securities are principally a function ofcurrent spreads and interest rates that arecorroborated by independent third-party data.Therefore, the fair values presented areindicative of amounts we could realize or settleat the respective balance sheet date. We do notnecessarily intend to dispose of or liquidate

such instruments prior to maturity. Tradingsecurities, which primarily consist of fixed-maturity securities, are carried at fair value.Equity securities, including common andnon-redeemable preferred stocks, are carriedat fair value. The carrying value of policy loansand other invested assets approximates fairvalue. The fair value of our note payable isbased on prevailing interest rates and anestimated spread based on notes ofcomparable issuers and maturity. Currencyswaps are stated at fair value. Segregatedfunds in separate accounts are carried at theunderlying value of the variable insurancecontracts, which is fair value.



The carrying amounts for cash and cashequivalents, receivables, accrued investmentincome, accounts payable, cash collateral andpayables for security transactions approximatetheir fair values due to the short-term nature ofthese instruments. Consequently, suchinstruments are not included in the above table.

Fair Value Option. In connection with ourcorporate reorganization, in the first quarter of2010 we transferred to Citi orsold to third parties all of thesecurities that had previouslybeen accounted for using thefair value option. On January 1,2010, these securities had afair value of approximately $7.7 million. Fairvalue gains included in net investment incomewere approximately $667,000 in 2010 andapproximately $3.1 million in 2009.

(5) Reinsurance

Reinsurance arrangements do not relieve us ofour primary obligation to the policyholder. Ourreinsurance contracts typically do not have afixed term. In general, the reinsurers’ ability toterminate coverage for existing cessions islimited to such circumstances as materialbreach of contract or nonpayment of premiumsby the ceding company. Our reinsurancecontracts generally contain provisions intendedto provide the ceding company with the abilityto cede future business on a basis consistentwith historical terms. However, either partymay terminate any of the contracts withrespect to the future business upon appropriatenotice to the other party. Generally, thereinsurance contracts do not limit the overallamount of the loss that can be incurred by thereinsurer.

Our policy is to limit the amount of lifeinsurance retained on the life of any one personto $1 million. To limit our exposure with any onereinsurer, we monitor the concentration ofcredit risk we have with our reinsurancecounterparties, as well as their financialcondition. We have not experienced any credit

losses related to our reinsurancecounterparties during the three-year periodended December 31, 2010.

Due from reinsurers represents ceded policyreserve balances and ceded claim liabilities. Theamounts of ceded claim liabilities included in duefrom reinsurers that we paid and which arerecoverable from those reinsurers were asfollows:

December 31,

2011 2010

(In thousands)Ceded claim liabilities recoverable from

reinsurers $37,756 $30,981

As part of our corporate reorganization andprior to completion of the IPO, we formed anew subsidiary, Prime Re, to which we made aninitial capital contribution. On March 31, 2010,we entered into a series of coinsuranceagreements with the Citi reinsurers. Underthese agreements, we ceded between 80% and90% of the risks and rewards of our term lifeinsurance policies in force at year-end 2009.Because these agreements were part of abusiness reorganization among entities undercommon control, they did not generate anydeferred gain or loss upon their execution.Concurrent with signing these agreements, wetransferred the corresponding accountbalances in respect of the coinsured policiesalong with the assets to support the statutoryliabilities assumed by the Citi reinsurers. OnApril 1, 2010, as part of our corporatereorganization, we transferred all of the issuedand outstanding capital stock of Prime Re toCiti. Each of the transferred account balances,including the invested assets and thedistribution of Prime Re, were transferred atbook value with no gain or loss recorded in netincome.

Three of the Citi coinsurance agreementssatisfy GAAP risk transfer rules. Under theseagreements, we ceded between 80% and 90%of our term life future policy benefit reserves,and we transferred a corresponding amount ofassets to the Citi reinsurers. These transactionsdid not impact our future policy benefit



reserves. As such, we have recorded an assetfor the same amount of risk transferred in duefrom reinsurers. We also reduced DAC by acorresponding amount, which reduces futureamortization expenses. In addition, we aretransferring between 80% and 90% of allfuture premiums and benefits and claimsassociated with these policies to thecorresponding reinsurance entities. We receiveongoing ceding allowances, which are reflectedas a reduction to insurance expenses, to coverpolicy and claims administration expenses aswell as certain corporate overhead chargesunder each of these reinsurance contracts.

A fourth coinsurance agreement relates to a10% reinsurance transaction that includes anexperience refund provision. This agreementdoes not satisfy GAAP risk transfer rules. As aresult, we have accounted for this contractusing deposit method accounting and haverecognized a deposit asset in other assets onour balance sheet for assets backing theeconomic reserves. The deposit assets held insupport of this agreement were $60.0 millionat December 31, 2011, with noassociated liability. We makecontributions to the depositasset during the life of theagreement to fulfill ourresponsibility of funding theeconomic reserve. The marketreturn on these deposit assetsis reflected in net investment

income during the life of the agreement. PrimeRe is responsible for ensuring that there aresufficient assets to meet all statutoryrequirements. We pay Prime Re a 3% financecharge for any statutory reserves requiredabove the economic reserves. This financecharge is reflected in interest expense in ourstatements of income.

The net impact of these transactions wasreflected as an increase in paid-in capital.Because the agreements were executed onMarch 31, 2010, but transferred the economicimpact of the agreements retroactive toJanuary 1, 2010, we recognized the earningsattributable to the underlying policies throughMarch 31, 2010 in our statement of income. Thecorresponding impact on retained earnings wasequally offset by a return of capital to Citi.

Due from reinsurers represents ceded policyreserve balances and ceded claim liabilities. Theamounts of ceded claim liabilities included indue from reinsurers that we paid and which arerecoverable those reinsurers were as follows:

December 31,

2011 2010

(Dollars in millions)Direct life insurance in force $ 669,939 $ 662,135Amounts ceded to other companies (596,975) (600,807)

Net life insurance in force $ 72,964 $ 61,328

Percentage of reinsured life insurancein force 89% 91%



Due from reinsurers includes ceded reservebalances and ceded claim liabilities.Reinsurance receivable and financial strengthratings by reinsurer were as follows:


Reinsurancereceivable

A.M. Bestrating

Reinsurancereceivable

A.M. Bestrating

(In millions)

Prime Reinsurance Company (1) $2,439 NR $2,353 NRFinancial Reassurance Company 2010, Ltd. (1) 335 NR 333 NRAmerican Health and Life Insurance Company (1) 164 A— 156 A

Due from related party reinsurers 2,938 2,842Swiss Re Life & Health America Inc. (3) 253 A+ 242 ASCOR Global Life Reinsurance Companies 143 A 139 AGenerali USA Life Reassurance Company 115 A— 112 ATransamerica Reinsurance Companies 104 A+ 103 A+Munich American Reassurance Company 99 A+ 97 A+Korean Reinsurance Company 83 A 83 A—RGA Reinsurance Company 68 A+ 64 A+All other reinsurers 53 — 50 —

Due from reinsurers (2) $3,856 $ 3,732

NR – not rated(1) Amounts shown are net of their share of the reinsurance recoverable from other reinsurers. As of December 31, 2011, the

reinsurer was no longer a related party.(2) Totals may not add due to rounding.(3) Includes amounts ceded to Lincoln National Life Insurance and 100% retroceded to Swiss Re Life & Health America Inc.

Certain reinsurers with which we do businessreceive group ratings. Individually, thosereinsurers are Scor Global Life Re InsuranceCompany of Texas, Scor Global Life U.S. ReInsurance Company, Transamerica FinancialLife Insurance Company, and Transamerica LifeInsurance Company.

As Prime Re and Financial ReassuranceCompany 2010, Ltd. (FRAC) do not havefinancial strength ratings, we required varioussafeguards prior to executing the coinsuranceagreements with these entities. Bothcoinsurance agreements include provisions toensure that Primerica Life and Primerica LifeCanada receive full regulatory credit for thereinsurance treaties. Under these agreements,Primerica Life and Primerica Life Canada will beable to recapture the ceded business with nofee in the event Prime Re or FRAC do notcomply with the various safeguard provisions in

their respective coinsurance agreements. PrimeRe also has entered into a capital maintenanceagreement requiring Citi to provide additionalfunding, if needed, at any point during the termof the agreement up to the maximum asdescribed in the capital maintenanceagreement.

In October 2010, a routine reinsurance auditidentified payments to reinsurers that mayhave exceeded our obligations under ourreinsurance agreements. We were uncertain ofour ability to recover past ceded premiums, butin the fourth quarter of 2010, we approachedour reinsurers and reached agreements torecover certain of these past ceded premiumsfor post-issue underwriting class upgrades. Themost common reason for such an upgradeoccurs when a policyholder who was originallyissued a term life policy as a tobacco usersubsequently quits using tobacco. Historically,



we have reduced policyholder premiums forsuch upgrades, but have not reduced cededpremiums to reflect the new underwriting class.As a result, we reduced ceded premiums in2010 by approximately $13.1 million related tothe agreements obtained withcertain reinsurers to recoverthese ceded premiums. Therecoveries recognized in 2010reflect the agreements signedin the fourth quarter of 2010.Additionally, in the first quarterof 2011 we reduced cededpremiums by approximately$8.7 million related toagreements obtained with certain reinsurers torecover ceded premiums. The recoveriesrecognized in 2011 reflect the agreementssigned in 2011. Further recoveries, if any, arenot expected to be significant.

(6) Deferred Policy Acquisition Costs

The balances of and changes in DAC were asfollows:


2011 2010 2009

(In thousands)DAC balance, beginning

of period $ 853,211 $2,789,905 $ 2,727,422

Capitalization 317,910 317,069 391,079

Amortization (119,348) (168,035) (381,291)

Transferred to Citireinsurers — (2,099,941) —

Foreign exchange andother (1,136) 14,213 52,695

DAC balance, end ofperiod $1,050,637 $ 853,211 $2,789,905

Investment yield reserve assumptions atDecember 31, 2011 ranged from 3.5% to 7.0%while investment yield assumptions rangedfrom 4.0% to 7.0% at December 31, 2010. Welowered the interest rate assumption in 2011 toreflect rates available in the current interestrate environment.

(7) Intangible Assets

The components of intangible assets were asfollows:

December 31, 2011

Gross carryingamount

Accumulatedamortization

Net carryingamount

(In thousands)Amortizing intangible

asset $ 84,871 $(58,218) $26,653Indefinite-lived intangible

asset 45,275 — 45,275

Total intangibleassets $130,146 $(58,218) $ 71,928



December 31, 2010

Gross carryingamount

Accumulatedamortization

Net carryingamount

(In thousands)Amortizing intangible

asset $ 84,871 $(54,789) $30,082Indefinite-lived intangible

asset 45,275 — 45,275

Total intangible assets $130,146 $(54,789) $ 75,357

We have an amortizing intangible asset relatedto a 1995 sales agreement termination paymentto Management Financial Services, Inc. Thisasset is supported by a non-competeagreement with the founder of our businessmodel. We calculate the amortization of thiscontract buyout on a straight-line basis over 24years, which represents the life of thenon-compete agreement. Intangible assetamortization expense was approximately $3.4million in 2011 and approximately $3.5 million ineach of 2010 and 2009. Amortization expenseis expected to be approximately $3.4 millionannually during the remainder of theamortization period. We assessed this asset forimpairment as of October 1, 2011 anddetermined that no impairment had occurred.There have been no subsequent eventsrequiring further analysis.

