Primerica Annual Report 2016

← All annual reports

FY2016 Annual Report · Primerica

Loading PDF…

2016 Annual Report

F I N A N C I A L H I G H L I G H T S
(in millions, except per share amounts and as noted)

GAAP

Total Revenues

Net Income

Stockholders’ Equity

Earnings Per Diluted Share2

Book Value Per Share2

Term Life Net Premium

End of Period Client Asset Values (in billions)

Weighted Average Shares Used to Calculate Diluted EPS

47.5

Common Shares Repurchased

End of Period Share Count3

Cash Dividends Declared Per Common Share

Market Price Per Share at Year End

Total Shareholder Return

Debt-to-Capital4

Operating5

Operating Revenues

Net Operating Income

Diluted Operating Earnings Per Share2

Net Operating Income Return

on Adjusted Stockholders’ Equity

2016

2015

Change1

$1,519.1

$1,404.2

$219.4

$189.9

$1,221.4

$1,145.8

8.2%

15.6%

6.6%

24.0%

12.6%

12.9%

10.5%

-6.8%

-29.6%

-5.3%

9.4%

46.4%

$4.59

$26.71

$822.2

$52.34

3.0

45.7

$0.70

$69.15

48.3%

23.4%

$3.70

$23.72

$728.2

$47.35

50.9

4.3

48.3

$0.64

$47.23

-11.8%

24.5%

2016

2015

Change

$1,515.0

$1,405.9

$216.8

$4.53

19.0%

$191.1

$3.72

16.9%

7.8%

13.5%

21.7%

1 Certain variances are noted as “nm” to indicate not meaningful.
2 Percent change in per share calculations is calculated prior to rounding per share amounts.
3 Share count reflects outstanding common shares and excludes restricted stock units (RSUs).
4 Debt-to-capital is that of the parent company only. Capital in the debt-to-capital ratio includes stockholders’ equity and
the note payable.
5 A reconciliation of GAAP results to operating results can be found on our website at http://investors.primerica.com

D E A R F E L L O W S T O C K H O L D E R S

IN 2016, PRIMERICA HAD OUR BEST YEAR OF

PERFORMANCE AS A PUBLIC COMPANY WITH

OUTSTANDING RESULTS THROUGHOUT OUR BUSINESS.

As we celebrate our 40th year in business, we

are particularly proud to combine a long track

record of success with outstanding growth.

These results have positioned us for the future,

as we plan to harness the strong momentum

generated in 2016 to drive growth in 2017 and

beyond. Our large, diverse sales force and

dedicated home office team share a high level of

energy, focus, and commitment to our mission:

To create financially independent families. Our

competitive advantages position us to continue

delivering value to our stockholders.

M A K I N G A D I F F E R E N C E
F O R M I D D L E I N C O M E F A M I L I E S

SINCE OUR FOUNDING IN 1977, PRIMERICA HAS FOCUSED
ON SERVING MAIN STREET FAMILIES IN COMMUNITIES
ACROSS NORTH AMERICA.

Middle income households are often underserved
by financial services companies, resulting in a
tremendous unmet need. Our unique business model
and financial solutions allow us to satisfy this demand.

Our representatives take an educational approach
to helping their families, friends, and acquaintances
understand essential financial concepts and select the
appropriate solutions for their needs. Our business
is frequently conducted at our client’s home – often
at the kitchen table – rather than in an office. We
know our clients on a personal level, and the financial
tools we deploy give us unparalleled insight into the
financial goals of these families.

Every day, Primerica makes a difference in the
lives of middle income families. Our experience has
shown that term life insurance is the best insurance
option for our market, and Primerica now protects
approximately 5 million people in North America. In
2016, we paid a record $1.2 billion in life insurance
claims to beneficiaries when they needed assistance

the most. During the year, issued term life policies
grew 15% over 2015, and newly issued face amount
reached almost $90 billion. Our Term Life Insurance
segment revenues increased 13% and operating
income before income taxes grew 23% year-over-year.

In 2016, our Investment and Savings Products (ISP)
business positively impacted middle income families
by providing solid investment fundamentals through
an educational approach to investing. During the
year, we helped thousands of new clients with their
investment needs, and we had more than 2 million
client investment accounts at year-end. In 2016, our
ISP segment posted solid results despite strong prior-
year comparables and market volatility early in the
year. Total ISP product sales topped $5.5 billion and
ISP net flows were $975 million for the year. We ended
the year with a record $52 billion in client assets
under management. In addition, during 2016 we were
an active participant in the rulemaking process for
the U.S. Department of Labor’s Fiduciary Rule. Our
priority continues to be doing what’s best for our

Primerica representatives like Senior National Sales Director Jeff Fieldstad of
Henderson, NV meet with clients in their homes to educate them and provide
them the products and services they need for a better financial future.

DILUTED OPERATING

EARNINGS PER SHARE

DILUTED OPERATING

EARNINGS PER SHARE

DILUTED OPERATING

EARNINGS PER SHARE

$4.53

$3.72

$4.53

$3.72

$4.53

$3.72

$3.31

$2.90

2013

2014

2015

2016

2013

2014

2015

2016

annualized growth in

Operating EPS over

2013

2014

the last 4 years

annualized growth in

Operating EPS over

2015

2016

the last 4 years

annualized growth in

INVESTMENT & SAVINGS PRODUCTS

SALES AND CLIENT ASSET VALUES

INVESTMENT & SAVINGS PRODUCTS

(in billions)

SALES AND CLIENT ASSET VALUES

INVESTMENT & SAVINGS PRODUCTS

$52.34

(in billions)

SALES AND CLIENT ASSET VALUES

$48.66

$47.35

(in billions)

$52.34

$48.66

$5.68

$48.66

$5.68

$47.35

$5.86

$47.35

$5.86

$5.68

$5.86

$52.34

$5.59

$44.99

$5.21

$44.99

$5.21

2013

2014

2015

2016

Full Year Sales

Ending Client Asset Values

2013

2014

2015

2016

Full Year Sales

Ending Client Asset Values

2013

2014

2015

2016

Full Year Sales

Ending Client Asset Values

Operating EPS over

OPERATING REVENUES

the last 4 years

(in millions)

ANNUALIZED NET OPERATING INCOME RETURN

Investment & Savings Products

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

Corporate & Other Distributed Products

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

19.0%

14.7%

15.3%

16.9%

19.0%

2013

2014

2015

2016

2013

2014

2015

2016

2013

2014

2015

2016

SIZE OF LIFE LICENSED

SALES FORCE

SIZE OF LIFE LICENSED

(end of period)

SALES FORCE

(end of period)

SIZE OF LIFE LICENSED

SALES FORCE

(end of period)

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

19.0%

16.9%

14.7%

15.3%

OPERATING REVENUES

(in millions)

OPERATING REVENUES

(in millions)

OPERATING REVENUES

$1,405.9

(in millions)

$764.0

$1,515.0

$866.4

$1,515.0

$866.4

$1,515.0

$866.4

$1,405.9

$764.0

$1,405.9

$764.0

$521.3

$524.6

$511.1

$521.3

$524.6

$1,221.2

$627.5

$1,221.2

$627.5

$1,221.2

$627.5

$456.2

$137.5

$456.2

2013

$137.5

2013

$137.5

$1,337.4

$692.4

$1,337.4

$692.4

$1,337.4

$692.4

$511.1

$133.9

$511.1

2014

$133.9

2014

$133.9

$120.6

$521.3

2015

$120.6

2015

$120.6

$124.0

$524.6

2016

$124.0

2016

$124.0

2016

Term Life Insurance

Investment & Savings Products

Corporate & Other Distributed Products

Term Life Insurance

2013

Investment & Savings Products

2014

2015

Corporate & Other Distributed Products

Term Life Insurance

19.0%

16.9%

OPERATING REVENUES

(in millions)

$1,515.0

$866.4

$1,405.9

$764.0

$1,337.4

$692.4

$1,221.2

$627.5

$456.2

2015

$137.5

2013

$511.1

$521.3

$524.6

2016

$133.9

2014

$120.6

2015

$124.0

2016

Term Life Insurance

Investment & Savings Products

Corporate & Other Distributed Products

TERM LIFE ISSUED POLICIES AND
FACE AMOUNT IN FORCE
($ in billions / policy count in thousands)
TERM LIFE ISSUED POLICIES AND
FACE AMOUNT IN FORCE
DILUTED OPERATING
$1,337.4
($ in billions / policy count in thousands)
DILUTED OPERATING
TERM LIFE ISSUED POLICIES AND
EARNINGS PER SHARE
$1,221.2
EARNINGS PER SHARE
FACE AMOUNT IN FORCE
$692.4
$728.39
($ in billions / policy count in thousands)

$627.5

$1,515.0

$866.4

$1,405.9

$764.0

PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500
(1-Year 2016)
PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500
(1-Year 2016)
PRIMERICA’S TOTAL STOCKHOLDER
Primerica, Inc.
RETURN (TSR) VERSUS S&P 500
S&P 500
(1-Year 2016)

Primerica, Inc.

15.3%

INVESTMENT & SAVINGS PRODUCTS
INVESTMENT & SAVINGS PRODUCTS
SALES AND CLIENT ASSET VALUES
SALES AND CLIENT ASSET VALUES
(in billions)
(in billions)

$693.19

$681.93

$693.19

$3.72
$3.72

260.1

$681.93

$3.31
$3.31

$456.2

221.0

260.1

$728.39

$4.53
$4.53

$728.39

298.2

$511.1

$521.3

$524.6

298.2

$44.99
$44.99

$5.21
$5.21

$647.87

$2.90
$2.90

$647.87
214.6

214.6

S&P 500

$48.66
$48.66

Primerica, Inc.

$47.35
S&P 500
$47.35

14.7%
$52.34
$52.34

$5.68
$5.68

$5.86
$5.86

$5.59
$5.59

$137.5

221.0

2013

$133.9

2014

$120.6

2015

$124.0

2016

2013

2014

48%

12%

2014

2013

2013
2013
Policies Issued

2014
2014

Term Life Insurance

2015

2015
2015

2016

2016
2016

2013

2014

Investment & Savings Products
OPERATING REVENUES
2016
Corporate & Other Distributed Products
(in millions)

Term Life Face Amount in Force
annualized growth in
annualized growth in
Operating EPS over
Operating EPS over
the last 4 years
Term Life Face Amount in Force
the last 4 years
clients by offering them the help and choice they need
2015
to meet their investment goals.

Policies Issued

2014

2016

2015

2013

Policies Issued

Term Life Face Amount in Force

$1,405.9

$1,337.4

$764.0

$692.4

Over the past few years, we have focused on increasing
$1,221.2
the profile of our ISP business within our sales force
$627.5
and expanding our ISP product offerings. In the second
TERM LIFE ISSUED POLICIES AND
quarter of 2017, we plan to launch our new Primerica
TERM LIFE ISSUED POLICIES AND
FACE AMOUNT IN FORCE
Advisors Lifetime Investment Platform, which
FACE AMOUNT IN FORCE
($ in billions / policy count in thousands)
incorporates state-of-the-art technology and expands
($ in billions / policy count in thousands)
product offerings from leading investment strategists.
$511.1
$456.2
We’re excited about the opportunities to better serve
our clients with this new platform.

$521.3

$728.39
$728.39

$137.5

$133.9

$681.93
$681.93

$693.19
In 2016, we paid a record $1.2
$693.19
2015
2013
billion in life insurance claims to
$647.87
$647.87
beneficiaries when they needed
assistance the most.