We also have an indefinite-lived intangible assetrelated to the 1989 purchase of the right tocontract with our sales force. This assetrepresents the core distribution model of ourbusiness, which is our primary competitiveadvantage to profitably distribute term lifeinsurance products on a significant scale, andas such, is considered to have an indefinite life.No amortization was recognized on this assetduring the three-year period endedDecember 31, 2011. This intangible asset issupported by a significant portion of thediscounted cash flows of our future business.We assessed this asset for impairment as ofOctober 1, 2011 and determined that noimpairment had occurred. There have been nosubsequent events requiring further analysis.

(8) Separate Accounts

The Funds consist of a series offive banded investment fundsknown as the Asset BuilderFunds and a money marketfund known as the CashManagement Fund. Theprincipal investment objectiveof each of the Asset Builder

Funds is to achieve long-term growth whilepreserving capital through a diversifiedportfolio of publicly traded Canadian stocks,investment-grade corporate bonds,Government of Canada bonds, and foreignequity investments. The Cash ManagementFund invests in government guaranteed short-term bonds and short-term commercial andbank papers, with the principal investmentobjective being the provision of interest incomewhile maintaining liquidity and preservingcapital.

Payments to policyholders under thesecontract offerings are only due upon death orupon a specific maturity date. Payments arebased on the value of the policyholder’s units inthe portfolio at the payment date, but areguaranteed to be no less than 75% of thepolicyholder’s contribution. Account values arenot guaranteed for withdrawn units ifpolicyholders make withdrawals prior to thematurity dates. Maturity dates varypolicy-by-policy and range from 10 to 50 yearsfrom the policy issuance date.

Both the asset and the liability for the separateaccounts reflect the value of the underlyingassets in the portfolio as of the reporting date.Primerica Life Canada’s exposure to lossesunder the guarantee at the time of accountmaturity is limited to policyholder accounts thathave declined in value more than 25% since theoriginal funding date. Because maturity datesrange from 10 to 50 years, the likelihood ofaccounts meeting both of these criteria at anygiven point is very small. Additionally, the



portfolio consists of a very large number ofindividual contracts, further spreading the riskrelated to the guarantee being exercised upondeath. The length of the contract termsprovides significant opportunity for theunderlying portfolios to recover any short-termlosses prior to maturities or deaths of thepolicyholders.

We periodically assess the exposure related tothese contracts to determine whether anyadditional liability should be recorded. As ofDecember 31, 2011 and 2010, an additionalliability for these contracts was deemed to beunnecessary.

(9) Insurance Reserves

Changes in policy claims and other benefitspayable were as follows:

December 31,

2011 2010 2009

(In thousands)Policy claims and other benefits

payable, beginning of period $229,895 $ 218,390 $225,641Less reinsured policy claims and

other benefits payable 233,346 184,381 174,221

Net balance, beginning ofperiod (3,451) 34,009 51,420

Incurred related to current year 142,685 221,601 485,629Incurred related to prior year 391 177 (1,852)

Total incurred 143,076 221,778 483,777Paid related to current year (153,540) (193,320) (455,377)Paid related to prior year 18,945 (35,313) (47,741)

Total paid (134,595) (228,633) (503,118)Transferred to Citi reinsurers — (31,125) —Foreign currency (206) 520 1,930

Net balance, end of period 4,824 (3,451) 34,009

Add reinsured policy claims andother benefits payable 236,930 233,346 184,381

Balance, end of period $ 241,754 $ 229,895 $218,390

The decrease in incurred and paid balancessince 2009 reflects the effect of the Citireinsurance transactions executed inconnection with our corporate reorganization.Because the Citi reinsurance transactions wereexecuted on March 31, 2010 but transferred theeconomic impact of the agreements retroactiveto January 1, 2010, we have reflected reinsured

claims activity attributable to the underlyingpolicies as a reduction to policy claims andother benefits payable in 2010 in the amount of$31.1 million.

Investment yield reserve assumptions atDecember 31, 2011 from 3.5% to 7.0% whileinvestment yield assumptions ranged from4.0% to 7.0% in 2010. During 2010, we loweredthe interest rate assumption to reflect ratesavailable in the current interest rateenvironment.

(10) Note Payable

In April 2010, we issued to Citi a $300.0 millionnote as part of our corporate reorganization inwhich Citi transferred to us the businesses thatcomprise our operations. Prior to the issuance

of the Citi note, we had nooutstanding debt. The Citi notebears interest at an annual rateof 5.5%, payable semi-annuallyin arrears on January 15 andJuly 15, and matures March 31,2015. We have the option toredeem the Citi note in wholeor in part at a redemption priceequal to 100% of the principalamount to be redeemed plusaccrued and unpaid interest tothe date of redemption. In theevent of a change in control,the holder of the Citi note hasthe right to require us torepurchase it at a price equal to101% of the outstandingprincipal amount plus accruedand unpaid interest.

The Citi note also requires us touse our commercially reasonable efforts toarrange and consummate an offering ofinvestment-grade debt securities, trustpreferred securities, surplus notes, hybridsecurities or convertible debt that generatessufficient net cash proceeds to repay the notein full at certain mutually agreeable dates,based on certain conditions.



We were in compliance with all of the covenantsof the Citi note at December 31, 2011. No eventsof default or defaults occurred during the yearended December 31, 2011.

(11) Income Taxes

Income tax expense (benefit) attributable toincome from continuing operations consists ofthe following:

Current Deferred Total

(In thousands)Year ended December 31, 2011:Federal $ 58,542 $ 19,007 $ 77,549Foreign 30,807 (11,417) 19,390State and local 793 (164) 629

Total tax expense $ 90,142 $ 7,426 $ 97,568

Year ended December 31, 2010:Federal $ 71,533 $ 43,007 $ 114,540Foreign 37,795 (10,660) 27,135State and local 7 (317) (310)

Total tax expense $109,335 $ 32,030 $ 141,365

Year ended December 31, 2009:Federal $217,339 $ 6,623 $223,962Foreign 68,732 (25,949) 42,783State and local (890) (489) (1,379)

Total tax expense $ 285,181 $ (19,815) $265,366

Total income tax expense is different from theamount determined by multiplying earningsbefore income taxes by the statutory federaltax rate of 35%. The reason for such differencefollows:


2011 2010 2009

Amount Percentage Amount Percentage Amount Percentage

(Dollars in thousands)Computed tax expense $96,545 35.0% $139,699 35.0% $265,984 35.0%Other 1,023 0.4% 1,666 0.4% (618) (0.1)%

Total tax expense/effective rate $97,568 35.4% $ 141,365 35.4% $265,366 34.9%

In conjunction with the IPO and the private sale,we made elections under Section 338(h)(10) ofthe Internal Revenue Code, which resulted inchanges to our deferred tax balances andreduced stockholders’ equity by $174.7 million.



Deferred income taxes are recognized for thefuture tax consequences of temporarydifferences between the financial statementcarrying amounts and the tax bases of assetsand liabilities. The main components ofdeferred income tax assets and liabilities wereas follows:

December 31,

2011 2010

(In thousands)Deferred tax assets:Policy benefit reserves and unpaid policy claims $ 163,451 $132,006Intangibles and tax goodwill 47,686 37,719Other 12,919 9,542

Total deferred tax assets 224,056 179,267Deferred tax liabilities:Deferred policy acquisition costs (279,712) (247,344)Investments (24,891) (17,469)Unremitted earnings on foreign subsidiaries (2,593) —Other (15,160) (7,456)

Total deferred tax liabilities (322,356) (272,269)

Net deferred tax liabilities $ (98,300) $(93,002)

The majority of the deferred tax asset isattributable to policy benefit reserves andunpaid policy claims, which represents thedifference between the financial statementcarrying value and tax basis for liabilities forfuture policy benefits. The tax basis for policybenefit reserves and unpaid policy claims areactuarially determined in accordance withguidelines set forth in the Internal RevenueCode. The deferred tax liabilities for DACrepresent the difference between the policyacquisition costs capitalized forGAAP purposes and thosecapitalized for tax purposes, aswell as the difference in theresulting amortization methods.

The Company has state netoperating losses resulting in adeferred tax asset ofapproximately $1.0 million,which are available for usethrough 2030. The Companyhas no other material netoperating loss or creditcarryforwards.

There was no deferred tax asset valuationallowance at December 31, 2011. In assessingthe realizability of deferred tax assets,management considers whether it is more likelythan not that some portion or all of thedeferred tax assets will not be realized.Management considers the scheduled reversal

of deferred tax liabilities,projected future taxableincome, carryback andcarryforward periods, andtax planning strategies inmaking this assessment.Management believes thatit is more likely than notthat the results of futureoperations will generatesufficient taxable incometo realize the deferred taxassets.

The Company has directownership of a group of

controlled foreign corporations in Canada. Wehave asserted a position of permanentreinvestment for the difference in share basisand certain operational earnings. It is notpracticable to estimate the amount of deferredtaxes associated with this difference at thistime. For those operational earnings for whichwe have not made a permanent reinvestmentassertion, we have established a deferred taxliability to account for the U.S. tax liability thatwill occur upon repatriation of such earnings.

December 31,

2011 2010

(In thousands)

Unrecognized tax benefits, beginning ofperiod $ 25,191 $26,608

Change in prior period unrecognized taxbenefits 920 (300)

Change in current period unrecognized taxbenefits 2,171 2,112

Reductions as a result of a lapse in statute oflimitations (6,926) (3,229)

Unrecognized tax benefits, end of period $21,356 $ 25,191



The total amount of unrecognized tax benefitsthat, if recognized, would affect our effectivetax rate was as follows:

December 31,

2011 2010

(In thousands)Unrecognized tax benefits yet to impact the

effective tax rate $6,666 $4,859

We recognize interest expense related tounrecognized tax benefits in tax expense net offederal income tax. The total amount of accruedinterest and penalties in the consolidated andcombined balance sheet follows.

December 31,

2011 2010

(In thousands)Total amount of accrued interest and penalties $4,054 $3,932

We recognized an interest benefit related tounrecognized tax benefits in the consolidatedand combined statements of income as follows:


2011 2010 2009

(In thousands)Interest benefit related to unrecognized

tax benefits $191 $2,576 $3,062

During the first quarter of 2010, our federalincome tax return was included as part of Citi’sconsolidated federal income tax return. InMarch 2010, in anticipation of our corporatereorganization, we entered into a taxseparation agreement with Citi. In accordancewith the tax separation agreement, Citi isresponsible 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 2010. After theclosing date of the IPO, the Company was nolonger part of Citi’s consolidated federalincome tax return.

We have no penalties included in calculatingour provision for income taxes. As mentionedabove, the Company is a party to a tax

separation agreement thatincludes a tax indemnificationagreement, which wasnegotiated and executed aspart of the separation from Citi.The indemnification requiresCiti to cover income taxliabilities incurred by theCompany for any consolidated,combined, or unitary returnsthat end on or prior to theseparation. As of December 31,2011, the Company had a Cititax indemnification asset of$15.2 million. All consolidated,combined or unitary taxliabilities are payable to eitherthe Parent Company orPrimerica Life, while taxliabilities related to separatereturn filings are payable to theappropriate taxing authority.

There is no significant changethat is reasonably possible to

occur within twelve months of the reportingdate.

The major tax jurisdictions inwhich we operate are the United States andCanada. We are currently open to tax audit bythe Internal Revenue Service for the yearsended December 31, 2006 and thereafter forfederal tax purposes. We are currently open toaudit in Canada for tax years endedDecember 31, 2005 and thereafter for federaland provincial tax purposes.