Term Life Insurance

298.2
298.2

Investment & Savings Products

$120.6

2014

48%

Corporate & Other Distributed Products

260.1
260.1

2013
2013

2014
2014

12/31/15

2015
2015

3/31/16

2016
2016

6/30/16

9/30/16

12/31/16

2013

2014

2015

2016

Full Year Sales
Full Year Sales

ANNUALIZED NET OPERATING INCOME RETURN
12/31/15
ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

Ending Client Asset Values
Ending Client Asset Values
6/30/16

12/31/16

9/30/16

3/31/16

$1,515.0

12/31/15

3/31/16

6/30/16

9/30/16

12/31/16

$866.4

$524.6

$124.0

2016

19.0%

16.9%

14.7%

15.3%
PRIMERICA’S TOTAL STOCKHOLDER
116,827
SIZE OF LIFE LICENSED
PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500
2016
RETURN (TSR) VERSUS S&P 500
SALES FORCE
(1-Year 2016)
106,710
(1-Year 2016)
(end of period)
2015

Primerica, Inc.
Primerica, Inc.
S&P 500
S&P 500

98,358
2014

95,566
2013

2013

2014

2015

2016

48%
48%

SIZE OF LIFE LICENSED

SALES FORCE

(end of period)

DILUTED OPERATING

EARNINGS PER SHARE

$4.53

$3.72

$3.31

$2.90

INVESTMENT & SAVINGS PRODUCTS

SALES AND CLIENT ASSET VALUES

(in billions)

$52.34

$48.66

$47.35

$5.68

$5.86

$5.59

$44.99

$5.21

2013

2014

2015

2016

annualized growth in

Operating EPS over

the last 4 years

DILUTED OPERATING

EARNINGS PER SHARE

2013

2014

2015

2016

Full Year Sales

Ending Client Asset Values

INVESTMENT & SAVINGS PRODUCTS
SALES AND CLIENT ASSET VALUES

(in billions)

$52.34

$4.53

$48.66

$47.35

$44.99

$5.68

$5.86

$5.59

$5.21

PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500

(1-Year 2016)

Primerica, Inc.

S&P 500

2013

2014

2015

2016

Full Year Sales

Ending Client Asset Values

TERM LIFE ISSUED POLICIES AND

$2.90

FACE AMOUNT IN FORCE

($ in billions / policy count in thousands)

$3.72

$3.31

$728.39

2013

2014

2015

2016

$693.19

$681.93

annualized growth in

Operating EPS over

the last 4 years

$647.87

298.2

260.1

214.6

221.0

TERM LIFE ISSUED POLICIES AND

FACE AMOUNT IN FORCE

($ in billions / policy count in thousands)

PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500
(1-Year 2016)

Primerica, Inc.

S&P 500

2014
2014

2013
2013
12%
Policies Issued
Policies Issued

2015
2015

2016
2016

Term Life Face Amount in Force
Term Life Face Amount in Force

SIZE OF LIFE LICENSED
SALES FORCE
(end of period)

12%
12%

12/31/15
12/31/15

3/31/16
3/31/16

6/30/16
6/30/16

9/30/16
9/30/16

12/31/16
12/31/16

214.6
214.6

221.0
221.0

$728.39

$693.19

$681.93

$647.87

2013

2014

2015

2016

Policies Issued

Term Life Face Amount in Force

214.6

221.0

298.2

260.1

12/31/15

3/31/16

6/30/16

9/30/16

12/31/16

48%

12%

2013

2014

2015

2016

Policies Issued

Term Life Face Amount in Force

12/31/15

3/31/16

6/30/16

9/30/16

12/31/16

M A K I N G A D I F F E R E N C E
F O R O U R S T O C K H O L D E R S

IN ADDITION TO MAKING A DIFFERENCE IN THE LIVES
OF MAIN STREET FAMILIES, WE REMAIN COMMITTED TO
PRODUCING SOLID FINANCIAL PERFORMANCE IN OUR
TWO COMPLEMENTARY BUSINESSES AND INCREASING
STOCKHOLDER VALUE BY ACTIVELY DEPLOYING CAPITAL.

During the year, operating revenues from our Term
Life and ISP segments accounted for 57% and 35% of
total operating revenues, respectively. Our Term Life
business generates predictable long-term recurring
income that protects us against significant fluctuations
in the economy and market. Our distribution of
products in our ISP segment generates significant
recurring income with low underlying capital
requirements, producing a high rate of return.

Our strong and diversified cash flows have allowed
us to return a significant amount of our operating
earnings to stockholders. During 2016, we continued
optimizing capital by repurchasing $150 million
of our shares, which enabled the retirement of
approximately 6% of our common stock outstanding
as of December 31, 2015. We also increased our
annual dividend payout to $33 million during the year.
These combined efforts reflect our confidence in our

business and future prospects. We’re pleased to have
returned approximately 85% of operating earnings to
stockholders in 2016, including stockholder dividends.
We also achieved a 22% increase in operating
earnings per share (EPS) and operating return on
adjusted equity (ROAE) expanded to 19.0% in 2016
versus 16.9% in the prior year. Primerica delivered a
total stockholder return of 48%, including dividends,
significantly outpacing the total return of the S&P 500
in 2016.

Primerica has a strong balance sheet and conservative
portfolio composed of high quality invested assets.
Our reliance on investment returns is relatively low
compared with the industry with a ratio of invested
assets and cash to stockholders’ equity at 2.1x and
net investment income representing only 5% of our
operating revenues in 2016. Primerica Life Insurance
Company remains well positioned for future growth
with a risk-based capital (RBC) ratio in excess of 450%
at year end. Our financial strength was confirmed in
2016 when Standard & Poor’s, Moody’s, and A.M. Best
Company affirmed their strong ratings of Primerica,
Inc. and Primerica Life Insurance Company.

INVESTMENT & SAVINGS PRODUCTS
SALES AND CLIENT ASSET VALUES
(in billions)

DILUTED OPERATING
EARNINGS PER SHARE
DILUTED OPERATING
EARNINGS PER SHARE
$52.34
INVESTMENT & SAVINGS PRODUCTS
SALES AND CLIENT ASSET VALUES
(in billions)

$48.66

$47.35

$44.99

ANNUALIZED NET OPERATING INCOME RETURN
ANNUALIZED NET OPERATING INCOME RETURN
ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)
ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

$5.86

$5.68

$5.59
$52.34
INVESTMENT & SAVINGS PRODUCTS
15.3%
14.7%
15.3%
14.7%
SALES AND CLIENT ASSET VALUES
$2.90
(in billions)

$48.66

$47.35

$3.31

$5.21

$44.99

$3.72

$3.31

$3.72

16.9%
16.9%

$4.53

$2.90

$5.68
$48.66

$5.86

$47.35

$52.34

$5.59

$5.68
2014

$5.86
2015

2016
$5.59

$5.21

$44.99

2013

$5.21

Full Year Sales

2013

Ending Client Asset Values
2014
2013
2013

2014
2014

2015

2015
2015

2016

2016
2016

$4.53

19.0%
19.0%

$1,221.2

$627.5

2013

2014

2013

2014

2015

2016

2015

annualized growth in
Operating EPS over
the last 4 years
annualized growth in
Operating EPS over
the last 4 years

2016

Full Year Sales

Ending Client Asset Values

2013

2014

2015

2016

Full Year Sales

Ending Client Asset Values

SIZE OF LIFE LICENSED
SIZE OF LIFE LICENSED
SALES FORCE
SALES FORCE
(end of period)
(end of period)

PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500
TERM LIFE ISSUED POLICIES AND
(1-Year 2016)
FACE AMOUNT IN FORCE
TERM LIFE ISSUED POLICIES AND
($ in billions / policy count in thousands)
FACE AMOUNT IN FORCE
Primerica, Inc.
($ in billions / policy count in thousands)
PRIMERICA’S TOTAL STOCKHOLDER
S&P 500
RETURN (TSR) VERSUS S&P 500
(1-Year 2016)
PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500
(1-Year 2016)

$693.19

$728.39

Primerica, Inc.

$681.93

S&P 500
Primerica, Inc.

$647.87

$681.93

S&P 500

$647.87

214.6

221.0

48%

$728.39

$693.19

260.1

298.2

48%

298.2

48%

12%

$511.1

$137.5

Corporate & Other Distributed Products

$456.2

$137.5

2013

2014

2015

Term Life Insurance

$133.9

Investment & Savings Products

2014

Corporate & Other Distributed Products

$120.6

2015

$124.0

2016

$5.21

$1,405.9

OPERATING REVENUES
(in millions)

$1,221.2

$1,337.4

$764.0

$5.68

$866.4

$5.86

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

$627.5

16.9%

$456.2
$627.5

$1,337.4

$692.4

$1,221.2

$137.5

$627.5

2013
$456.2

2013

2014

2015

2016

Term Life Insurance

Investment & Savings Products

Full Year Sales

OPERATING REVENUES

INVESTMENT & SAVINGS PRODUCTS

SALES AND CLIENT ASSET VALUES

(in millions)

INVESTMENT & SAVINGS PRODUCTS

(in billions)

SALES AND CLIENT ASSET VALUES

$1,405.9

$1,337.4

OPERATING REVENUES

$48.66

$764.0

$44.99

$692.4

(in millions)

$44.99

(in billions)

$1,515.0

$866.4

$47.35

$48.66

$47.35

$5.68

$1,515.0

$5.86

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

OPERATING REVENUES

(in millions)

OPERATING REVENUES

(in millions)

ANNUALIZED NET OPERATING INCOME RETURN

19.0%

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

16.9%

$1,337.4

$1,405.9

14.7%

15.3%

$1,221.2

$627.5

$1,221.2

$692.4

$1,337.4

$692.4

$764.0

$1,405.9

$764.0

19.0%

$1,515.0

$866.4

$1,515.0

$866.4

$52.34

$5.59

14.7%

15.3%

$456.2

19.0%

16.9%

$456.2

$511.1

$521.3

$524.6

$511.1

$521.3

$524.6

2014

$137.5

2015

$133.9

2016

$120.6

2013

$137.5

2014

$133.9

Term Life Insurance

2014

2013

2015

$120.6

2015

Investment & Savings Products

$124.0

2016

$124.0

2016

2013

2014

2015

2016

Term Life Insurance

Corporate & Other Distributed Products

Investment & Savings Products

Corporate & Other Distributed Products

2013

2014

2015

2016

$692.4

$511.1

$5.21

$521.3

$524.6

$1,515.0

$866.4

$1,405.9

$764.0

$133.9

$511.1

2014

$120.6

$521.3

2015

$124.0

$524.6

2016

14.7%

15.3%

2013

$521.3

2014

$524.6

$133.9

$120.6

Full Year Sales

Ending Client Asset Values

2015

2016

Ending Client Asset Values

$124.0

2016

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

ANNUALIZED NET OPERATING INCOME RETURN

ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

19.0%

16.9%

14.7%

15.3%

2013

2014

2015

2016

SIZE OF LIFE LICENSED

SALES FORCE

SIZE OF LIFE LICENSED

(end of period)

SALES FORCE

(end of period)

SIZE OF LIFE LICENSED

SALES FORCE

PRIMERICA’S TOTAL STOCKHOLDER

(end of period)

RETURN (TSR) VERSUS S&P 500

PRIMERICA’S TOTAL STOCKHOLDER

(1-Year 2016)

RETURN (TSR) VERSUS S&P 500

Primerica, Inc.