(12) Stockholders’ Equity

Prior to April 1, 2010, we had 100 shares ofoutstanding common stock. In the secondquarter of 2010, we issued common stock aspart of our corporate reorganization. Areconciliation of the number of shares of ourcommon stock follows.


2011 2010 (1)

(In thousands)Common stock - issued:Balance, beginning of period 72,843 —Shares issued to Citi in connection with the IPO — 75,000New shares of common stock issued, net 348 11Shares of common stock issued upon lapse of restricted stock units (RSUs) 784 122Common stock retired (9,092) —Treasury stock retired — (2,290)

Balance, end of period 64,883 72,843Treasury stock:Balance, beginning of period — —Treasury stock contributed from Citi — (5,021)Treasury stock acquired — (6)Treasury stock reissued as restricted common stock — 2,737Treasury stock retired — 2,290

Balance, end of period — —

Common shares outstanding, end of period 64,883 72,843

(1) Period following our corporate reorganization and IPO on April 1, 2010

In November 2011, we repurchasedapproximately 8.9 million shares from Citi at aprice of $22.42 per share, for a total purchaseprice of approximately $200.0 million. Theper-share purchase price was determinedbased on the volume-weighted average priceper share of Primerica common stock duringthe seven-day period prior to execution of therepurchase agreement. We funded thisrepurchase with funds made available by adividend from Primerica Life to the ParentCompany.

The above reconciliation excludes RSUs whichdo not have voting rights and are subject tosale restrictions. As the restrictions lapseduring the three years following the issuance of

the RSUs, we will issue common shares withvoting rights. As of December 31, 2011, we had atotal of approximately 3.2 million RSUsoutstanding, including approximately 535,200RSUs granted in 2011.

The following 2010 transactions took place in2010 on or after April 1, 2010:

• we issued 74,999,900 shares of commonstock to Citi;

• we issued warrants to Citi, exercisable for4,103,110 additional shares of our commonstock;

• our common stock began trading under theticker symbol PRI on the New York StockExchange;



• Citi sold 24,564,000 shares of ourcommon stock to the public in the IPO;

• Citi contributed 5,021,412 shares ofcommon stock back to us;

• we granted equity awards consisting of2,615,000 RSUs to certain sales forceleaders;

• we granted 2,560,000 equity awards tomanagement in the form of restrictedcommon stock and RSUs;

• we issued 210,166 shares of restrictedcommon stock upon the conversion of fullyvested restricted stock awards previouslygranted by Citi and held by certain of oursales force leaders;

• we issued 11,246 shares of restrictedcommon stock upon the conversion ofrestricted stock awards previously grantedby Citi and held by management;

• we retired 2,284,375 common sharesunderlying the RSU awards describedabove, plus an additional 7,098 commonshares to cover withholding taxes andemployee forfeitures; and

• we granted 11,858 shares of restrictedcommon stock to our independentdirectors.

As a result of the issuance of the 2010 equityawards, we recorded non-cash compensationcharges based on the fair value of awardsvested during the reporting period. Employeeawards representing 2,571,246 shares weremeasured at their April 1, 2010 grant date fairvalues of $15.00 per share and vest over threeyears. We believe compensation expenserelated to these awards will be approximately$3.1 million per quarter, subject to changebased on deviations from our forecastedforfeiture rates.

We granted 1,865,000 RSUs to certain salesforce leaders on April 1, 2010. These RSUs werefully vested on April 1, 2010 with deferreddelivery occurring over three years. Werecorded the related compensation expense for

the IPO grants, which excluded the convertedawards, upon vesting. Because the awards weresubject to deferred delivery and/or salerestrictions following their vesting, their fairvalue was discounted to reflect a correspondingilliquidity discount.

An additional 750,000 RSUs were granted tosales force leaders between April 1, 2010 andOctober 1, 2010, which vested between July 1,2010 and January 1, 2011, with deferred deliveryoccurring over three years. These additionalawards varied with and primarily related to lifeinsurance policy acquisitions. As such, wedeferred $12.3 million and recognized acorresponding increase in DAC which will beamortized over the life of the underlyingpolicies. The fair value of these awards also hasbeen discounted to properly reflect theilliquidity discount due to sales restrictionsexisting after the awards have vested.

In connection with the conversion of Citi stockawards to Primerica stock awards andconcurrent with the signing of the reinsuranceagreements on March 31, 2010, we recorded areclass of approximately $23.5 million from dueto affiliates and other liabilities to paid-incapital and Citi converted the underlyingpayable to a capital contribution.

In April 2010, Citi sold approximately16.4 million shares of our common stock toWarburg Pincus for an aggregate purchaseprice of $230.0 million. The sale also includedwarrants held by Citi that will allow theWarburg Pincus funds to acquire from us anaggregate of approximately 4.1 millionadditional shares of our common stock, for upto seven years, at an exercise price of $18.00per share. The warrants may be physicallysettled or net share settled at the option of thewarrant holder. The warrant holder does nothave the option to cash settle any portion ofthe warrants. The warrants are classified aspermanent equity based on the fair value at theoriginal April 1, 2010 issuance date. Subsequentchanges in fair value will not be recognized aslong as the warrants continue to be classifiedas equity. Because the warrants were issued as



a return of capital to Citi, there was no netimpact on stockholders’ equity related to thewarrants. The warrant holder is not entitled toreceipt of dividends declared on the underlyingcommon stock or non-voting common stock(but will be entitled to adjustments forextraordinary dividends), or to any voting orother rights that might accrue to holders ofcommon stock or non-voting common stock. Asof December 31, 2011, Warburg Pincus ownedapproximately 16.4 million shares of ouroutstanding common stock.

(13) Earnings Per Share

The calculation of basic and diluted EPSfollows.


2011 2010 (1)

(In thousands, exceptper-share amounts)

Basic EPS:Numerator:Net income $178,276 $257,778Income attributable to unvested

participating securities (5,565) (10,433)

Net income used in calculating basic EPS $ 172,711 $247,345

Denominator:Weighted-average vested shares 72,283 72,099

Basic EPS $ 2.39 $ 3.43

Diluted EPS:Numerator:Net income $178,276 $257,778Income attributable to unvested

participating securities (5,507) (10,326)

Net income used in calculating dilutedEPS $172,769 $247,452

Denominator:Weighted-average vested shares 73,107 72,882

Diluted EPS $ 2.36 $ 3.40

(1) Pro forma basis using weighted-average shares, including the shares issued orissuable upon lapse of restrictions following our April 1, 2010 corporatereorganization as though they had been issued and outstanding on January 1,2010.



(14) Share-Based Transactions

As of December 31, 2011, the Company hadoutstanding equity awards under its OmnibusIncentive Plan (OIP). The OIP provides for theissuance of equity awards, including stockoptions, stock appreciation rights, restrictedstock, deferred stock, RSUs, unrestricted stockas well as cash-based awards. Inaddition to time-based vestingrequirements, awards granted underthe OIP also may be subject tospecified performance criteria. As ofDecember 31, 2011, we had 4.5 millionshares available for future grantsunder this plan.

Employee Share-Based Transactions

The following table summarizes employee anddirector restricted stock activity during 2011and 2010.

Shares

Weighted-averagemeasurement-date fair

value per share

(Shares in thousands)

Unvested employee restricted stock andRSUs, December 31, 2009 — $ —

Granted in 2010 2,569 15.02Forfeited in 2010 (3) 15.00Conversions from awards in Citi shares 11 15.00Vested in 2010 (11) 15.00

Unvested employee restricted stockand RSUs, December 31, 2010 2,566 15.02

Granted in 2011 368 25.65Forfeited in 2011 (12) 18.25Vested in 2011 (858) 15.04

Unvested employee restricted stockand RSUs, December 31, 2011 2,064 16.88

The value of restricted stock and RSUs grantedto employees was based on the fair marketvalue of our common stock at the date of grant.We granted shares of restricted stock to U.S.employees and non-employee directors andRSUs to Canadian employees. All outstandingmanagement awards have time-based vesting

requirements. These awards vest over threeyears and are not subject to any salesrestrictions or deferred delivery followingvesting.

In connection with our granting of managementequity awards, we recognized expense and taxbenefit offsets as follows:


2011 2010

(In thousands)

Management equity award expense $16,139 $11,894Tax benefit associated with

management equity awards 5,530 3,971



Management equity award expense reflectsvesting activity related to management IPOshares granted on April 1, 2010 as well asvesting activity for approximately 354,500shares granted on February 22, 2011 at $25.80,less a nominal forfeiture adjustment. As ofDecember 31, 2011, total compensation cost notyet recognized in our financial statementsrelated to equity awards with time-basedvesting conditions yet to be reached was asfollows:

December 31, 2011

(Dollars in thousands)Total management equity award compensation cost not

yet recognized $ 22,318Weighted-average period over which cost will be

recognized 1.5 years

Non-Employee Share-BasedTransactions

The following table summarizes non-employeerestricted stock unit activity during 2011 and2010.

Shares

Weighted-average

measurement-date fair value

per share

(Shares in thousands)Unvested non-employee RSUs, December 31, 2009 — —Granted in 2010 2,615 $ 13.27Vested in 2010 (2,427) 12.80

Unvested non-employee RSUs, December 31, 2010 188 19.37Granted in 2011 517 17.17Vested in 2011 (588) 17.70

Unvested non-employee RSUs, December 31, 2011 117 17.55

All of our 2011 non-employee share-basedtransactions relate to the granting of RSUs tomembers of our sales force. These awards areearned over a three month service period andvest at the conclusion of the service period.However, they are subject to long-term salesrestrictions expiring over three years. Becausethe sale restrictions extend up to three yearsbeyond the vesting period, the awards aresubject to an illiquidity discount reflecting therisk associated with the post-vesting

restrictions. Toquantify thisdiscount for eachaward, we used aseries of Black-Scholes modelswith one-, two-and three-year

tenors to estimate put option costs less anominal transaction cost as a methodology forquantifying the cost of eliminating the downsiderisk associated with the sale restrictions.

The most significant assumptions in the Black-Scholes models were the volatility assumptions.

Because our stockand the options onour stock havehad a very limitedactive tradinghistory, wederived volatilityassumptions byanalyzing otherpublic insurancecompanies’historical andimplied volatilities

over terms comparable to the sale restrictionterms.



The following table presents the assumptionsused in valuing quarterly RSU grants:


2011 2010

Expected volatility 29 to 67 36 to 52

Quarterly dividends expected $0.01 to $0.03 $0.00 to $0.01

Risk-free interest rates Less than 1% Less than 2%

Our quarterly incentive awards to our salesforce leaders have performance-based vestingrequirements for which the granting and theservice period occur within the same calendarquarter. These awards are granted in the formof RSUs which vest upon the conclusion of thequarterly contest and are subject to salerestrictions expiring over the three yearssubsequent to vesting. Because the awards aresubject to sale restrictions following theirvesting, their fair value is discounted to reflecta corresponding illiquidity discount. Theseawards vary with and primarily relate toacquiring life insurance policies and thereforeare deferred and amortized in the same manneras other deferred policy acquisition costs.

Details on the granting and valuation of theseawards follows:


2011 2010

(Dollars in thousands, exceptper-share amounts)

Total quarterly RSUs granted 517,374 750,000

Measurement date per-share fair value of awards $14.08 to $21.06 $15.44 to $19.37

Illiquidity discounts 17% to 32% 20% to 28%Quarterly incentive awards expense deferred $8,805 $12,318Concurrent tax benefit of deferred expense $2,836 $4,031

As of December 31, 2011, all non-employeeequity awards were fully vested with theexception of approximately 116,600 shares thatvested on January 1, 2012. As such, any relatedcompensation cost not recognized in ourfinancial statements through December 31, 2011is immaterial. Shares awarded underperformance-based, non-employee grants wereearned by certain of our sales force leadersbased on performance criteria varying with and

primarily relating to acquiring life insurancepolicies, and therefore increased our DAC.These amounts are then amortized over the

terms of the underlyingpolicies acquired.

For the year endedDecember 31, 2010, we alsorecognized approximately$22.4 million of expense in

connection with the IPO shares granted tocertain of our sales force leaders in April 2010.This IPO-related grant expense was partiallyoffset by a tax benefit of approximately $7.1million. The IPO price per share was $15.00. Werecognized a discounted fair value of theseawards of $12.00 per RSU, reflecting theilliquidity discount described above.

All of our outstanding equity awards are eligiblefor dividends or dividend equivalents regardlessof vesting status.



(15) Statutory Accounting andDividend Restrictions

U.S. Insurance Subsidiaries

Our U.S. insurance subsidiaries are required toreport their results of operations and financialposition to state authorities on the basis ofstatutory accounting practices prescribed orpermitted by such authorities and the NationalAssociation of Insurance Commissioners(NAIC), which is a comprehensive basis ofaccounting other than U.S. generally acceptedaccounting principles. Prescribed statutoryaccounting practices include a variety ofpublications of the NAIC, as well as state laws,regulations and general administrative rules.Permitted statutory accounting practicesencompass all accounting practices not soprescribed. Primerica Life’s statutory financialstatements are prepared on the basis ofaccounting practices prescribed or permittedby the NAIC and the Massachusetts Division ofInsurance (Massachusetts DOI), while NBLIC’sstatutory financial statements are prepared onthe basis of accounting practices prescribed orpermitted by the NAIC and the New York StateDepartment of Financial Services (NYSDFS).Our U.S. insurance subsidiaries’ ability to paydividends is subject to and limited by thevarious laws and regulations of their respectivestates.

For Primerica Life, statutory dividend capacityis based on the greater of (1) the previousyear’s statutory net gain from operations (notincluding pro rata distributions of any class ofthe insurer’s own securities) or (2) 10% of theprevious year-end statutory surplus (net ofcapital stock), subject to a maximum limit equalto statutory unassigned surplus. Dividends that,together with the amount of other distributionsor dividends made within the preceding 12months, exceed this statutory limitation arereferred to as extraordinary dividends.Extraordinary dividends require advance noticeto the Massachusetts DOI, Primerica Life’sprimary state insurance regulator, and aresubject to potential disapproval. For dividends

exceeding these thresholds, Primerica Lifemust provide notice to the Massachusetts DOIand receive notice that the Massachusetts DOIdoes not object to the payment of suchdividends. Primerica Life’s statutory surpluswas $440.6 million at December 31, 2011. Itsstatutory net gain from operations was $182.0million in 2011. However, as a result of ourcorporate reorganization, we had negativeunassigned surplus as of December 31, 2011.Therefore, any dividend payments in 2012 willrequire regulatory approval.

For NBLIC, statutory dividend capacity is basedon the lesser of (1) 10% of the previous year-endstatutory earned surplus or (2) the previousyear’s statutory net gain from operations, notincluding realized capital gains. Dividends that,together with the amount of other distributionsor dividends in any calendar year, exceed thisstatutory limitation are considered to beextraordinary dividends. Extraordinary dividendsrequire advance notice to the NYSDFS, NBLIC’sprimary state insurance regulator, and aresubject to potential disapproval. For dividendsexceeding these thresholds, NBLIC must providenotice to the NYSDFS and receive notice that theNYSDFS does not object to the payment of suchdividends.

NBLIC’s earned surplus was $171.2 million as ofDecember 31, 2011. Its statutory net gain fromoperations, not including realized capital gains,was $16.1 million in 2011.

The amount of dividends that our U.S.insurance subsidiaries may pay in 2012 withoutregulatory consent follows:

2012 StatutoryDividend Capacity

(In thousands)

Primerica Life $181,995

NBLIC 16,075



The statutory capital and surplus of our U.Sinsurance subsidiaries was as follows:

December 31,

2011 2010

(In thousands)

Primerica Life capitaland surplus $ 443,141 $629,842

NBLIC capital andsurplus 173,679 163,249

Primerica Life and NBLIC both exceed theminimum risk-based capital requirements forinsurance companies operating in the UnitedStates.

Canadian Insurance Subsidiary

Primerica Life Canada is incorporated underthe provisions of the Canada BusinessCorporations Act and is a domiciled CanadianCompany subject to regulation under theInsurance Companies Act (Canada) by theOffice of the Superintendent of FinancialInstitutions Canada (OSFI) and by ProvincialSuperintendents of Financial Institutions/Insurance in those provinces in which PrimericaLife Canada is licensed. The financialstatements of Primerica Life Canada areprepared in accordance with InternationalFinancial Reporting Standards, or IFRS.

In Canada, dividends can be paid subject to thepaying insurance company continuing to meetthe regulatory requirements for capitaladequacy and liquidity and upon 15 days’minimum notice to OSFI. The amount ofdividends that may be paid in 2012 withoutregulatory consent for Primerica Life Canada isCAD53.3 million, or $52.3 million using theDecember 31, 2011 period-end exchange rate.

Primerica Life Canada exceeds the minimumcapital requirements for insurance companiesregulated by the Office of Supervision ofFinancial Institutions in Canada.

(16) Commitments and ContingentLiabilities

Commitments

We lease office equipment and office andwarehouse space under various noncancelableoperating lease agreements that expirethrough June 2028. Rent expense was asfollows:


2011 2010 2009

(In thousands)

Minimum rentexpense $6,726 $6,490 $6,483

Total rentexpense $6,726 $6,490 $6,483

We had no contingent rent expense during 2011,2010, and 2009. In September 2011, we signedan agreement to lease a new build-to-suitfacility which will replace and consolidatesubstantially all of our existing Duluth, Georgia-based executive and home office operations.We expect the building to be complete andready for occupancy in the second quarter of2013. The initial lease term will be 15 years withestimated minimum annual rental paymentsranging from approximately $4.5 million atinception to approximately $5.6 million in year15. The leases covering our existing Duluth,Georgia-based executive and home officeoperations will terminate in the second quarterof 2013. As such, we do not expect a materialincrease in our annual operating leaseexpenditures.



At January 1, 2012, the minimum aggregaterental commitments for operating leases wereas follows:

Year endingDecember 31,

(In thousands)

2012 $ 6,803

2013 6,559

2014 6,356

2015 5,863

2016 5,916

Thereafter 61,064

Total minimum rentalcommitments for operatingleases $92,561

Contingent Liabilities

In late 2011 and early 2012, several arbitrationclaims were filed with the Financial IndustryRegulatory Association (FINRA) against oursubsidiary, PFS Investments, Inc. and certain ofits registered representatives seekingunspecified damages arising from theallegation that the representativesimproperly recommended that the claimantstransfer their retirement benefits from theFlorida Retirement System’s defined benefitplan to its defined contribution plan. In addition,a case alleging the same claims has been filedagainst us, PFS Investments, Inc. and aregistered representative in Miami-DadeCounty Circuit Court. We believe we havemeritorious defenses to the claims, and weintend to vigorously defend against them. Wecould incur significant costs and liabilitiesdefending and/or resolving these claims, andwe are unable at this early stage to assess withconfidence what effect, if any, the ultimateresolution of these claims will have on ourbusiness, financial position or results ofoperations.

The lawyer representing the claimants in thismatter has informed us that he intends topursue similar claims on behalf of other

potential claimants. We could incur significantcosts and liabilities defending and/or settlingthese claims, and we are unable at this earlystage to assess with confidence what effect, ifany, the ultimate resolution of these claims willhave on our business, financial condition orresults of operations.

The Company is involved from time to time inlegal disputes, regulatory inquiries andarbitration proceedings in the normal course ofbusiness. These disputes are subject touncertainties, including the large and/orindeterminate amounts sought in certain ofthese matters and the inherentunpredictability of litigation. As such, theCompany is unable to estimate the possibleloss or range of loss that may result fromthese matters. While it is possible that anadverse outcome in certain cases could havea material adverse effect upon theCompany’s financial position, based oninformation currently known by theCompany’s management, in management’sopinion, the outcomes of such pendinginvestigations and legal proceedings are notlikely to have such an effect.

(17) Benefit Plans

We participated in various benefit plans,including a pension plan and a 401(k) plan,sponsored by Citi during the period prior to ourcorporate reorganization in 2010. These plansare now either closed or no longer effective forour employees. The expense, if any, associatedwith the benefits earned under such plans wasimmaterial during 2011, 2010, and 2009.

In connection with our corporatereorganization, we established a 401(k) plan forthe benefit of our employees in 2010. Theexpense associated with this plan wasapproximately $6.1 million in 2011 andapproximately $3.1 million in 2010.



(18) Related Party Transactions

The net distributions we declared and paid toCiti, as a then-wholly owned subsidiary, were asfollows:


2011 2010 2009

(In thousands)

Distributions declared $— $3,491,556 $ 193,927Distributions paid — 3,491,556 44,927Distributions payable — — 149,000

The increase in net distributions in 2010 was adirect result of the transactions executed inconnection with our corporate reorganization.

The revenues we earned or expenses weincurred in connection with other materialrelated party transactions were as follows:


2011 2010 2009

(In thousands)Loan origination

service revenuesfrom Citi affiliates $ 4,990 $ 10,327 $29,519

Payroll, employeebenefits andshared servicesexpenses — (13,463) (34,142)

Customer servicetelephone supportexpense (4,286) (5,921) (6,406)

Citi stock awardexpense — (3,244) (5,660)

We had various agreements with various whollyowned subsidiaries of Citi, whereby we providedthese affiliates with certain services related totheir origination of unsecured personal,consumer and student loans. The receivablesrelated to these loan origination services wereimmaterial as of December 31, 2011 and 2010.

We had arrangements with various Citigroupaffiliates whereby they provided payrollprocessing services and paid for employeebenefits and various shared services on behalfof the Company. These arrangementsterminated in July 2010. Amounts due to or

from affiliates under these arrangements atDecember 31, 2010 were immaterial.

We had an arrangement with Citicorp DataSystems, Inc. (CDS), a wholly owned subsidiaryof Citi, whereby CDS provided customer service

telephone support for the Company.This arrangement terminated inOctober 2011.

We had arrangements in relation tounvested stock awards and otherpayables related to stock awards for

various share-based compensation planssponsored by Citi during the period prior to ourcorporate reorganization. These plans areclosed or no longer effective for our employeesexcept for exercise or delivery associated withawards granted prior to our corporatereorganization. The payables to Citi related tothese agreements were as follows:

December 31,

2011 2010

(In thousands)

Payables related tovested Citi stock awards $2,249 $7,501

Remaining arrangements to provide services toor receive services from Citi affiliates wereimmaterial during 2011, 2010, and 2009.

In November 2011, we repurchased from Citiapproximately 8.9 million shares of ourcommon stock at a price of $22.42 per share,for a total purchase price of approximately$200.0 million. The per-share purchase pricewas determined based on the volume-weightedaverage price per share of Primerica, Inc.common stock during the seven-day periodprior to execution of the repurchaseagreement. We funded this repurchase withfunds made available by a dividend fromPrimerica Life to the Parent Company.