(1-Year 2016)

SIZE OF LIFE LICENSED

SALES FORCE

S&P 500

SIZE OF LIFE LICENSED

(end of period)

Primerica, Inc.

S&P 500

SALES FORCE

(end of period)

48%

12%

12/31/15

3/31/16

6/30/16

9/30/16

12/31/16

Term Life Insurance

Investment & Savings Products

Corporate & Other Distributed Products

2013

2014

2015

2013
2013

2016
2014
2014

2015
2015

2016
2016

12/31/15

3/31/16

6/30/16

9/30/16

12%
12/31/16

12%

Term Life Face Amount in Force

2013

2014

2015

2016

12/31/15

3/31/16

6/30/16

9/30/16

12/31/16

Policies Issued

2013

2014

Term Life Face Amount in Force

2015

2016

2013

2014

2015

2016

Policies Issued

Term Life Face Amount in Force

Policies Issued

Term Life Face Amount in Force

12/31/15

3/31/16

6/30/16

9/30/16

12/31/16

SIZE OF LIFE LICENSED

SALES FORCE

(end of period)

INVESTMENT & SAVINGS PRODUCTS

SALES AND CLIENT ASSET VALUES

(in billions)

DILUTED OPERATING
EARNINGS PER SHARE

OPERATING REVENUES
OPERATING REVENUES
(in millions)
(in millions)

$52.34

DILUTED OPERATING
EARNINGS PER SHARE

$4.53

$5.68

$5.86

$5.59

$2.90

$3.31

$3.72
$1,221.2
$1,221.2
DILUTED OPERATING
$627.5
$627.5
EARNINGS PER SHARE

$1,337.4
$1,337.4
$692.4
$692.4

$4.53

$1,515.0
$1,515.0
$866.4
$866.4

$1,405.9
$1,405.9
$764.0
$764.0

2013

2014

2015

2016

annualized growth in

Operating EPS over

the last 4 years

2013

2014

2015

2016

Full Year Sales

Ending Client Asset Values

$3.31

$2.90

2013

2014

$2.90

2013

2014

$3.72

$456.2
$456.2

$3.72

$511.1
$511.1

$4.53

$521.3
$521.3

$524.6
$524.6

$120.6
$120.6
2015
2015

$124.0
$124.0
2016
2016

$3.31

2015
$137.5
$137.5
2013
2013

annualized growth in
Operating EPS over
the last 4 years

2016
$133.9
$133.9
2014
2014

Term Life Insurance
Term Life Insurance
Investment & Savings Products
Investment & Savings Products
Corporate & Other Distributed Products
Corporate & Other Distributed Products

2016

2015

annualized growth in
Operating EPS over
2014
2015
the last 4 years

2016

2013

PRIMERICA’S TOTAL STOCKHOLDER
PRIMERICA’S TOTAL STOCKHOLDER
RETURN (TSR) VERSUS S&P 500
RETURN (TSR) VERSUS S&P 500

TERM LIFE ISSUED POLICIES AND
annualized growth in
Operating EPS over
FACE AMOUNT IN FORCE
the last 4 years
($ in billions / policy count in thousands)

(1-Year 2016)

TERM LIFE ISSUED POLICIES AND
FACE AMOUNT IN FORCE
($ in billions / policy count in thousands)

ANNUALIZED NET OPERATING INCOME RETURN
ANNUALIZED NET OPERATING INCOME RETURN
ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)
ON ADJUSTED STOCKHOLDERS’ EQUITY (ROAE)

$728.39

TERM LIFE ISSUED POLICIES AND
FACE AMOUNT IN FORCE
($ in billions / policy count in thousands)

$681.93

$693.19

$647.87

48%
48%

19.0%
19.0%

$728.39
298.2
15.3%
15.3%

$728.39

16.9%
16.9%

14.7%
14.7%

$693.19
260.1

$681.93
221.0

$693.19

$681.93

214.6
$647.87

$647.87

12%
12%

221.0

214.6

298.2

260.1

221.0

DILUTED OPERATING

EARNINGS PER SHARE

$4.53

$3.72

$3.31

$2.90

$48.66

$47.35

$44.99

$5.21

DILUTED OPERATING

EARNINGS PER SHARE

$4.53

$3.72

$3.31

$2.90

TERM LIFE ISSUED POLICIES AND

FACE AMOUNT IN FORCE

($ in billions / policy count in thousands)

INVESTMENT & SAVINGS PRODUCTS

SALES AND CLIENT ASSET VALUES

(in billions)

$728.39

$52.34

$48.66

$681.93

$693.19

$47.35

$5.68

$5.86

298.2

$5.59

298.2

260.1

$44.99

$647.87

$5.21

214.6

221.0

2013

2014

2015

2016

annualized growth in

Operating EPS over

the last 4 years

2013

2014

2015

2016

2013

Full Year Sales

2014

2015

Ending Client Asset Values

2016

2015

Policies Issued

Term Life Face Amount in Force

OPERATING REVENUES

Primerica, Inc.

(in millions)

S&P 500

$1,515.0

$866.4

$1,405.9

$764.0

$1,337.4

$692.4

$1,221.2

$627.5

$456.2

$511.1

$521.3

$524.6

$137.5

2013

$133.9

2014

$120.6

2015

$124.0

2016

Term Life Insurance

12/31/15

3/31/16

Investment & Savings Products

6/30/16

Corporate & Other Distributed Products

TERM LIFE ISSUED POLICIES AND

FACE AMOUNT IN FORCE

($ in billions / policy count in thousands)

$728.39

$693.19

$681.93

$647.87

298.2

260.1

214.6

221.0

PRIMERICA’S TOTAL STOCKHOLDER

RETURN (TSR) VERSUS S&P 500

(1-Year 2016)

Primerica, Inc.

S&P 500

48%

12%

2013

2014

2015

2016

Policies Issued

Term Life Face Amount in Force

12/31/15

3/31/16

6/30/16

9/30/16

12/31/16

Policies Issued

9/30/16
9/30/16

12/31/16
12/31/16

O U R D I F F E R E N C E I S O U R P E O P L E

OUR ACHIEVEMENTS ARE THE RESULT OF THE
TREMENDOUS EFFORTS OF OUR SALES FORCE AND HOME
OFFICE TEAMMATES.

Our people are our key competitive advantage. To
continue growing our sales force year after year, we
strive to improve every facet of life insurance licensing,
including state and provincial processes, representative
education, and test preparation. Our objective is to
increase licensing success for the broader spectrum of
recruits who are coming into our business.

In 2016, we grew the size of our life-licensed sales force
to 116,827, a 9% increase year-over-year. It is exciting
to see that after 40 years in business, Primerica
continues to attract a large number of aspiring
entrepreneurs who are seeking a unique opportunity
to build their own financial services businesses.

In addition to the benefit of a larger sales force,
our focus on the needs of the middle market led to
increased productivity, which has remained at the
top of our historical range for seven quarters through
year-end 2016. As a result of both a larger sales force
and high productivity, our 15% growth in life insurance
policies issued in 2016 far exceeded the 1% increase

in application activity for individually underwritten life
insurance policies reported by MIB Life Index in 2016.

The size of our sales force alone is not the sole
differentiator between Primerica and our competition:
the leadership strength and experience of our sales
force and home office team truly set us apart. The
entrepreneurial men and women who lead our field
force provide vision, training, and motivation. Our
corporate senior leadership team – which averages over
30 years with the company – is committed to supporting
the sales force and providing strategic vision and
leadership for the company. Most importantly, our sales
force leaders and the home office team are in lockstep
in terms of understanding the company’s mission, goals,
and challenges, and we work together to meet the
needs of our clients and to drive business growth.

In 2016, we grew the size of our
life-licensed sales force to 116,827,
a 9% increase year-over-year.

Mercy Mburu, pictured above, works in the Meetings and Conventions
department at the Primerica Home Office. She has been a Primerica Home
Office employee for 14 years.

C O N T I N U I N G T O M A K E A D I F F E R E N C E

At our core, Primerica is a leadership company, and

we will continue to lead with great people, great

products, and the use of cutting-edge technology. We

excel at providing financial education and products

to Main Street families, and our commitment to that

market is unwavering. Thanks to the combined efforts

of our exceptional field leadership, our 116,827 life

insurance-licensed representatives, and the more than

2,000 people on our home office team, we are well

positioned to continue building long-term value for

all of our stakeholders in 2017 and for years to come.

Thank you for your continued investment in Primerica.

Sincerely,

Glenn J. Williams
Chief Executive Officer

E X E C U T I V E L E A D E R S H I P

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

Michael C. Adams
Chief Business Technology Officer

Alexis P. Ginn
General Counsel

Alison S. Rand
Chief Financial Officer

Chess E. Britt
Chief Marketing Officer

William A. Kelly
President of PFS Investments

Peter W. Schneider
President

Jeffrey S. Fendler
Chief Compliance and Risk Officer

Gregory C. Pitts
Chief Operating Officer

Glenn J. Williams
Chief Executive Officer

UNITED STATES
SECURITIES 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

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF

1934

For the fiscal year ended December 31, 2016
OR

For the transition period from

Commission File Number: 001-34680

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

Delaware
(State or other jurisdiction of incorporation or organization)
1 Primerica Parkway
Duluth, Georgia
(Address of principal executive offices)

27-1204330
(I.R.S. Employer Identification No.)

30099
(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
Common Stock, $0.01 Par Value

Name of each exchange on which registered
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 Securities
Act. È Yes ‘ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
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 the registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. È Yes ‘ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant 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 of this
chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, 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
Non-accelerated filer ‘ (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). ‘ Yes È No
The aggregate market value of the voting common equity held by non-affiliates of the registrant as of June 30,
2016, was $2,645,868,915. The number of shares of the registrant’s Common Stock outstanding at January 31,
2017, with $0.01 par value, was 45,700,523.

‘
Accelerated filer
Smaller reporting company ‘

Documents Incorporated By Reference
Certain information contained in the Proxy Statement for the Company’s Annual Meeting of Stockholders to be
held on May 17, 2017 is incorporated by reference into Part III hereof.

TABLE OF CONTENTS

PART I

Item 1.

Business

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Item 2.

Properties

Item 3.

Legal Proceedings

Item 4. Mine Safety Disclosures

Item X.

Executive Officers and Certain Significant Employees of the Registrant

PART II

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

Purchases of Equity Securities

Item 6.

Selected Financial Data

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

Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Financial Statements and Supplementary Data

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure

Item 9A. Controls and Procedures

Item 9B. Other Information

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Item 11. Executive Compensation

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

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

Item 14. Principal Accounting Fees and Services

PART IV

Item 15. Exhibits, Financial Statement Schedules

Signatures

Page

146

148

149

150

151

169

CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS

Investors are cautioned that certain statements
contained in this report as well as some
statements in periodic press releases and some
oral statements made by our officials during our
presentations are “forward-looking” statements.
Forward-looking statements include, without
limitation, any statement that may project,
indicate or imply future results, events,
performance or achievements, and may contain
the words “expect”, “intend”, “plan”, “anticipate”,
“estimate”, “believe”, “will be”, “will continue”,
“will likely result”, and similar expressions, or
future conditional verbs such as “may”, “will”,
“should”, “would”, and “could.” In addition, any
statement concerning future financial
performance (including future revenues,
earnings or growth rates), ongoing business
strategies or prospects, and possible actions
taken by us or our subsidiaries are also forward-
looking statements. These forward-looking
statements involve external risks and
uncertainties, including, but not limited to, those
described under the section entitled “Risk
Factors” included herein.