In April 2011, Citi sold 12.0 million shares of ourcommon stock in an underwritten publicoffering at a price of $22.75 per share. InDecember 2011, Citi sold approximately8.1 million shares of our common stock,



representing all of its remaining shares of ourcommon stock, in an underwritten publicoffering at a price of $22.29 per share. We didnot receive any proceeds from the sale of theseshares. As required by the registration rightsagreement, we incurred expenses ofapproximately $1 million on behalf of Citi inconnection with these offerings.

In 2010, the Company forgave and wrote off anexpense reimbursement receivable ofapproximately $0.7 million due from WarburgPincus, a significant stockholder with two

representatives on our Board of Directors atthe time of the forgiveness. The receivablearose out of an agreement between Citi andWarburg Pincus pursuant to which WarburgPincus agreed to reimburse the Company for aspecified portion of certain costs expected tobe incurred by the Company for a businessevent to be held in connection with the closingof the IPO. The agreement was signed prior toour corporate reorganization. Warburg Pincusrequested a waiver of the obligation in 2010,which the Audit Committee approved.



Unaudited Quarterly Financial DataIn management’s opinion, the following quarterly consolidated and combined financial informationfairly presents the results of operations for such periods and is prepared on a basis consistent withour annual audited consolidated and combined financial statements. Financial information for thequarter ended March 31, 2010 was prepared on a combined basis, while financial information forquarters ending after March 31, 2010 was prepared on a consolidated basis.

We completed our IPO on April 1, 2010. Prior to April 2010, outstanding stock consisted of 100 sharesof stock issued to Citi in October 2009. As such, pro forma per-share earnings for the quarter endedMarch 31, 2010 are not presented as they would not be comparable to per-share earnings in periodsafter the Transactions due to the substantial increase in shares used in the computation of earningsper share.

Quarter endedMarch 31, 2011

Quarter endedJune 30, 2011

Quarter endedSeptember 30, 2011

Quarter endedDecember 31, 2011

(In thousands, except per-share amounts)Direct premiums $ 552,069 $ 560,881 $ 560,739 $ 555,778Ceded premiums (422,238) (435,564) (425,643) (419,630)

Net premiums 129,831 125,317 135,096 136,148Commissions and fees 106,116 108,698 100,883 97,282Net investment income 28,626 27,229 27,103 25,643Realized investment gains (losses), including

OTTI 327 2,035 (178) 4,256Other, net 11,452 11,816 12,887 12,526

Total revenues 276,352 275,095 275,791 275,855Total benefits and expenses 195,207 206,934 211,940 213,168

Income before income taxes 81,145 68,161 63,851 62,687Income taxes 28,678 24,138 23,250 21,502

Net income $ 52,467 $ 44,023 $ 40,601 $ 41,185

Earnings per share — basic $ 0.69 $ 0.58 $ 0.54 $ 0.58

Earnings per share — diluted $ 0.68 $ 0.58 $ 0.53 $ 0.57

Quarter endedMarch 31, 2010

Quarter endedJune 30, 2010

Quarter endedSeptember 30, 2010

Quarter endedDecember 31, 2010

(In thousands, except per-share amounts)Direct premiums $537,845 $547,455 $ 547,444 $548,330Ceded premiums (148,119) (447,213) (437,054) (417,981)

Net premiums 389,726 100,242 110,390 130,349Commissions and fees 91,690 93,226 89,737 108,288Net investment income 82,576 27,991 27,855 26,688Realized investment gains, including OTTI 31,057 374 1,015 1,700Other, net 11,893 12,466 12,239 12,362

Total revenues 606,942 234,299 241,236 279,387Total benefits and expenses 386,540 197,961 179,357 198,864

Income before income taxes 220,402 36,338 61,879 80,523Income taxes 77,116 14,330 22,284 27,634

Net income $ 143,286 $ 22,008 $ 39,595 $ 52,889

Earnings per share — basic n/a $ 0.29 $ 0.53 $ 0.70

Earnings per share — diluted n/a $ 0.29 $ 0.52 $ 0.69

Quarterly amounts may not agree in total to the corresponding annual amounts due to rounding.


ITEM 9. Changes in and Disagreements with Accountants on Accounting Matters

ITEM 9. CHANGES IN ANDDISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTINGMATTERS.

There have been no changes in, ordisagreements with, accountants on accountingand financial disclosure matters during theyears ended December 31, 2011 and 2010.

ITEM 9A. CONTROLS ANDPROCEDURES.

Disclosure Controls and Procedures

The Company’s management, with theparticipation of the Company’s Co-ChiefExecutive Officers and Chief Financial Officer,has evaluated the effectiveness of theCompany’s disclosure controls and procedures(as such term is defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of1934, as amended (the “Exchange Act”)) as ofthe end of the period covered by this quarterlyreport (the “Evaluation Date”). Based on suchevaluation, the Company’s Co-Chief ExecutiveOfficers and Chief Financial Officer haveconcluded that, as of the Evaluation Date, theCompany’s disclosure controls and proceduresare effective.

Changes in Internal Control OverFinancial Reporting

There have not been any changes in theCompany’s internal control over financialreporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)

during the fourth fiscal quarter of 2011 thathave materially affected, or are reasonablylikely to materially affect, the Company’sinternal control over financial reporting.

Management’s Annual Report OnInternal Control Over FinancialReporting

Our management is responsible for establishingand maintaining adequate internal control overfinancial reporting for our company. With theparticipation of the Co-Chief Executive Officersand the Chief Financial Officer, ourmanagement conducted an evaluation of theeffectiveness of our internal control overfinancial reporting based on the framework andcriteria established in Internal Control —Integrated Framework, issued by theCommittee of Sponsoring Organizations of theTreadway Commission. Based on thisevaluation, our management has concludedthat our internal control over financialreporting was effective as of December 31, 2011.

Our independent auditor, KPMG LLP, anindependent registered public accounting firm,has issued an attestation report on theeffectiveness of our internal control overfinancial reporting. This attestation reportappears below.


Item 9A. Controls And Procedures

Report of Independent Registered Public Accounting Firm


We have audited Primerica, Inc.’s (the Company) internal control over financial reporting as ofDecember 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’smanagement is responsible for maintaining effective internal control over financial reporting and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanyingManagement’s Annual Report on Internal Control over Financial Reporting. Our responsibility is toexpress an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining an understanding of internal controlover financial reporting, assessing the risk that a material weakness exists, and testing andevaluating the design and operating effectiveness of internal control based on the assessed risk. Ouraudit also included performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of the company; and(3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness to future periods aresubject to the risk that controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.

In our opinion, Primerica, Inc. maintained, in all material respects, effective internal control overfinancial reporting as of December 31, 2011, based on criteria established in Internal Control —Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting OversightBoard (United States), the consolidated balance sheets of Primerica, Inc. as of December 31, 2011 and2010, and the related consolidated and combined statements of income, changes in stockholders’equity, comprehensive income and cash flows for each of the years in the three-year period endedDecember 31, 2011, and our report dated February 28, 2012 expressed an unqualified opinion on thoseconsolidated and combined financial statements.

/s/ KPMG LLP



Item 9B. Other Information

ITEM 9B. OTHER INFORMATION.

Not applicable.


Item 10. Directors, Executive Officers and Corporate Governance

PART III

Pursuant to General Instruction G to Form 10-K,and as described below portions of Items 10through 14 of this report are incorporated byreference from the Company’s definitive ProxyStatement relating to the Company’s 2012Annual Meeting of Stockholders (the “ProxyStatement”), which will be filed with the SECwithin 120 days of December 31, 2011, pursuantto Regulation 14A under the Exchange Act. TheReport of the Audit Committee and the Reportof the Compensation Committee to be includedin the Proxy Statement shall be deemed to befurnished in this report and shall not beincorporated by reference into any filing underthe Securities Act of 1933, as amended, as aresult of such furnishing.

Our website address is www.primerica.com. Youmay obtain free electronic copies of our annualreports on Form 10-K, quarterly reports onForm 10-Q, current reports on Form 8-K, and allamendments to those reports from theinvestors section of our website. These reportsare available on our website as soon asreasonably practicable after we electronicallyfile them with the SEC. These reports shouldalso be available through the SEC’s website atwww.sec.gov.

We have adopted corporate governanceguidelines. The guidelines and the charters ofour board committees are available in thecorporate governance subsection of theinvestor relations section of our website,www.primerica.com, and are also available inprint upon written request to the CorporateSecretary, Primerica, Inc., 3120 BreckinridgeBoulevard, Duluth, GA 30099.

Item 10. DIRECTORS, EXECUTIVEOFFICERS AND CORPORATEGOVERNANCE.For a list of executive officers, see Part I Item X.Executive Officers of the Registrant.

We have adopted a written code of conductthat applies to all directors, officers and

employees, including a separate code thatapplies to only our principal executive officersand senior financial officers in accordance withSection 406 of the Sarbanes-Oxley Act of 2002and the rules of the SEC promulgatedthereunder. Our Code of Conduct is available inthe corporate governance subsection of theinvestor relations section of our website,www.primerica.com, and is available in printupon written request to the CorporateSecretary, Primerica, Inc., 3120 BreckinridgeBlvd., Duluth, GA 30099. In the event that wemake changes in, or provide waivers from, theprovisions of the Code of Conduct that the SECrequires us to disclose, we will disclose theseevents in the corporate governance section ofour website.

Except for the information above and theinformation set forth in Part I, Item X. ExecutiveOfficers of the Registrant, the informationrequired by this item will be contained underthe following headings in the Proxy Statementand is incorporated herein by reference:

• Corporate Governance – Independence ofCommittee Members;

• Corporate Governance – Code of Conduct;

• Corporate Governance – Section 16(a)Beneficial Ownership ReportingCompliance;

• Board of Directors – Members of OurBoard;

• Board of Directors – Committees of theBoard;

• Executive Compensation – EmploymentAgreements with Named ExecutiveOfficers;

• Audit Committee Matters – Report of theAudit Committee;

• Related Party Transactions – Transactionswith Citigroup; and

• Related Party Transactions – Transactionswith Warburg Pincus.


Item 11. Executive Compensation

Item 11. EXECUTIVECOMPENSATION.

The information required by this item will becontained under the following headings in theProxy Statement and is incorporated herein byreference:

• Board of Directors – Committees of theBoard – Compensation Committee;

• Board of Directors – DirectorCompensation; and

• Executive Compensation.

Item 12. SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERSAND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS.

Except for the information set forth in Part II,Item 5. Market for Registrant’s Common Equity,Related Stockholder Matters and IssuerPurchases of Equity Securities, the informationrequired by this item will be contained underthe following headings in the Proxy Statementand is incorporated herein by reference:

• Corporate Governance – BeneficialOwnership of Common Stock.

Item 13. CERTAIN RELATIONSHIPSAND RELATIONSHIPS, ANDDIRECTOR INDEPENDENCE.


• Introductory paragraph to CorporateGovernance;

• Corporate Governance – Independence ofDirectors;

• Corporate Governance – CategoricalStandards of Independence;

• Corporate Governance – Independence ofCommittee Members;

• Board of Directors – Committees of theBoard; and

• Related Party Transactions.

Item 14. PRINCIPAL ACCOUNTINGFEES AND SERVICES.


• Matters to be Voted on – Proposal 2:Ratification of the Appointment of theIndependent Registered Public AccountingFirm;

• Board of Directors – Committees of theBoard – Audit Committee; and

• Audit Committee Matters – Fees andServices of the Independent RegisteredPublic Accounting Firm.