Forward-looking statements are based on
current expectations and projections about
future events and are inherently subject to a
variety of risks and uncertainties, many of which
are beyond the control of our management
team. All forward-looking statements in this
report and subsequent written and oral forward-
looking statements attributable to us, or to
persons acting on our behalf, are expressly
qualified in their entirety by these risks and
uncertainties. These risks and uncertainties
include, among others:

• our failure to continue to attract new

recruits, retain sales representatives or
license or maintain the licensing of our sales
representatives would materially adversely
affect our business, financial condition and
results of operations;

•

there are a number of laws and regulations
that could apply to our distribution model,

which could require us to modify our
distribution structure;

•

there may be adverse tax, legal or financial
consequences if the independent contractor
status of our sales representatives is
overturned;

the Company’s or its independent sales
representatives’ violation of, or
non-compliance with, laws and regulations
and related claims and proceedings could
expose us to material liabilities;

any failure to protect the confidentiality of
client information could adversely affect our
reputation and have a material adverse
effect on our business, financial condition
and results of operations;

• we may face significant losses if our actual
experience differs from our expectations
regarding mortality or persistency;

•

the occurrence of a catastrophic event could
materially adversely affect our business,
financial condition and results of operations;

• our insurance business is highly regulated,
and statutory and regulatory changes may
materially adversely affect our business,
financial condition and results of operations;

•

a decline in the regulatory capital ratios of
our insurance subsidiaries could result in
increased scrutiny by insurance regulators
and ratings agencies and have a material
adverse effect on our business, financial
condition and results of operations;

a significant ratings downgrade by a ratings
organization could materially adversely
affect our business, financial condition and
results of operations;

the failure by any of our reinsurers or
reserve financing counterparties to perform
its obligations to us could have a material
adverse effect on our business, financial
condition and results of operations;

Primerica 2016 Annual Report

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

• our Investment and Savings Products

segment is heavily dependent on mutual
fund and annuity products offered by a
relatively small number of companies, and,
if these products fail to remain competitive
with other investment options or we lose
our relationship with one or more of these
companies, our business, financial condition
and results of operations may be materially
adversely affected;

the Company’s or its securities-licensed
sales representatives’ violations of, or
non-compliance with, laws and regulations
could expose us to material liabilities;

if heightened standards of conduct or more
stringent licensing requirements, such as
those proposed by the Securities and
Exchange Commission and those adopted
by the Department of Labor, are imposed
on us or our sales representatives, or selling
compensation is reduced as a result of new
legislation or regulations, it could have a
material adverse effect on our business,
financial condition and results of operations;

if our suitability policies and procedures
were deemed inadequate, it could have a
material adverse effect on our business,
financial condition and results of operations;

•

• our sales force support tools may fail to
appropriately identify financial needs or
suitable investment products;

• non-compliance with applicable regulations
could lead to revocation of our subsidiary’s
status as a non-bank custodian;

•

as our securities sales increase, we become
more sensitive to performance of the equity
markets;

credit deterioration in, and the effects of
interest rate fluctuations on, our invested
asset portfolio and other assets that are
subject to changes in credit quality and
interest rates could materially adversely
affect our business, financial condition and
results of operations;

•

valuation of our investments and the
determination of whether a decline in the

Freedom Lives Here™

fair value of our invested assets is other-
than-temporary are based on estimates that
may prove to be incorrect;

changes in accounting standards can be
difficult to predict and could adversely
impact how we record and report our
financial condition and results of operations;

the effects of economic down cycles in the
United States and Canada could materially
adversely affect our business, financial
condition and results of operations;

•

• we are subject to various federal, state and

provincial laws and regulations in the United
States and Canada, changes in which or
violations of which may require us to alter
our business practices and could materially
adversely affect our business, financial
condition and results of operations;

•

litigation and regulatory investigations and
actions may result in financial losses and
harm our reputation;

the current legislative and regulatory
climate with regard to financial services may
adversely affect our business, financial
condition, and results of operations;

the inability of our subsidiaries to pay
dividends or make distributions or other
payments to us in sufficient amounts would
impede our ability to meet our obligations
and return capital to our stockholders;

a significant change in the competitive
environment in which we operate could
negatively affect our ability to maintain or
increase our market share and profitability;

the loss of key employees and sales force
leaders could negatively affect our financial
results and impair our ability to implement
our business strategy;

if one of our significant information
technology systems fails, if its security is
compromised, or if the Internet becomes
disabled or unavailable, our business,
financial condition and results of operations
may be materially adversely affected;

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

•

the current legislative and regulatory
climate with regard to cybersecurity may
adversely affect our business, financial
condition, and results of operations;

in the event of a disaster, our business
continuity plan may not be sufficient, which
could have a material adverse effect on our
business, financial condition and results of
operations;

• we may be materially adversely affected by
currency fluctuations in the United States
dollar versus the Canadian dollar; and

•

the market price of our common stock may
fluctuate.

Developments in any of these areas could cause
actual results to differ materially from those

anticipated or projected or cause a significant
reduction in the market price of our common
stock.

The foregoing list of risks and uncertainties may
not contain all of the risks and uncertainties that
could affect us. In addition, in light of these risks
and uncertainties, the matters referred to in the
forward-looking statements contained in this
report may not in fact occur. Accordingly, undue
reliance should not be placed on these
statements. We undertake no obligation to
publicly update or revise any forward-looking
statements as a result of new information, future
events or otherwise, except as otherwise
required by law.

Primerica 2016 Annual Report

PART I

ITEM 1. BUSINESS.

Primerica, Inc. (“Primerica”, “we”, “us” or the
“Parent Company”) is a leading distributor of
financial products to middle-income households
in the United States and Canada with 116,827
licensed sales representatives at December 31,
2016. We assist our clients in meeting their
needs for term life insurance, which we
underwrite, and mutual funds, annuities,
managed investments and other financial
products, which we distribute primarily on behalf
of third parties. We insured approximately five
million lives and have over two million client
investment accounts at December 31, 2016. Our
distribution model uniquely positions us to
reach underserved middle-income consumers in
a cost effective manner and has proven itself in
both favorable and challenging economic
environments.

Our mission is to serve middle-income families
by helping them make informed financial
decisions and providing them with a strategy
and means to gain financial independence. Our
distribution model is designed to:

• Address our clients’ financial needs. Our

licensed sales representatives primarily use
our proprietary financial needs analysis tool
(“FNA”) and an educational approach to
demonstrate how our product offerings can
assist clients to provide financial protection
for their families, save for their retirement
and other needs, and manage their debt.
Typically, our clients are the friends, family
members and personal acquaintances of
our sales representatives. Meetings are
generally held in informal, face-to-face
settings, usually in the clients’ homes.

• Provide a business opportunity. We provide
an entrepreneurial business opportunity for
individuals to distribute financial products.
Low entry fees as well as the ability to select
their own schedules and time commitments
allow our sales representatives to
supplement their income by starting their
own independent businesses without
leaving their current jobs. Our unique

Freedom Lives Here™

compensation structure, technology, sales
support and back-office processing are
designed to enable our sales
representatives to successfully grow their
independent businesses.

CorporateStructure

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

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

• Primerica Life Insurance Company

(“Primerica Life”), our principal life insurance
underwriting company; and

• PFS Investments Inc. (“PFS Investments”),
our investment and savings products
company, broker-dealer and registered
investment advisor.

Primerica Life is domiciled in Massachusetts, and
its wholly owned subsidiary, National Benefit Life
Insurance Company (“NBLIC”), is a New York-
domiciled life insurance underwriting company.

We conduct our core business activities in
Canada through three principal entities, all of
which are indirect wholly owned subsidiaries of
the Parent Company:

• Primerica Life Insurance Company of
Canada (“Primerica Life Canada”), our
Canadian life insurance underwriting
company;

• PFSL Investments Canada Ltd. (“PFSL
Investments Canada”), our Canadian
licensed mutual fund dealer; and

• PFSL Fund Management Ltd. (“PFSL Fund
Management”), our Canadian investment
funds manager.

Primerica was incorporated in the United States
as a Delaware corporation in October 2009 to
serve as a holding company for the Primerica
businesses (collectively, the “Company”). Our
businesses, which prior to April 1, 2010, were

wholly owned indirect subsidiaries of Citigroup
Inc. (“Citigroup”), were transferred to us by
Citigroup on April 1, 2010 in a reorganization
pursuant to which we completed an initial public
offering in April 2010 (the “IPO”). On March 31,
2010, we entered into certain coinsurance
transactions with entities then affiliated with
Citigroup and ceded between 80% and 90% of
the risks and rewards of our term life insurance
policies that were in force at year-end 2009. We
continue to administer all policies subject to
these coinsurance agreements.

OurClients

Our clients are generally middle-income
consumers, which we define as households with
$30,000 to $100,000 of annual income.
According to the 2015 U.S. Census Bureau
Current Population Survey, the latest period for
which data is available, almost 50% of U.S.
households fall in this range. We believe that we
understand the financial needs of the middle-
income segment which include:

• Many have inadequate or no life insurance

coverage.
Individual life insurance sales in
the United States declined from 12.5 million
policy sales in 1975 to 9.9 million policy
sales in 2015, the latest period for which
data is available, according to the Life
Insurance Marketing and Research
Association International, Inc. (“LIMRA”), a
worldwide association of insurance and
financial services companies. We believe
that term life insurance, which we have
provided to middle-income clients for many
years, is generally the best option for them
to meet their life insurance needs.

• Many need help saving for retirement and

other personal goals. Many middle-income
families continually find it challenging to
save for retirement and other goals. By
developing personalized savings programs
for our clients using our proprietary FNA
and offering a wide range of mutual funds,
annuities, managed investments and
segregated fund products sponsored and
managed by established firms, our sales
representatives are well equipped to help

ITEM 1. BUSINESS

clients develop long-term savings plans to
address their financial needs.

• Many need to reduce their consumer

debt. Many middle-income families have
numerous debt obligations from credit
cards, auto loans, and home mortgages. We
help our clients address these financial
burdens by providing personalized and
client-driven debt resolution techniques.

• Many prefer to meet face-to-face when

considering financial products. Historically,
many middle-income consumers have
indicated a preference to meet face-to-face
when considering financial products or
services. As such, we have designed our
business model to address this preference
in a cost-effective manner.

OurDistributionModel

Our distribution model, which is based on a
traditional insurance agency model and borrows
aspects from franchising and direct sales, is
designed to reach and serve middle-income
consumers efficiently by selling to customers
through our sales representatives. Key
characteristics of our unique distribution model
include:

•

Independent entrepreneurs: Our sales
representatives are independent contractors
building and operating their
own businesses. This business-
within-a-business approach means that our
sales representatives are entrepreneurs who
take responsibility for selling products,
recruiting and developing sales
representatives, setting their own schedules
and managing and paying the
administrative expenses associated with
their sales activities.

Flexible time commitment: By offering a
flexible time commitment opportunity, we
are able to attract a significant number of
recruits who desire to earn supplemental
income and generally concentrate on
smaller-sized transactions typical of middle-
income consumers. Our sales
representatives are able to start their

Primerica 2016 Annual Report

ITEM 1. BUSINESS

independent businesses for low entry fees,
for which they receive technological
support, pre-licensing training and access to
licensing examination preparation
programs. Our sales representatives sell or
refer products directly to consumers, and
therefore our business opportunity does not
require recruits to purchase and resell our
products. Most of our sales representatives
begin selling products on a part-time basis,
which enables them to hold jobs while
exploring an entrepreneurial business
opportunity with us.

Incentive to build distribution: When a sale
is made, the selling representative receives a
commission, as does the licensed
representative who recruited him or her in
most cases. Sales commissions are paid
through several levels of the selling
representative’s recruitment organization.
This structure motivates existing sales
representatives to grow our sales force and
provides them with commission income
from the sales completed by representatives
in their sales organization.

Sales force leadership: A sales
representative who has built a successful
organization and has obtained his or her life
insurance and securities licenses can achieve
the sales designation of Regional Vice
President (“RVP”), which qualifies him or her
to a higher commission schedule. RVPs are
independent contractors who open and
operate offices for their sales organizations
and devote their full-time attention to their
businesses. RVPs also support and monitor
the sales representatives, on whose sales
they earn commissions, in achieving
compliance with applicable regulatory
requirements. RVPs’ efforts to expand their
businesses are a primary driver of our
success.

Innovative commission structure: We have
developed an innovative system for
compensating our independent sales force
that is contingent upon product sales. We
advance to our sales representatives a
significant portion of their insurance

•

Freedom Lives Here™

commissions upon their submission of an
insurance application and the first month’s
premium payment. In addition to being a
source of motivation, this advance provides
our sales representatives with immediate
cash flow to offset costs associated with
originating the business. In addition,
monthly production bonuses are paid to
RVPs whose sales organizations meet
certain sales levels. With compensation tied
to sales activity, our compensation
approach accommodates varying degrees
of individual productivity, which allows us to
effectively use a large group of part-time
sales representatives while providing a
variable cost structure. In addition, we
incentivize our RVPs with equity
compensation in the form of quarterly
restricted stock units (“equity-based
compensation”), which aligns their interests
with those of our stockholders.

Large, dynamic sales force: Members of
our sales force primarily serve their friends,
family members and personal
acquaintances through individually driven
networking activities. We believe that this
warm market approach is an effective way
to distribute our product offerings because
it facilitates face-to-face interaction initiated
by a trusted acquaintance of the
prospective client, which is difficult to
replicate using other distribution
approaches. Due to the large size of our
sales force and their active recruiting of new
sales representatives, our sales force is able
to continually access an expanding base of
prospective clients without engaging costly
media channels.

•

• Motivational culture:

In addition to the

motivation for our sales representatives to
achieve financial success, we seek to create
a culture that inspires and rewards our sales
representatives for their personal successes
and those of their sales organizations
through sales force recognition events and
contests. We also use Intranet-streamed
broadcasts and local, regional and national
meetings to inform and teach our sales
representatives, as well as facilitate

camaraderie and the exchange of ideas
across the sales force organization. These
initiatives encourage and empower our
sales representatives to develop their own
successful sales organizations.

•

Inclusive culture: Building and maintaining
an ethnically and demographically diverse
sales force is important to us, as we believe
our sales force reflects the middle market
communities we serve. As the communities
we serve become more diverse, our sales
force does as well.

StructureandScalabilityofOurSales
Force

New sales representatives are recruited by
existing sales representatives. When these new
recruits join our sales force, they become part of
the sales organization of the sales representative
who recruited them as well as the sales
organizations to which the recruiting sales
representative belongs. As new sales
representatives are successful in recruiting other
sales representatives, they begin to build their
own organization of sales representatives. We
encourage our sales representatives to bring in
new recruits to build their own sales
organizations, enabling them to earn
commissions on sales made by members of their
sales organizations.

RVPs establish and maintain their own offices,
which we refer to as field offices. Additionally,
they are responsible for funding the costs of their
administrative staff, marketing materials, travel
and training and certain recognition events for
the sales representatives in their respective sales
organizations. Field offices provide a location for
our representatives to conduct recruiting
meetings, training events and sales-related
meetings, disseminate our Intranet-streamed
broadcasts, conduct compliance functions, and
house field office business records. Some
business locations contain more than one onsite
field office. At December 31, 2016, approximately
4,840 field offices in approximately 2,749
locations were managed by sales representatives
that served as full-time RVPs.

ITEM 1. BUSINESS

RVPs play a major role in training, motivating
and monitoring their sales representatives.
Because the sales representative’s compensation
grows with the productivity of his or her sales
organization, our distribution model provides
financial rewards to sales representatives who
successfully develop, support and monitor
productive sales representatives. In addition to
our commission structure, we offer the Primerica
Ownership Program. This program provides
qualifying RVPs a contractual right, upon
meeting certain criteria, to transfer their
Primerica businesses to another RVP or a
qualifying family member at such time as they
desire. Furthermore, we have developed
proprietary tools and technology to enable our
RVPs to reduce the time spent on administrative
responsibilities associated with their sales
organizations so they can devote more time to
the sales and recruiting activities that drive our
growth. We believe that our tools and
technology, coupled with our sales
compensation programs, further incentivize our
sales representatives to become RVPs.

Both the structure of our sales force and the
capacity of our support capabilities provide us
with a high degree of scalability as we grow our
business. Our support systems and technology
are capable of supporting a large sales force and
a high volume of transactions. In addition, by
sharing training and compliance activities with
our RVPs, we are able to grow without incurring
proportionate overhead expenses.

RecruitmentofSalesRepresentatives

The recruitment of sales representatives is
undertaken by our existing sales representatives,
who identify prospects and share with them the
benefits of associating with our organization.
Our sales representatives showcase our
organization as dynamic and capable of
improving lives of middle-income families.

After the initial contact, prospective recruits
typically are invited to an opportunity meeting,
which is conducted by an RVP. The objective of
an opportunity meeting is to inform prospective
recruits about our mission and their opportunity
to start their own business by becoming sales

Primerica 2016 Annual Report

ITEM 1. BUSINESS

representatives. At the conclusion of each
opportunity meeting, prospective recruits are
asked to complete an application and pay a
nominal entry fee to commence their
pre-licensing training and licensing examination
preparation programs and, depending on the
state or province, to cover their licensing exam
registration costs, which are provided by the
Company generally at no additional charge.
Recruits are not obligated to purchase any of the
products we offer in order to become sales
representatives, though they may elect to make
such purchases.

Recruits may become our clients or provide us
with access to their friends, family members and
personal acquaintances. As a result, we
continually work to improve our systematic
approach to recruiting and training new sales
representatives.

Similar to other distribution systems that rely
upon part-time sales representatives and typical
of the life insurance industry in general, we
experience wide disparities in the productivity of
individual sales representatives. Many new

Number of new recruits

recruits do not get licensed, often due to the
time commitment required to obtain licenses
and various regulatory and licensing hurdles.
Many of our licensed sales representatives are
only marginally active, as there are no minimum
life insurance production requirements. As a
result, we plan for this disparate level of
productivity and view a continuous recruiting
cycle as a key component of our distribution
model. Our distribution model is designed to
address the varying productivity associated with
our sales representatives by paying production-
based compensation, emphasizing recruiting,
and developing initiatives to address barriers to
licensing new recruits. By providing commissions
to sales representatives on the sales generated
by their sales organization, our compensation
structure aligns the interests of our sales
representatives with our interests in recruiting
new representatives and creating sustainable
sales production.

The following table provides information on new
recruits and life insurance-licensed sales
representatives:

Year ended December 31,

2016

2015

2014

262,732 228,115 190,439

Number of newly life insurance-licensed sales representatives

44,724

39,632

33,832

Number of life insurance-licensed sales representatives, at period end

116,827 106,710

98,358

Average number of life insurance-licensed sales representatives during

period

111,843 101,660

96,780

We define new recruits as individuals who have
submitted an application to join our sales force
together with payment of the nominal entry fee
to commence their pre-licensing training.
Certain recruits may not meet the compliance
standards to join our sales force, and others
elect to withdraw prior to becoming active in our
business.

On average, it requires approximately three
months for our sales representatives to
complete the necessary applications and
pre-licensing coursework and to pass the
applicable state or provincial examinations to
obtain a license to sell our term life insurance

Freedom Lives Here™

products. As a result, individuals recruited to join
our sales force within a given fiscal period may
not become licensed sales representatives or
meet compliance standards until a subsequent
period.

SalesForceMotivation,Trainingand
Communication

Motivating, training and communicating with
our sales force are critical to our success and
that of our sales force.

Motivation. Through our proven system of
sales force recognition events, contests and

communications, we provide incentives that
drive our results. Motivation is driven in part by
our sales representatives’ desire to achieve
higher levels of financial success by building
their own businesses as Primerica sales
representatives. The opportunity to help
underserved middle-income households address
financial challenges is also a significant source of
motivation for many of our sales representatives,
as well as for our management and home office
employees.

We motivate our sales representatives to
succeed in their businesses by:

•

compensating our sales representatives for
product sales made by them and their sales
organizations;

• helping our sales representatives learn
financial fundamentals so they can
confidently and effectively assist our clients;

•

reducing the administrative burden on our
sales force, which allows them to devote
more of their time to building a sales
organization and selling products; and

creating a culture in which sales
representatives are encouraged to achieve
goals through the recognition of their sales
and recruiting achievements, as well as
those of their sales organizations.

We conduct numerous local, regional and
national meetings to help inform and motivate
our sales force. In June 2017, we are scheduled
to hold our biennial international convention
and associated meetings at the Indianapolis
Convention Center and Lucas Oil Stadium in
Indianapolis, Indiana. In previous years, tens of
thousands of our new recruits and sales
representatives have attended our conventions
and associated meetings at their own expense,
which we believe further demonstrates their
commitment to our organization and mission.

Licensing Support and Training. Our sales
representatives must hold licenses to sell most
of our product offerings. Our in-house life
insurance licensing program offers a significant
number of classroom, online and self-study life
insurance pre-licensing courses to meet

ITEM 1. BUSINESS

applicable state and provincial licensing
requirements and prepare recruits to pass
applicable licensing exams. For those
representatives who wish to sell investment and
savings products, we contract with third-party
training firms to conduct exam preparation and
also offer supplemental training tools.

As part of the entry fee, new recruits receive a
personalized study plan, a variety of review
classes, exam review videos and audios, and
exam and license registration. Additionally, many
RVPs conduct training either on nights or
weekends, providing new recruits a convenient
opportunity to attend training outside of
weekday jobs or family commitments.

Communication and Training. We
communicate with our sales force and provide
training through multiple channels, including:

• Primerica Online (“POL”), which is our secure
Intranet website designed to be a support
system for our sales force. POL provides
sales representatives with access to their
Primerica e-mail, bulletins and alerts,
business tracking and management tools,
pre-licensing study materials and exam
registration, product-specific training, sales
procedures and tools, point-of-sale
application tools, forms and brochures,
contact lists, and real-time updates on their
pending life insurance applications and new
recruits. Additionally, POL provides access
to internal training programs including
online exam simulators and videos covering
sales, management skills, business
ownership, products and compliance. We
also use POL to provide real-time
recognition of sales representatives’
successes and scoreboards for sales force
production, contests and trips. In addition,
POL is a gateway to our product providers
and product support. Subscribers generally
pay a small monthly fee to subscribe to POL,
which helps cover the cost of maintaining
this support system. A limited version of
POL that provides access to Primerica
e-mail, compliance and compensation
information, newsletters and bulletins is
available at no cost.