Item 15. Exhibits, Financial Statement Schedules

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) 1. FINANCIAL STATEMENTS

Included in Part II, Item 8, of this report:Primerica, Inc.:Report of Independent Registered Public Accounting Firm 103

Consolidated Balance Sheets as of December 31, 2011 and 2010 104

Consolidated and Combined Statements of Income for each of the years in the three-yearperiod ended December 31, 2011 105

Consolidated and Combined Statements of Stockholders’ Equity for each of the years in thethree-year period ended December 31, 2011 106

Consolidated and Combined Statements of Comprehensive Income for each of the years in thethree-year period ended December 31, 2011 107

Consolidated and Combined Statements of Cash Flows for each of the years in the three-yearperiod ended December 31, 2011 108

Notes to Consolidated and Combined Financial Statements 109

Unaudited Quarterly Financial Data 153

2. FINANCIAL STATEMENT SCHEDULESIncluded in Part IV of this report:

Report of Independent Registered Public Accounting Firm on Financial StatementSchedules 165

Schedule I – Summary of Investments — Other than Investments in Related Parties as ofDecember 31, 2011 166

Schedule II – Condensed Financial Information of Registrant as of December 31, 2011 and2010, and for the years ended December 31, 2011 and 2010 and the periodfrom October 29, 2009 to December 31, 2009 167

Schedule III – Supplementary Insurance Information as of December 31, 2011 and 2010,and for each of the years in the three-year period ended December 31, 2011 174

Schedule IV – Reinsurance for each of the years in the three-year period endedDecember 31, 2011 175

3. EXHIBIT INDEX

An “Exhibit Index” has been filed as part of this Report beginning on the following page and isincorporated herein by reference.

Schedules other than those listed above are omitted because they are not required, are not material,are not applicable, or the required information is shown in the financial statements or notes thereto.

(b) Exhibit Index.

The agreements included as exhibits to this report are included to provide information regarding theterms of these agreements and are not intended to provide any other factual or disclosureinformation about the Company or its subsidiaries, our business or the other parties to these



agreements. These agreements may contain representations and warranties by each of the partiesto the applicable agreement. These representations and warranties have been made solely for thebenefit of the other parties to the applicable agreement and:

• should not in all instances be treated as categorical statements of fact, but rather as a way ofallocating the risk to one of the parties if those statements prove to be inaccurate;

• have been qualified by disclosures that were made to the other party in connection with thenegotiation of the application agreement, which disclosures are not necessarily reflected in theagreement;

• may apply standards of materiality in a way that is different from what may be viewed asmaterial to our investors; and

• were made only as of the date of the applicable agreement or such other date or dates as maybe specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as ofthe date they were made or at any other time, and should not be relied upon by investors.

ExhibitNumber Description

2.1 Securities Purchase Agreement dated February 8, 2010, by and among CitigroupInsurance Holding Corporation, Primerica, Inc., Warburg Pincus Private Equity X, L.P. andWarburg Pincus X Partners, L.P. (Incorporated by reference to Exhibit 2.1 to Primerica’sRegistration Statement on Form S-1 (File No. 333-162918))

3.1 Restated Certificate of Incorporation of the Registrant (Incorporated by reference toExhibit 3.1 to Primerica’s Quarterly Report on Form 10-Q for the quarter ended March 31,2010 (Commission File No. 001-34680))

3.2 Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2to Primerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010(Commission File No. 001-34680))

4.1 Warrant to purchase 3,975,914 shares of common stock dated as of April 15, 2010(Incorporated by reference to Exhibit 4.1 to Primerica’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2010 (Commission File No. 001-34680))

4.2 Warrant to purchase 127,196 shares of common stock dated as of April 15, 2010(Incorporated by reference to Exhibit 4.2 to Primerica’s Quarterly Report on Form 10-Qfor the quarter ended March 31, 2010 (Commission File No. 001-34680))

4.3 Note Agreement dated April 1, 2010 between the Registrant, the Guarantors namedtherein and Citigroup Insurance Holding Corporation (Incorporated by reference toExhibit 4.3 to Primerica’s Quarterly Report on Form 10-Q for the quarter ended March 31,2010 (Commission File No. 001-34680))

4.4 Note of the Registrant in favor of Citigroup Insurance Holding Company dated as ofApril 1, 2010 (Incorporated by reference to Exhibit 4.4 to Primerica’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2010 (Commission File No. 001-34680))

10.1 Intercompany Agreement dated as of April 7, 2010 by and between the Registrant andCitigroup Inc. (Incorporated by reference to Exhibit 10.1 to Primerica’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2010 (Commission File No. 001-34680))



10.2 Transition Services Agreement dated as of April 7, 2010 by and between the Registrant andCitigroup Inc. (Incorporated by reference to Exhibit 10.2 to Primerica’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2010 (Commission File No. 001-34680))

10.3 Tax Separation Agreement dated as of March 30, 2010 by and between the Registrant andCitigroup Inc. (Incorporated by reference to Exhibit 10.3 to Primerica’s Quarterly Report onForm 10-Q for the quarter ended March 31, 2010 (Commission File No. 001-34680))

10.4 Long-Term Services Agreement dated as of April 7, 2010 by and between CitiLife FinancialLimited and Primerica Life Insurance Company (Incorporated by reference to Exhibit 10.4 toPrimerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010(Commission File No. 001-34680))

10.5 80% Coinsurance Agreement dated March 31, 2010 by and between Primerica LifeInsurance Company and Prime Reinsurance Company, Inc. (Incorporated by reference toExhibit 10.5 to Primerica’s Quarterly Report on Form 10-Q for the quarter ended March 31,2010 (Commission File No. 001-34680))

10.6 10% Coinsurance Agreement dated March 31, 2010 by and between Primerica Life InsuranceCompany and Prime Reinsurance Company, Inc. (Incorporated by reference to Exhibit 10.6to Primerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010(Commission File No. 001-34680))

10.7 80% Coinsurance Trust Agreement dated March 29, 2010 among Primerica Life InsuranceCompany, Prime Reinsurance Company, Inc. and The Bank of New York Mellon(Incorporated by reference to Exhibit 10.7 to Primerica’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2010 (Commission File No. 001-34680))

10.8 10% Coinsurance Economic Trust Agreement dated March 29, 2010 among Primerica LifeInsurance Company, Prime Reinsurance Company, Inc. and The Bank of New York Mellon(Incorporated by reference to Exhibit 10.8 to Primerica’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2010 (Commission File No. 001-34680))

10.9 10% Coinsurance Excess Trust Agreement dated March 29, 2010 among Primerica LifeInsurance Company, Prime Reinsurance Company, Inc. and The Bank of New York Mellon(Incorporated by reference to Exhibit 10.9 to Primerica’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2010 (Commission File No. 001-34680))

10.10 Capital Maintenance Agreement dated March 31, 2010 by and between Citigroup Inc. andPrime Reinsurance Company, Inc. (Incorporated by reference to Exhibit 10.10 to Primerica’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2010(Commission File No. 001-34680))

10.11 90% Coinsurance Agreement dated March 31, 2010 by and between National Benefit LifeInsurance Company and American Health and Life Insurance Company (Incorporated byreference to Exhibit 10.11 to Primerica’s Quarterly Report on Form 10-Q for the quarterended March 31, 2010 (Commission File No. 001-34680))

10.12 Trust Agreement dated March 29, 2010 among National Benefit Life Insurance Company,American Health and Life Insurance Company and The Bank of New York Mellon(Incorporated by reference to Exhibit 10.12 to Primerica’s Quarterly Report on Form 10-Q forthe quarter ended March 31, 2010 (Commission File No. 001-34680))



10.13 Coinsurance Agreement dated March 31, 2010 by and between Primerica Life InsuranceCompany of Canada and Financial Reassurance Company 2010, Ltd. (Incorporated byreference to Exhibit 10.13 to Primerica’s Quarterly Report on Form 10-Q for the quarterended March 31, 2010 (Commission File No. 001-34680))

10.14 Common Stock Exchange Agreement dated as of April 15, 2010 among the Registrant,Warburg Pincus LLC and Warburg Pincus & Co. (Incorporated by reference to Exhibit10.39 to Primerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010(Commission File No. 001-34680))

10.15 Registration Rights Agreement dated as of April 7, 2010 by and among CitigroupInsurance Holding Corporation, Warburg Pincus Private Equity X, L.P., Warburg Pincus XPartners, L.P. and the Registrant (Incorporated by reference to Exhibit 10.40 toPrimerica’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010(Commission File No. 001-34680))

10.16 Monitoring and Reporting Agreement dated as of March 31, 2010 by and among PrimericaLife Insurance Company and Prime Reinsurance Company, Inc. (Incorporated by referenceto Exhibit 10.41 to Primerica’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2010 (Commission File No. 001-34680))

10.17 Monitoring and Reporting Agreement dated as of March 31, 2010 by and among NationalBenefit Life Insurance Company and American Health and Life Insurance Company(Incorporated by reference to Exhibit 10.42 to Primerica’s Quarterly Report on Form 10-Qfor the quarter ended March 31, 2010 (Commission File No. 001-34680))

10.18 Monitoring and Reporting Agreement dated as of March 31, 2010 by and among PrimericaLife Insurance Company of Canada and Financial Reassurance Company 2010 Ltd.(Incorporated by reference to Exhibit 10.43 to Primerica’s Quarterly Report on Form 10-Qfor the quarter ended March 31, 2010 (Commission File No. 001-34680))

10.19† Occupancy Services Agreement dated as of April 7, 2010, between National Benefit LifeInsurance Company and Citibank, N.A.

10.20† Amendment No. 1 dated as of October 7, 2011 to Occupancy Services Agreement dated asof April 7, 2010, between National Benefit Life Insurance Company and Citibank, N.A.

10.21 Primerica, Inc. Stock Purchase Plan for Agents and Employees (Incorporated by referenceto Exhibit 10.45 to Primerica’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2010 (Commission File No. 001-34680))

10.22*† Primerica, Inc. Amended and Restated 2010 Omnibus Incentive Plan

10.23*† Form of Restricted Stock Award Agreement under the Primerica, Inc. 2010 OmnibusIncentive Plan

10.24† Form of Director Restricted Stock Award Agreement

10.25* Form of Restricted Stock Award Agreement for Messrs. Addison and R. Williams(Incorporated by reference to Exhibit 10.47 to Primerica’s Registration Statement onForm S-1 (File No. 333-162918))

10.26* Form of Indemnification Agreement for Directors and Officers. (Incorporated by referenceto Exhibit 10.48 to Primerica’s Registration Statement on Form S-1 (File No. 333-162918))



10.27* Employment Agreement, dated as of August 19, 2010, between the Registrant andMr. D. Richard Williams. (Incorporated by reference to Exhibit 99.1 to Primerica’s CurrentReport on Form 8-K dated August 19, 2010 (Commission File No. 001-34680)

10.28* Employment Agreement, dated as of August 19, 2010, between the Registrant andMr. John A. Addison, Jr. (Incorporated by reference to Exhibit 99.2 to Primerica’sCurrent Report on Form 8-K dated August 19, 2010 (Commission File No. 001-34680)

10.29* Employment Agreement, dated as of August 19, 2010, between the Registrant andMr. Peter W. Schneider (Incorporated by reference to Exhibit 99.3 to Primerica’s CurrentReport on Form 8-K dated August 19, 2010 (Commission File No. 001-34680)

10.30* Employment Agreement, dated as of August 19, 2010, between the Registrant andMr. Glenn J. Williams (Incorporated by reference to Exhibit 99.4 to Primerica’s CurrentReport on Form 8-K dated August 19, 2010 (Commission File No. 001-34680)

10.31* Employment Agreement, dated as of August 19, 2010, between the Registrant andMs. Alison S. Rand (Incorporated by reference to Exhibit 99.5 to Primerica’s CurrentReport on Form 8-K dated August 19, 2010 (Commission File No. 001-34680)

10.32* Employment Agreement, dated as of August 19, 2010, between the Registrant andMr. Gregory C. Pitts (Incorporated by reference to Exhibit 99.6 to Primerica’s CurrentReport on Form 8-K dated August 19, 2010 (Commission File No. 001-34680)

10.33 Nonemployee Directors’ Deferred Compensation Plan, effective as of January 1, 2011,adopted on November 10, 2010 (Incorporated by reference to Exhibit 10.31 to AnnualReport on Form 10-K for the year ended December 31, 2010 (Commission File No. 001-34680)

10.34† Share Repurchase Agreement dated as of November 1, 2011, between the Registrant andCitigroup Insurance Holding Corporation

21.1† Subsidiaries of the Registrant

23.1† Consent of KPMG LLP

31.1† Rule 13a-14(a)/15d-14(a) Certification, executed by D. Richard Williams, Chairman of theBoard and Co-Chief Executive Officer

31.2† Rule 13a-14(a)/15d-14(a) Certification, executed by John A. Addison, Jr., Chairman ofPrimerica Distribution and Co-Chief Executive Officer

31.3† Rule 13a-14(a)/15d-14(a) Certification, executed by Alison S. Rand, Executive VicePresident and Chief Financial Officer

32.1† Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63of Title 18 of the United States Code (18 U.S.C. 1350), executed by D. Richard Williams,Chairman of the Board and Co-Chief Executive Officer, John A. Addison, Jr., Chairman ofPrimerica Distribution and Co-Chief Executive Officer, and Alison S. Rand, Executive VicePresident and Chief Financial Officer

101.INS**† XBRL Instance Document (1)

101.SCH**† XBRL Taxonomy Extension Schema

101.CAL**† XBRL Taxonomy Extension Calculation Linkbase



101.DEF**† XBRL Taxonomy Extension Definition Linkbase

101.LAB**† XBRL Taxonomy Extension Label Linkbase

101.PRE**† XBRL Taxonomy Extension Presentation Linkbase

† Filed herewith.* Identifies a management contract or compensatory plan or arrangement.** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a

registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, aredeemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise arenot subject to liability under those sections. The financial information contained in the XBRL(eXtensible BusinessReporting Language)-related documents is “unaudited” and “unreviewed”.

(1) Includes the following materials contained in this Annual Report on Form 10-K for the year ended December 31, 2011,formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated and Combined Statements of Income,(iii) Consolidated and Combined Statements of Stockholders’ Equity, (iv) Consolidated and Combined Statements ofComprehensive Income, (v) Consolidated and Combined Statements of Cash Flows, (vi) Notes to Consolidated andCombined Financial Statements.



(c) Financial Statement Schedules.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ONFINANCIAL STATEMENT SCHEDULES


Under date of February 28, 2012, we reported on the consolidated balance sheets of Primerica, Inc.and subsidiaries (the Company) as of December 31, 2011 and 2010, and the related consolidated andcombined statements of income, stockholders’ equity, comprehensive income, and cash flows foreach of the years in the three-year period ended December 31, 2011. In connection with our audits ofthe aforementioned consolidated and combined financial statements, we also audited the relatedfinancial statement schedules. These financial statement schedules are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statementschedules based on our audits.

In our opinion, such financial statement schedules, when considered in relation to the basicconsolidated and combined financial statements taken as a whole, present fairly, in all materialrespects, the information set forth therein.

As discussed in note 1 to the consolidated and combined financial statements, in April 2010 theCompany completed its initial public offering and a series of related transactions. Also as discussedin note 1 to the consolidated and combined financial statements, the Company adopted theprovisions of FASB Staff Position Financial Accounting Standard No. 115-2 and Financial AccountingStandard No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (includedin FASB ASC Topic 320, Investments — Debt and Equity Securities) as of January 1, 2009.

/s/ KPMG LLP




Schedule ISummary of Investments — Other Than Investments in Related Parties

PRIMERICA, INC.

As of December 31, 2011

Type of Investment Cost Value

Amount at whichshown in thebalance sheet

(In thousands)

Fixed maturities:

Bonds:United States Government and government

agencies and authorities $ 10,050 $ 10,986 $ 10,986

States, municipalities and political subdivisions 28,264 30,935 30,935

Foreign governments 97,206 111,845 111,845

Public utilities — — —

Convertibles and bonds with warrants attached 11,850 12,099 12,099

All other corporate bonds 1,672,318 1,801,846 1,801,846

Certificates of deposit 75 75 75

Redeemable preferred stocks 1,389 1,010 1,010

Total fixed maturities 1,821,152 1,968,796 1,968,796

Equity securities:Common stocks:

Public utilities 2,462 3,618 3,618

Banks, trusts and insurance companies 5,492 7,698 7,698

Industrial, miscellaneous and all other 13,290 15,199 15,199

Nonredeemable preferred stocks 85 197 197

Total equity securities 21,329 26,712 26,712

Mortgage loans on real estate — — —

Real estate — — —

Policy loans 25,982 25,982 25,982

Other long-term investments — — —

Short-term investments 14 14 14

Total investments $1,868,477 $2,021,504 $2,021,504

See the accompanying report of independent registered public accounting firm.



Schedule IICondensed Financial Information of Registrant

PRIMERICA, INC. (Parent Only)Condensed Balance Sheets

December 31,

2011 2010

(In thousands)

AssetsInvestments:

Fixed-maturity securities available for sale, at fair value (amortizedcost: $23,077 in 2011 and $0 in 2010) $ 23,069 $ —

Total investments 23,069 —Cash and cash equivalents 28,093 250Due from affiliates* 257 —Other receivables 112 —Income taxes receivable from subsidiaries* — 1,640Investment in subsidiaries* 1,683,682 1,738,699Other assets 28 —

Total assets $ 1,735,241 $1,740,589

Liabilities and Stockholders’ EquityLiabilities:Note payable $ 300,000 $ 300,000Current tax payable 2,696 —Deferred tax payable 1,477 —Due to affiliates* 247 897Interest payable 7,608 7,608Other liabilities 572 592Commitments and contingent liabilities (see Note F)

Total liabilities 312,600 309,097

Stockholders’ equity:Common stock ($.01 par value, authorized 500,000 in 2011 and 2010 and

issued 64,883 shares in 2011 and 72,843 shares in 2010) 649 728Paid-in capital 707,912 883,168Retained earnings 566,021 395,057Accumulated other comprehensive income, net of income tax 148,059 152,539

Total stockholders’ equity 1,422,641 1,431,492

Total liabilities and stockholders’ equity $ 1,735,241 $1,740,589

* Eliminated in consolidation.

See the accompanying notes to condensed financial statements.See the accompanying report of independent registered public accounting firm.




PRIMERICA, INC. (Parent Only)Condensed Statements of Income


Period fromOctober 29,

2009 toDecember 31,

20092011 2010

(In thousands)

Revenues:

Dividends from subsidiaries* $275,250 $ 7,313 $ —

Net investment income 61 — —

Realized investment losses, including other-than-temporaryimpairment losses (5) — —

Other, net — 18 —

Total revenues 275,306 7,331 —

Expenses:

Interest expense 16,500 12,375 —

Other operating expenses 8,554 8,936 —

Total expenses 25,054 21,311 —

Income (loss) before income taxes 250,252 (13,980) —

Income tax benefit (7,131) (8,281) —

Income (loss) before equity in undistributed earnings ofsubsidiaries 257,383 (5,699) —

Equity in undistributed earnings of subsidiaries* (79,107) 120,191 —

Net income $ 178,276 $114,492 $ —






PRIMERICA, INC. (Parent Only)Condensed Statements of Comprehensive Income



2009 toDecember 31,

20092011 2010

(In thousands)

Net income $178,276 $ 114,492 $ —

Other comprehensive (loss) income before income taxes:

Unrealized investment gains (losses):

Equity in unrealized holding gains on investments securitiesheld by subsidiaries (625) 15,027 —

Change in unrealized losses on investment securities (13) — —

Reclassification adjustment for realized investment lossesincluded in net income 5 — —

Foreign currency translation adjustments:

Equity in unrealized foreign currency translation gains ofsubsidiaries (3,850) 3,416 —

Total other comprehensive (loss) income before incometaxes (4,483) 18,443 —

Income tax benefit related to items of other comprehensive(loss) income (3) — —

Other comprehensive (loss) income, net of income taxes (4,480) 18,443 —

Total comprehensive income $173,796 $132,935 $ —





PRIMERICA, INC. (Parent Only)Condensed Statements of Cash Flows



2009 toDecember 31,

20092011 2010

(In thousands)Cash flows from operating activities:Net income $ 178,276 $ 114,492 $ —Adjustments to reconcile net income to cash provided by

operating activities:Equity in undistributed earnings of subsidiaries* 79,107 (120,191) —Non-cash securities dividends received from

subsidiaries* (21,742) — —Realized investment losses, including other-than-

temporary impairments 5 — —Accretion and amortization of investments 40 — —Share-based compensation (3,913) (6) —Deferred tax provision 2,533 — —Change in accrued and other income taxes 3,297 (1,640) —Change in due to/from affiliates* (907) 897 —Change in other receivables (112) — —Change in interest payable — 7,608 —Change in other liabilities (21) 592 —Change in other assets (28) — —

Net cash provided by operating activities 236,535 1,752 —Cash flows from investing activities:Available-for-sale investments sold, matured or called:

Fixed-maturity securities—matured or called 5,210 — —Available-for-sale investments acquired:

Fixed-maturity securities (6,590) — —

Net cash used in investing activities (1,380) — —Cash flows from financing activities:Repurchase of shares held by Citi (200,000) — —Dividends (7,312) (1,502) —

Net cash used in financing activities (207,312) (1,502) —Change in cash and cash equivalents 27,843 250 —

Cash and cash equivalents, beginning of period 250 — —

Cash and cash equivalents, end of period $ 28,093 $ 250 $ —

Supplemental disclosures of cash flow information:Interest paid $ 16,500 $ 4,767 $ —

Non-cash activities:Share-based compensation $ 29,443 $ 44,023 $ —Net contributions from Citi 1,573 1,728,574 —






PRIMERICA, INC. (Parent Only)Notes to Condensed Financial Statements

(A) Corporate Organization

Primerica, Inc. was incorporated in Delaware onOctober 29, 2009 by Citi to serve as a holdingcompany for the life insurance and financialproduct distribution businesses that we haveoperated for more than 30 years. At such time,we issued 100 shares of common stock to Citi.These businesses, which prior to April 1, 2010were wholly owned indirect subsidiaries of Citi,were transferred to us on April 1, 2010. Inconjunction with our reorganization, we issuedto a wholly owned subsidiary of Citi(i) 74,999,900 shares of our common stock (ofwhich 24,564,000 shares of common stockwere subsequently sold by Citi in the IPOcompleted in April 2010; 16,412,440 shares ofcommon stock were subsequently sold by Citi inApril 2010 to certain private equity fundsmanaged by Warburg Pincus LLC (WarburgPincus) (the private sale); and 5,021,412 sharesof common stock were immediately contributedback to us for equity awards granted to ouremployees and sales force leaders inconnection with the IPO), (ii) warrants topurchase from us an aggregate of 4,103,110shares of our common stock (which weresubsequently transferred by Citi to WarburgPincus pursuant to the private sale), and (iii) a$300.0 million note payable due on March 31,2015 bearing interest at an annual rate of 5.5%(the Citi note). Prior to our corporatereorganization, we had no material assets orliabilities. Upon completion of the corporatereorganization, we became a holding companywith our primary asset being the capital stockof our operating subsidiaries and our primaryliability being the Citi note.