Primerica 2016 Annual Report

ITEM 1. BUSINESS

• our in-house broadcasts, which are

delivered by Intranet-streaming video. We
create original broadcasts and videos that
enable senior management to update our
sales force and provide training and
motivational presentations. We broadcast
live programs hosted by home office
management and selected RVPs that focus
on new developments and provide
motivational messages to our sales force.
We also broadcast a training-oriented
program to our sales force on a weekly
basis and profile successful sales
representatives, allowing these individuals
to educate and train other sales
representatives by sharing their methods for
success.

• our publications department, which

produces materials to support, motivate and
inform our sales force. We sell recruiting
materials, sales brochures, business cards
and stationery and provide total
communications services, including web
design, print presentations, graphic design
and script writing. We also produce a
weekly mailing that includes materials
promoting our current incentives, as well as
the latest news about our product offerings.

SalesForceSupportandTools

Our information systems and technology are
designed to support a sales and distribution
model that relies on a large group of
predominantly part-time sales representatives
and assist them in building their own businesses.
We provide our sales representatives with sales
tools that allow both new and experienced sales
representatives to offer financial information and
products to their clients. The most significant of
these tools are:

• Our Financial Needs Analysis: Our FNA is a
proprietary, needs-based analysis tool. The
FNA gives our sales representatives the
ability to collect and synthesize client
financial data and develop a financial
analysis for the client that is easily
understood. The FNA, while not a financial

Freedom Lives Here™

plan, helps our clients understand their
financial needs in the areas of debt, financial
protection, and savings as well as introduces
prudent financial concepts, such as regular
saving and accelerating the repayment of
high cost credit card debt to help them
reach their financial goals. The FNA provides
clients with a snapshot of their current
financial position and identifies their life
insurance, savings and debt resolution
needs.

• Our Point-of-Sale Application Tool: Our

point-of-sale technology, TurboApps, is an
internally developed system that
streamlines the application process for our
insurance products. This application
populates client information from the FNA
to eliminate redundant data collection and
provides real-time feedback to eliminate
incomplete and illegible applications.
Integrated with our paperless field office
management system described below, and
with our home office systems, TurboApps
allows our RVPs and us to realize the
efficiencies of straight-through-processing
of application data and other information
collected on our sales representatives’
mobile devices, which results in expedited
processing of our life insurance product
sales. In addition, we leverage similar
technology as TurboApps with our
investment partners to process mutual fund
and annuity product sales.

• Virtual Base Shop:

In an effort to ease the
administrative burden on RVPs and simplify
sales force operations, we make available to
RVPs a secure Intranet-based paperless field
office management system as part of the
POL subscription. This virtual office is
designed to automate the RVP’s
administrative responsibilities and can be
accessed by subscribing sales
representatives in an RVP’s immediate sales
organization, which we refer to as his or her
base shop.

• Primerica Mobile Application (“Primerica
App”): The Primerica App is a cross-
platform companion application to POL that

includes various tools and information to
help sales representatives build their
business, including: current company news;
training and development content;
company approved marketing and
motivational materials; business intelligence
including on-demand mobile reports;
rewards and recognition tracking; contact
management tools; and point-of-sale tools
for generating proposals, completing
product applications, and receiving real-
time notifications. We continue to add new
features and functionality to the Primerica
App as the use of mobile devices becomes
more ubiquitous.

We also make available other technology to
assist our sales force in selling and referring
products and serving our clients, including:

•

toll-free sales support call centers to answer
inquiries and assist with paperwork,
underwriting and licensing;

a tele-underwriting process used to obtain
detailed medical information from clients
without it being disclosed to our sales
representatives;

• POL for tracking the status of pending life
insurance applications and the progress of
new recruits in their training and licensing
efforts; and

•

Shareholder Account Manager, which is a
web-based tool that allows our investment-
licensed representatives to service client
investments in mutual funds accessed
through our transfer agent platform.

Performance-BasedCompensation
Structure

Our commission structure is rooted in our origin
as an insurance agency. Our sales
representatives can receive commissions in
multiple ways, including:

•

sales commissions and fees based on their
personal sales, referrals, and client assets
under management;

ITEM 1. BUSINESS

•

sales commissions based on sales and
referrals by sales representatives in their
sales organizations and fees based on client
assets under management in their sales
organizations;

• bonuses and other compensation, including
equity-based compensation, generated by
their own sales performance, the aggregate
sales performance of their sales
organizations and other criteria; and

• participation in our contests and other

incentive programs.

Our compensation structure pays a commission
to the sales representative who sells the product
and to several representatives above the selling
representative within their sales organization.
With respect to term life insurance sales,
commissions are calculated based on the total
first-year premium (excluding policy fee) for all
policies and riders up to a maximum premium.
To motivate our sales force, we compensate
sales representatives for term life insurance
product sales as quickly as possible. We advance
a majority of the insurance commission upon the
submission of a completed application and the
first month’s premium payment. As the client
makes his or her premium payments, the
commission is earned by the sales representative
and the commission advance is recovered by the
Company. If premium payments are not made
by the client and the policy terminates, any
outstanding advance commission is charged
back to the sales representative. The chargeback,
which only occurs in the first year of a policy,
would equal that portion of the advance that
was made, but not earned, by the sales
representative because the client did not pay the
full premium for the period of time for which the
advance was made to the sales representative.
Chargebacks, which occur in the normal course
of business, may be recovered by reducing any
cash amounts otherwise payable to the sales
representative.

Sales representatives and representatives above
them in their sales organizations are
contractually obligated to repay us any
commission advances that are ultimately not
earned due to the underlying policy lapsing

Primerica 2016 Annual Report

ITEM 1. BUSINESS

prior to the full commission being earned.
Additionally, we hold back a portion of the
commissions earned by our sales representatives
as a reserve out of which we may recover
chargebacks. The amounts held back are
referred to as deferred compensation account
commissions (“DCA commissions”). DCA
commissions are available to reduce amounts
owed to the Company by sales representatives.
DCA commissions also provide a sales
representative with a cushion against the
chargeback obligations of representatives in
their sales organization. DCA commissions,
unless applied to amounts owed, are ultimately
released to sales representatives.

We pay most term life insurance commissions
during the first policy year. One of our term
riders provides for coverage increases after the
first year. For such riders, we pay first year and
renewal commissions only for premium
increases related to the increased coverage.
Additionally, we pay renewal commissions on
some older in-force policies. At the end of the
policy durations, we pay compensation on policy
continuations and exchanges.

For most mutual funds (non-managed
investments) and annuity products, commissions
are paid both on the sale and on the value of
assets under management and are calculated
based on the dealer reallowance and trail
compensation actually paid to us. For managed
investment mutual fund products, fees earned
are primarily based on the total of assets under
management and represent the annual fee we
receive as compensation for as long as we retain
the account. We pay our sales representatives in
Canada a sales commission on segregated fund
investments and a monthly fee based on clients’
asset values.

We also pay compensation to our sales force
with respect to sales of prepaid legal services
subscriptions, referrals for customers purchasing
auto and home insurance, and other financial
products. Prepaid legal services commissions are
paid in fixed amounts on the sale of the
respective subscription. For auto and
homeowners’ insurance products, fees are paid
for referrals that result in completed

Freedom Lives Here™

applications. Commissions related to other
financial products are calculated based on the
type of product sold or referred.

We pay bonuses and other incentive
compensation for the sale of certain products.
Bonuses are paid to the sales representatives
and RVPs for achieving specified production
levels for the sale of term life insurance,
investment and savings products and other
distributed products.

In addition to these methods of compensation,
we use a quarterly compensation program under
which RVPs can earn equity-based
compensation based on various production
criteria.

SalesForceLicensing

The states, provinces and territories in which our
sales representatives operate generally require
our sales representatives to obtain and maintain
licenses to sell our insurance and securities
products, requiring our sales representatives to
pass applicable examinations. Our sales
representatives may also be required to maintain
licenses to sell certain of our other financial
products. To encourage new recruits to obtain
their life insurance licenses, we either pay
directly or reimburse the sales representative for
certain licensing-related fees and expenses once
he or she passes the applicable exam and
obtains the applicable life insurance license.

To sell insurance products, our sales
representatives must be licensed by their
resident state, province or territory and by any
other state, province or territory in which they
do business. In most states, our sales
representatives must be appointed by our
applicable insurance subsidiary.

To sell mutual funds and variable annuity
products, our U.S. sales representatives must be
registered with the Financial Industry Regulatory
Authority (“FINRA”) and hold the appropriate
license(s) designated by each state in which they
sell securities products, as well as be appointed
by the annuity underwriter in the states in which
they market annuity products. Our sales
representatives must meet all state and

regulatory requirements and be designated as
an investment advisor representative in order to
sell our managed investment products.

Our Canadian sales representatives selling
mutual fund products are required to be
licensed by the securities regulators in the
provinces and territories in which they sell
mutual fund products. Our Canadian sales
representatives who are licensed to sell our
insurance products do not need any further
licensing to sell our segregated funds products.

For sales of our supplemental products,
appropriate state, provincial and territorial
licensing may be required.

SupervisionandCompliance

To ensure compliance with various federal, state,
provincial and territorial legal requirements, we
along with the RVPs share responsibility for
maintaining an overall compliance program that
involves compliance training and supporting as
well as monitoring the activities of our sales
representatives. We work with the RVPs to
develop and maintain appropriate compliance
procedures and systems.

Generally, all RVPs must obtain a principal license
(FINRA Series 26 in the United States and Branch
Manager license in Canada), and, as a result, they
assume responsibility over the activities of their
sales organizations. Additional supervision is
provided by approximately 503 Offices of
Supervisory Jurisdiction (“OSJs”), which are run by
select RVPs who receive additional compensation
for assuming responsibility for supervision and
compliance monitoring across all product lines.
OSJs are required to periodically inspect sales
force field offices and report to us any
compliance issues they observe. Our Field
Supervision Department regularly assists the OSJs
and communicates compliance requirements to
them to ensure they properly discharge their
responsibilities. In addition, our Compliance
Department regularly runs surveillance reports
designed to monitor the activity of our sales force
and investigates any unusual or suspicious activity
identified during these reviews or during periodic
inspections of RVP offices.

ITEM 1. BUSINESS

All of our sales representatives are required to
participate in our annual regulatory-required
compliance meeting, a program administered by
our senior management and our legal and
compliance staff at which we provide a
compliance training overview across all product
lines and require the completion of compliance
checklists by each of our licensed sales
representatives for each product he or she
offers. Additionally, our sales representatives
receive periodic compliance communications
regarding new compliance developments and
issues of special significance. Furthermore, the
OSJs are required to complete an annual training
program that focuses on securities compliance
and field supervision.

Our Field Audit Department regularly conducts
audits of all sales representative offices,
including scheduled and no-notice audits. The
Field Audit Department reviews all regulatory-
required records that are not maintained at our
home office. Any compliance deficiencies noted
in the audit must be corrected, and we carefully
monitor all corrective action. Field offices that
fail an audit are subject to a follow-up audit in
150 days. Audit deficiencies are addressed
through fines, reprimands, probations and
contract terminations.

OurProductOfferings

Reflecting our philosophy of helping middle-
income clients with their financial product needs
and ensuring compatibility with our distribution
model, our product offerings generally meet the
following criteria:

• Consistent with sound individual finance
principles: Products must be consistent
with good personal finance principles for
middle-income consumers, such as financial
protection, minimizing expenses,
encouraging long-term savings and
reducing debt.

• Designed to support multiple client

goals: Products are designed to address
and support a broad range of financial
goals rather than compete with or
cannibalize each other. For example, term

Primerica 2016 Annual Report

ITEM 1. BUSINESS

life insurance does not compete with
mutual funds because term life has no cash
value or investment element.

• Ongoing needs based: Products are

designed to meet the ongoing financial
needs of many middle-income consumers.
This long-term approach bolsters our
relationship with our clients by allowing us
to continue to serve them as their financial
needs evolve.

•

Easily understood and sold: Products must
be appropriate for distribution by our sales
force, which requires that the application
and approval process must be simple to
understand and explain, and the likelihood
of approval must be sufficiently high to
justify the investment of time by our sales
representatives.

We use three operating segments to organize,
evaluate and manage our business: Term Life
Insurance, Investment and Savings Products, and
Corporate and Other Distributed Products. See
“Management’s Discussion and Analysis of
Financial Condition and Results of Operations –
Results of Operations” and Note 3 (Segment and
Geographical Information) to our consolidated
financial statements included elsewhere in this
report for certain financial information regarding
our operating segments and the geographic
areas in which we operate.

The following table provides information on our
principal product offerings and the principal
sources thereof by operating segment as of
December 31, 2016.

Operating Segment
Term Life Insurance

Principal Product Offerings

Term Life Insurance

Investment and Savings

Products

Mutual Funds and
Certain Retirement Plans

Managed Investments
Variable Annuities

Fixed Indexed Annuities

Fixed Annuities

Segregated Funds

Freedom Lives Here™

Principal Sources of Products
(Applicable Geographic Territory)

Primerica Life (U.S. (except New York), the

District of Columbia and certain territories)

NBLIC (New York)
Primerica Life Canada (Canada)
American Century Investments (U.S.)
American Funds (U.S.)
AXA Distributors, LLC (U.S.)
Franklin Templeton (U.S.)
VOYA Financial, Inc. (U.S.)
Invesco (U.S.)
Legg Mason Global Asset Management (U.S.)
Pioneer Investments (U.S.)
AGF Investments (Canada)
PFSL Funds Management Ltd. (Canada)
Mackenzie Investments (Canada)
Fidelity Investments (Canada)
Lockwood Advisors and PFS Investments (U.S.)
American General Life Insurance Company and
its affiliates (U.S.)
AXA Distributors, LLC (U.S.)
Lincoln National Life Insurance Company and
its affiliates (U.S.)
MetLife Investors and its affiliates (U.S.)
American General Life Insurance Company and
its affiliates (U.S.)
Lincoln National Life Insurance Company and
its affiliates (U.S.)
Universal Life Insurance Company (Puerto Rico)
MetLife Investors USA Life Insurance Company
and its affiliates (U.S.)
Universal Life Insurance Company (Puerto Rico)
Primerica Life Canada (Canada)

Operating Segment

Principal Product Offerings

Principal Sources of Products
(Applicable Geographic Territory)

Corporate and Other

Distributed Products

Credit Information Services Equifax Consumer Services LLC (U.S. and

Canada)

ITEM 1. BUSINESS

Long-Term Care Insurance Genworth Life Insurance Company and its
affiliates (U.S.)
John Hancock Life Insurance Company and its
affiliates (U.S.)
Various insurance companies, as offered
through LTCI Partners, LLC (U.S.)
LegalShield (U.S. and Canada)
The Edge Benefits Inc. and its affiliates (Canada)

Prepaid Legal Services
Supplemental Health and
Accidental Death &
Disability Insurance
Health Insurance
Auto and Homeowners’
Insurance(1)
Mortgage Loan Referrals(1)

GoHealth, LLC (U.S.)
Various insurance companies, as offered
through Answer Financial, Inc. (U.S.)
B2B Bank (Canada)

(1) Referrals only.

TermLifeInsurance

Through our three life insurance subsidiaries –
Primerica Life, NBLIC and Primerica Life Canada –
we offer term life insurance to clients in the
United States, its territories, the District of
Columbia and Canada. In 2015, the latest period
for which data is available, we ranked as a
leading provider of individual term life insurance
in the United States in an annual study
published by LIMRA.

We believe that term life insurance is generally a
better alternative for middle-income clients than
cash value life insurance. Term life insurance
provides a guaranteed death benefit if the
insured dies during the fixed coverage period of
an in-force policy, thereby providing financial
protection for his or her named beneficiaries in
return for the periodic payment of premiums.
Term insurance products, which are sometimes
referred to as pure protection products, have no
savings or investment features. By buying term
life insurance rather than cash value life
insurance, a policyholder initially pays a lower
premium and, as a result, would have funds
available to invest for retirement and other
needs. We also believe that a person’s need for
life insurance is inversely proportional to that
person’s need for retirement savings, a concept

we refer to as the theory of decreasing
responsibility. Young adults with children, new
mortgages and other obligations need to buy
higher amounts of insurance to protect their
family from the loss of future income resulting
from the death of a primary bread winner. With
its lower initial premium, term life insurance lets
young families buy more coverage for their
premium dollar when their needs are greatest
and still have the ability to have funds for their
retirement and other savings goals.

We design our term life insurance products to
be easily understood by, and meet the needs of,
our clients. Clients purchasing our term life
insurance products generally seek stable, longer-
term income protection products for themselves
and their families. In response to this demand,
we offer term life insurance products with level-
premium coverage periods that range from 10
to 35 years and a wide range of coverage face
amounts. Additionally, certain term life insurance
policies may be customized through the
addition of riders to provide coverage for
specific protection needs, such as mortgage and
college expense protection. Policies remain in
force until the expiration of the coverage period
or until the policyholder ceases to make
premium payments and terminates the policy.
Premiums are guaranteed for policies issued in

Primerica 2016 Annual Report

ITEM 1. BUSINESS

the United States for the initial term period, up
to a maximum of 20 years. After 20 years, we
have the right to raise the premium, subject to
limits provided for in the applicable policy. In
Canada, the amount of the premium is
guaranteed for the entire term of the policy.

One of the innovative term life insurance
products that we offer is TermNow, our rapid
issue term life product that provides for face
amounts of $300,000 (local currency) and below.
TermNow allows a sales representative to accept
an application online or through the Primerica
App and, with the client’s permission, allows the
Company to access databases, including Medical
Information Bureau (“MIB”) data in the United

Life insurance issued:
Number of policies issued

Face amount issued (in millions)

Life insurance in force:
Number of policies in force

Face amount in force (in millions)

Pricing and Underwriting. We believe that
effective pricing and underwriting are significant
drivers of the profitability of our life insurance
business and we have established our pricing
assumptions to be consistent with our
underwriting practices. We set pricing
assumptions for expected claims, lapses and
expenses based on our experience and other
factors while also considering the competitive
environment. These other factors include:

•

expected changes from relevant experience
due to changes in circumstances, such as
(i) revised underwriting procedures affecting
future mortality and reinsurance rates,
(ii) new product features, and (iii) revised
administrative programs affecting sales
levels, expenses, and client continuation or
termination of policies; and

Freedom Lives Here™

States and Canada and prescription drug and
motor vehicle records in the United States, as
part of the underwriting process. The Company
uses this data and the client’s responses to
application questions to determine any
additional underwriting requirements. Results of
these processes are reported in real time to our
underwriting system, which then decides
whether or not to rapidly issue a policy.

The average face amount of our in-force policies
issued in 2016 was approximately $241,500. The
following table sets forth selected information
regarding our term life insurance product
portfolio:

Year ended December 31,

2016

2015

2014

298,244

260,059

220,984

89,869 $

79,111 $

69,574

December 31,

2016

2015

2014

2,489,493

2,403,713

2,341,670

$ 728,385 $ 693,194 $ 681,927

• observed trends in experience that we
expect to continue, such as general
mortality improvement in the general
population and better or worse policy
persistency (the period over which a policy
remains in force) due to changing economic
conditions.

Under our current underwriting guidelines, we
individually assess each insurable adult applicant
and place each applicant into a risk classification
based on current health, medical history and
other factors. Each classification (generally
preferred plus, preferred, non-tobacco and
tobacco) has specific health criteria. We may
decline an applicant’s request for coverage if his
or her health or activities create unacceptable
risks for us.

Our sales representatives ask applicants a series
of yes or no questions regarding the applicant’s

medical history. We may also consider
information about the applicant from third-party
sources, such as MIB, prescription drug
databases, motor vehicle records and physician
statements. If we believe that follow up
regarding an applicant’s medical history is
warranted, we use a third-party provider and its
trained personnel to contact the applicant by
telephone to obtain a more detailed medical
history. Additionally, we may require copies of
applicants’ medical information from their
attending physicians. The report resulting from
this process is electronically transmitted to us
and is evaluated in our underwriting process. For
higher issued face amount applications,
paramedical requirements are also needed.

To accommodate the significant volume of
insurance business that we process, we and our
sales force use technology to make our
operations more efficient. We provide an
electronic life insurance application that
supports TermNow and other term life insurance
products. Approximately 93% of the life
insurance applications we received in 2016 were
submitted electronically. Our electronic life
insurance application ensures that the
application is submitted error-free, collects the
applicant’s electronic signatures and populates
the RVP’s sales log. For paper applications, we
use our proprietary review and screening system
to automatically screen that an application
meets regulatory and other requirements, as
well as alert our application processing staff to
any deficiencies with the application. If any
deficiencies are noted, our application
processing staff contacts the sales representative
to obtain the necessary information. Once an
application is complete, the pertinent application
data is uploaded to our life insurance
administrative systems, which manage the
underwriting process by electronically analyzing
data, recommending underwriting decisions,
requirements for higher face amounts or older
ages and communicating with the sales
representative and third-party service providers.

Claims Management. Our insurance
subsidiaries processed over 14,600 life insurance
benefit claims in 2016 on policies underwritten
by us and sold by our sales representatives.

ITEM 1. BUSINESS

These claims fall into three categories: death,
waiver of premium (applicable to disabled
policyholders who purchased a rider pursuant to
which Primerica agrees to waive remaining life
insurance premiums during a qualifying
disability), or terminal illness. The claim may be
reported by our sales representative, a
beneficiary or, in the case of qualifying disability
or terminal illness, the policyholder. Following
are the benefits paid by us for each category of
claim:

Year ended December 31,

2016

2015

2014

(In thousands)
$1,238,393 $1,204,629 $1,176,450

43,168

40,528

36,215

14,232

13,716

13,976

Death

Waiver of

premium

Terminal

illness(1)

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

In the United States, after coverage has been in
force for two years, we may not contest the
policy for misrepresentations in the application
or the suicide of the insured. In Canada, we have
a similar two-year contestability period, but we
are permitted to contest insurance fraud at any
time. As a matter of policy, we do not contest
any coverage issued by us to replace the face
amount of another insurance company’s
individual coverage to the extent the replaced
coverage would not be contestable by the
replaced company. We believe this approach
helps our sales representatives sell replacement
policies, as it reassures clients that claims made
under their replacement policies are not more
likely to be contested as to the face amount
replaced. Through our claims administration
system, we record, process and pay the
appropriate benefit for any reported claim. Our
claims system is used by our home office
investigators to order medical and investigative
reports from third-party providers, calculate
amounts due to the beneficiary (including
interest), and report payments to the
appropriate reinsurance providers.