(B) Basis of Presentation

These condensed financial statements reflectthe results of operations, financial position andcash flows for the parent company. We prepareour financial statements in accordance withGAAP. These principles are establishedprimarily by the FASB. The preparation offinancial statements in conformity with GAAPrequires us to make estimates and assumptionsthat affect financial statement balances,revenues and expenses and cash flows as wellas the disclosure of contingent assets andliabilities. Management considers availablefacts and knowledge of existing circumstanceswhen establishing the estimates included in ourfinancial statements.

The most significant item that involves agreater degree of accounting estimates subjectto change in the future is determination of ourinvestments in subsidiaries. Estimates for thisand other items are subject to change and arereassessed by management in accordance withGAAP. Actual results could differ from thoseestimates.

The accompanying condensed financialstatements should be read in conjunction withthe consolidated and combined financialstatements and notes thereto of Primerica, Inc.and Subsidiaries included in Part II, Item 8 ofthis report.



(C) Note Payable

In April 2010, we issued to Citi a $300.0 millionnote as part of our corporate reorganization inwhich Citi transferred to us the businesses thatcomprise our operations. Prior to the issuanceof the Citi note, we had no outstanding debt.The Citi note bears interest at an annual rate of5.5%, payable semi-annually in arrears onJanuary 15 and July 15, and matures March 31,2015. Citi may participate out, assign or sell allor any portion of the note at any time.

We have the option to redeem the Citi note inwhole or in part at a redemption price equal to100% of the principal amount to be redeemedplus accrued and unpaid interest to the date ofredemption. In the event of a change in control,the holder of the Citi note has the right torequire us to repurchase it at a price equal to101% of the outstanding principal amount plusaccrued and unpaid interest.

The Citi note also requires us to use ourcommercially reasonable efforts to arrange andconsummate an offering of investment-gradedebt securities, trust preferred securities,surplus notes, hybrid securities or convertibledebt that generates sufficient net cashproceeds (after deducting fees and expenses)to repay the note in full at certain mutuallyagreeable dates, based on certain conditions.

We were in compliance with all of the covenantsof the Citi note at December 31, 2011. No eventsof default or defaults under the Citi noteoccurred during 2011.

(D) Income Taxes

In conjunction with the IPO and the private sale,we made elections under section 338(h)(10) ofthe Internal Revenue Code, which has resultedin changes to the deferred tax balances of ourdirect and indirect wholly owned subsidiariesand reduced our stockholders’ equity by $174.7million.

Prior to the IPO, our federal income tax returnwas included as part of Citi’s consolidated

federal income tax return. On March 30, 2010,in anticipation of our corporate reorganization,we entered into a tax separation agreementwith Citi and prepaid our estimated tax liabilityto Citi. In accordance with the tax separationagreement, Citi will indemnify the Company andits subsidiaries against any consolidated,combined, affiliated, unitary or similar federal,state or local income tax liability for anytaxable period ending on or before the closingdate of the IPO. The advance tax payments paidto Citi exceeded our subsidiaries’ actual taxliabilities. As a result, our subsidiaries reducedtheir tax assets and recorded the excesspayments as a return of capital.

As a result of our corporate reorganization, wehave direct ownership of a group of controlledforeign corporations in Canada. We haveasserted a position of permanent reinvestmentfor the difference in share basis and certainoperational earnings. It is not practicable toestimate the amount of deferred taxesassociated with this difference at this time. Forthose operational earnings for which we havenot made a permanent reinvestment assertion,we have established a deferred tax liability ofapproximately $2.6 million to account for theU.S. tax liability that will occur uponrepatriation of such earnings. The Company hasno other material deferred tax liabilities.

As of December 31, 2011, the Company has statenet operating losses resulting in a deferred taxasset of approximately $1.0 million, which areavailable for use through 2030. The Companyhas no other material deferred tax assets.

There was no deferred tax asset valuationallowance at December 31, 2011. In assessingthe realizability of deferred tax assets,management considers whether it is more likelythan not that some portion or all of thedeferred tax assets will not be realized.Management considers the scheduled reversalof deferred tax liabilities, projected futuretaxable income, carryback and carryforwardperiods, and tax planning strategies in makingthis assessment. Management believes that it ismore likely than not that the results of future



operations will generate sufficient taxableincome to realize the deferred tax assets.

The earliest tax year for which the Companymay be examined is 2010. However, theCompany’s subsidiaries are open toexamination in the United States for the years2006 and thereafter, and in Canada for theyears 2005 and thereafter.

(E) Dividends

Primerica, Inc. received dividends from itsnon-life subsidiaries and life insurancesubsidiaries of approximately $75.3 million and$200 million, respectively, in 2011. In 2010, theCompany received dividends of approximately$7.3 million from its non-life subsidiaries. Nodividends were received in 2010 from the lifeinsurance subsidiaries. Primerica, Inc. had nosubsidiaries until the corporate reorganizationin April 2010.

(F) Commitments and ContingentLiabilities

The Company is involved from time to time inlegal disputes, regulatory inquiries andarbitration proceedings in the normal course ofbusiness. These disputes are subject touncertainties, including the large and/orindeterminate amounts sought in certain ofthese matters and the inherent unpredictabilityof litigation. As such, the Company is unable toestimate the possible loss or range of loss thatmay result from these matters. While it ispossible that an adverse outcome in certaincases could have a material adverse effectupon the Company’s financial position, basedon information currently known by theCompany’s management, in its opinion, theoutcomes of such pending investigations andlegal proceedings are not likely to have such aneffect.



Schedule IIISupplementary Insurance Information

PRIMERICA, INC.

Deferred policyacquisition costs

Futurepolicy

benefitsUnearnedpremiums

Other policybenefits and

claims payableSeparate account

liabilities

(In thousands)December 31, 2011:Term Life Insurance $ 933,928 $4,445,472 $ — $ 219,666 $ —Investment and Savings Products 66,134 — — — 2,407,515Corporate and Other Distributed

Products 50,575 169,388 7,022 22,088 1,083

Total $1,050,637 $ 4,614,860 $7,022 $ 241,754 $2,408,598

December 31, 2010:Term Life Insurance $ 734,187 $4,237,487 $ — $ 210,595 $ —Investment and Savings Products 68,254 — — — 2,445,590Corporate and Other Distributed

Products 50,770 171,696 5,563 19,300 1,196

Total $ 853,211 $ 4,409,183 $5,563 $229,895 $2,446,786

Premiumrevenue

Net investmentincome

Benefitsand claims

Amortization ofdeferred policy

acquisitioncosts

Other operatingexpenses

Premiumswritten

(In thousands)Year ended December 31,

2011:Term Life Insurance $ 460,641 $ 62,688 $ 197,159 $103,553 $ 59,674 $ —Investment and Savings

Products — — — 12,482 267,145 —Corporate and Other

Distributed Products 65,751 45,913 45,537 3,313 138,386 41,891

Total $ 526,392 $108,601 $242,696 $ 119,348 $465,205 $ 41,891

Year ended December 31,2010:

Term Life Insurance $ 664,668 $ 110,633 $ 277,653 $ 156,312 $ 75,559 $ —Investment and Savings



Total $ 730,707 $ 165,111 $ 317,703 $168,035 $476,982 $40,429

Year ended December 31,2009:

Term Life Insurance $ 1,434,197 $274,212 $559,038 $ 371,663 $ 152,352 $ —Investment and Savings



Total $1,502,027 $351,326 $600,273 $ 381,291 $478,882 $40,849




Schedule IVReinsurance

PRIMERICA, INC.

Year ended December 31, 2011

Gross amountCeded to other

companies

Assumedfrom othercompanies Net amount

Percentageof amountassumed

to net


Life insurance in force $ 669,938,841 $ 596,975,143 $— $ 72,963,698 — %

Premiums:

Life insurance $ 2,185,791 $ 1,701,269 $— $ 484,522 — %

Accident and healthinsurance 43,676 1,806 — 41,870 — %

Total premiums $ 2,229,467 $ 1,703,075 $— $ 526,392 — %



companies



to net


Life insurance in force $ 662,135,294 $600,806,666 $— $ 61,328,628 — %

Premiums:

Life insurance $ 2,138,912 $ 1,448,694 $— $ 690,218 — %

Accident and healthinsurance 42,162 1,673 — 40,489 — %

Total premiums $ 2,181,074 $ 1,450,367 $— $ 730,707 — %



companies



to net


Life insurance in force $655,659,625 $ 421,621,165 $— $234,038,460 — %

Premiums:

Life insurance $ 2,069,009 $ 610,020 $— $ 1,458,989 — %

Accident and healthinsurance 43,772 734 — 43,038 — %

Total premiums $ 2,112,781 $ 610,754 $— $ 1,502,027 — %



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

Primerica, Inc.

By: /s/ Alison S. Rand February 28, 2012

Alison S. RandExecutive Vice President andChief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signedbelow by the following persons on behalf of the registrant and in the capacities and on the datesindicated.

/s/ D. Richard Williams

D. Richard Williams

Chairman of the Board andCo-Chief Executive Officer(Principal Executive Officer) February 27, 2012

/s/ John A. Addison, Jr.

John A. Addison, Jr.

Chairman of PrimericaDistribution and Co-ChiefExecutive Officer (PrincipalExecutive Officer) February 27, 2012

/s/ Alison S. Rand

Alison S. Rand

Executive Vice President andChief Financial Officer(Principal Financial andAccounting Officer) February 28, 2012

/s/ Joel M. Babbit

Joel M. Babbit

Director February 27, 2012

/s/ P. George Benson

P. George Benson


/s/ Michael E. Martin

Michael E. Martin


/s/ Mark Mason

Mark Mason


/s/ Robert F. McCullough

Robert F. McCullough


/s/ Barbara A. Yastine

Barbara A. Yastine


/s/ Daniel Zilberman

Daniel Zilberman



Annual MeetingThe annual meeting of stockholders of Primerica, Inc. will be held on May 16, 2012, at 10:00 a.m.

Primerica TV Studio Building 4 3100 Breckinridge Blvd. Duluth, GA 30099

Corporate OfficePrimerica, Inc.3120 Breckinridge Blvd.Duluth, GA 30099(770) 381-1000www.primerica.com

Investor ContactInvestor RelationsPrimerica, Inc.3120 Breckinridge Blvd.Duluth, GA 30099(866) [email protected]

Media ContactCorporate CommunicationsPrimerica, Inc.3120 Breckinridge Blvd.Duluth, GA 30099(770) 564-6329

Form 10-KCopies of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, including finan-cial statements, are available on the Company’s Investor Relations website at www.investors.primerica.com or by written request to:

Investor RelationsPrimerica, Inc.3120 Breckinridge Blvd.Duluth, GA 30099

Common StockTrading Symbol: PRINew York Stock Exchange

Transfers Agent and RegistrarAmerican Stock TransferOperations Center6201 15th AvenueBrooklyn, NY 11219Toll Free Number: (800) 937-5449http://www.amstock.com/shareholder/shareholder_services.asp

TTY for Hearing Impaired: (866) 703-9077Foreign Stockholders: (718) 921-8124TTY Foreign Stockholders: (718) 921-8386

Stockholder Information

© 2012 Primerica / 43545 / 12PFS111-2 / 3.12