Primerica 2016 Annual Report

ITEM 1. BUSINESS

Primerica Life, a Massachusetts domestic insurer,
regularly consults the Social Security
Administration’s Death Master File (“Death
Master File”) in accordance with applicable state
requirements. NBLIC, a New York domestic
insurer, regularly consults the Death Master File
in accordance with New York state insurance
requirements. These processes help identify
potential deceased policyholders for whom
claims have not been presented in the normal
course of business. If unreported deaths are
identified, Primerica Life and NBLIC attempt to
determine if a valid claim exists, to locate
beneficiaries, and to pay benefits accordingly.
Prior to 2011, the Company did not use the
Death Master File in any aspect of its business.

Reinsurance. We use reinsurance primarily to
reduce the volatility risk with respect to
mortality. Since 1994, we have reinsured death
benefits in the United States on a first dollar
quota share yearly renewable term (“YRT”) basis.
We pay premiums to each reinsurer based on
rates in the applicable agreement.

We generally reinsure 90% of all term life
insurance policies sold in the United States,
excluding coverage under certain riders. For
policies sold in Canada, we now utilize a YRT
reinsurance arrangement similar to our U.S.
program. Prior to 2012, we reinsured a smaller
proportion of the face amount for policies sold
in Canada. We also reinsure substandard cases
on a facultative basis to capitalize on the
extensive experience some of our reinsurers
have with substandard cases. A substandard
case has a level of risk that is acceptable to us,
but at higher premium rates than a standard
case because of the health, habits or occupation
of the applicant.

While our reinsurance agreements have
indefinite terms, both we and our reinsurers are
entitled to discontinue any reinsurance
agreement as to future policies by giving
advance notice of 90 days to the other. Each
reinsurer’s ability to terminate coverage for
existing policies is limited to circumstances such
as a material breach of contract or nonpayment
of premiums by us. Each reinsurer has the right
to increase rates with certain restrictions. If a

Freedom Lives Here™

reinsurer increases rates, we have the right to
immediately recapture the business. Either party
may offset any balance due from the other party.
For additional information on our reinsurance,
see Note 1 (Description of Business, Basis of
Presentation, and Summary of Significant
Accounting Policies) and Note 6 (Reinsurance) to
our consolidated financial statements included
elsewhere in this report.

Financial Strength Ratings. Ratings with
respect to financial strength are an important
factor in establishing our competitive position
and maintaining public confidence in us and our
ability to market products. Ratings organizations
review the financial performance and condition
of most insurers and provide opinions regarding
financial strength, operating performance and
ability to meet obligations to policyholders. For
additional information, see “Management’s
Discussion and Analysis of Financial Condition
and Results of Operations – Liquidity and Capital
Resources – Financial Ratings.”

InvestmentandSavingsProducts

We believe that many middle-income families
have significant unmet retirement and savings
needs. Using our FNA tool, our sales
representatives help our clients understand their
current financial situation and how they can use
time-tested financial principles, such as
prioritizing personal savings, to reach their
savings goals. Our product offerings comprise
basic saving and investment vehicles that seek to
meet the needs of clients in all stages of life.

Through PFS, PFS Investments, Primerica Life
Canada, PFSL Investments Canada, and our
licensed sales representatives, we distribute and
sell to our clients mutual funds, managed
investments, variable and fixed annuities, fixed
indexed annuities and segregated funds. As of
December 31, 2016, approximately 23,750 of our
sales representatives were licensed to distribute
mutual funds in the United States (including
Puerto Rico) and Canada. As of December 31,
2016, approximately 13,600 of our sales
representatives were licensed and appointed to
distribute annuities in the United States and

approximately 10,400 of our sales
representatives were licensed to sell segregated
funds in Canada.

In the United States, clients acquire securities
products from PFS Investments in either a
brokerage or an advisory relationship. In a
brokerage relationship, a PFS Investments
registered representative, pursuant to FINRA
rules, is required to make a recommendation
that is suitable for the client, but provides no
ongoing monitoring of the client’s investments.
For its services, PFS Investments receives an
upfront commission in connection with the sale,
and a smaller, annual trail commission or 12b-1
fee for the continued servicing of the account.
PFS Investments markets mutual funds and
variable annuities on a brokerage basis. In an
advisory relationship, PFS Investments and its
investment advisory representative have a
fiduciary obligation to the client that arises
under the Investment Advisers Act of 1940 and
related case law. Our current managed
investment offering is a mutual fund wrap fee
program in which our co-sponsor has
discretionary authority over the client’s account
and provides ongoing investment advice. As a
co-sponsor of the program, PFS Investments and
its investment advisory representatives provide
the initial investment advice and receive part of
the annual advisory fee, which is assessed as a
percentage of the value of the assets in the
account.

In the United States, our

Mutual Funds.
licensed sales representatives primarily distribute
mutual funds from the following select asset
management firms: American Century
Investments, American Funds, Franklin
Templeton, Invesco, Legg Mason and Pioneer.
These firms have diversified product offerings,
including domestic and international equity,
fixed-income and money market funds. Each
firm continually evaluates its fund offerings and
adds new funds on a regular basis. Additionally,
their product offerings reflect diversified asset
classes and varied investment styles. We have
selling agreements with a number of other fund
companies and we believe that collectively,
these asset management firms provide funds
that meet the investment needs of our clients.

ITEM 1. BUSINESS

During 2016, four of these fund families (Legg
Mason, Invesco, American Funds and Franklin
Templeton) accounted for approximately 92% of
our mutual fund sales in the United States. Legg
Mason and Invesco each have large wholesaling
teams that support our sales force in distributing
their mutual fund products. Our selling
agreements with these firms all have indefinite
terms and provide for termination at will.

An affiliate of PFS Investments, Primerica
Shareholder Services, Inc. (“PSS”), provides
transfer agent services to investors who
purchase shares of mutual funds offered by
American Century Investments, Franklin
Templeton, Invesco, or Pioneer Investments
through PFS Investments. In exchange for these
services, PSS receives recordkeeping and
account maintenance fees from the applicable
fund company. PSS has retained BNY Mellon
Asset Servicing (“BNYMAS”) to perform the
necessary transfer agent services for these
accounts on its proprietary SuRPASS system.
Also, BNYMAS provides transfer agent services
to investors who purchase shares of Legg Mason
funds through PFS Investments. By agreement
with Legg Mason, such positions are included on
a consolidated account statement prepared by
PSS for PFS Investments clients. PFS Investments
serves as the IRS approved non-bank custodian
for customers that open individual retirement
accounts (“IRA”) (or certain other retirement
accounts) with PFS Investments and invest in
shares of mutual funds offered by American
Century Investments, Franklin Templeton,
Invesco, Legg Mason or Pioneer Investments. For
these services, PFS Investments receives an
annual custodian fee.

In Canada, our sales representatives offer
Primerica-branded Concert™ Series funds, which
accounted for approximately 37% of our
Canadian mutual fund product sales in 2016.
Our Concert™ Series of funds consist of six
different asset allocation funds with varying
investment objectives ranging from fixed income
to aggressive growth. Each Concert™ Series fund
is a fund of funds that allocates fund assets
among equity and income mutual funds of AGF
Investments, a leading asset management firm in
Canada. The asset allocation within each

Primerica 2016 Annual Report

ITEM 1. BUSINESS

Concert™ Series fund is determined on an
advisory contract basis by Morneau Shepell
Asset and Risk Management Ltd. The principal
non-proprietary funds that we offer our clients
in Canada are funds of AGF Investments,
Mackenzie Investments, and Fidelity
Investments. Sales of these non-proprietary
funds accounted for approximately 50% of
mutual fund product sales in Canada in 2016.
Like our U.S. fund family list, the asset
management partners we have chosen in
Canada have a diversified offering of equity,
fixed-income and money market funds,
including domestic and international funds with
a variety of investment styles.

A key part of our investment philosophy for our
clients is the long-term benefits of dollar cost
averaging through systematic investing. To
accomplish this, we assist our clients by
facilitating monthly contributions to their
investment account by bank draft against their
checking accounts. During the year ended
December 31, 2016, average client assets held in
individual retirement accounts in the United
States and Canada accounted for an estimated
74% and 73% of total average client account
assets, respectively. Our individual retirement
accounts in Canada are considered registered
retirement savings plans (“RRSP”). An RRSP is
similar to a traditional IRA, in the United States
in that contributions are made to the RRSP on a
pre-tax basis and income is earned on a
tax-deferred basis. Our high concentration of
retirement plan accounts and our systematic
savings philosophy are beneficial to us as these
accounts tend to have lower redemption rates
than the industry and, therefore, generate more
recurring asset-based revenues.

Managed Investments. PFS Investments is a
registered investment advisor in the United
States, and it offers a managed investments
program under a contract with Lockwood
Advisors, a registered investment advisor and
unit of Bank of New York Mellon. The offering
consists of a mutual fund advisory program with
a $25,000 minimum initial investment. Lockwood
Advisors is a co-sponsor of the program, and
acts as the discretionary portfolio manager of
the asset allocation models offered. In contrast

Freedom Lives Here™

to our mutual fund and annuity business, clients
do not pay an upfront commission in an
advisory fee program; rather, they pay an annual
fee based on the value of the assets in their
account. In 2017, PFS Investments will launch a
separate, expanded managed investments
platform. This platform will also have an annual
fee based on the value of assets in the account
rather than an upfront commission and will
provide our customers access to mutual fund
and exchange-traded fund investment models
designed and managed by several unaffiliated
investment advisers. PFS Investments will
provide transfer agent and custodial services for
the expanded managed investments platform
through a subservice agreement with TD
Ameritrade Institutional.

Variable Annuities. Our U.S. licensed sales
representatives also distribute variable annuities
underwritten and provided by American General
Life Insurance Company and its affiliates (“AIG”),
AXA Distributors, LLC, Lincoln National Life
Insurance Company and its affiliates (“Lincoln
National”), and MetLife Investors and its affiliates.
Variable annuities are insurance products that
enable our clients to invest in accounts with
attributes similar to mutual funds, but also have
benefits not found in mutual funds, including
death benefits that protect beneficiaries from
losses due to a market downturn and income
benefits that guarantee future income payments
for the life of the policyholder(s). Each of these
companies bears the insurance risk on its variable
annuities that we distribute.

In Canada, we offer

Segregated Funds.
segregated fund products, which are branded as
our Common Sense Funds™, that have some of
the characteristics of our variable annuity
products distributed in the United States. Our
Common Sense Funds™ are underwritten by
Primerica Life Canada and offer our clients the
ability to participate in a diversified managed
investments program that can be opened for as
little as $25. While the assets and corresponding
liability (reserves) are recognized on our
consolidated balance sheets, the assets are held
in trust for the benefit of the segregated fund
contract owners and are not commingled with
the general assets of the Company.

There are two fund products within our
segregated funds offerings: the Asset Builder
Funds and the Strategic Retirement Income
Funds (“SRIF”). The investment objective of Asset
Builder Funds is long-term capital appreciation
combined with some guarantee of principal.
Unlike mutual funds, our Asset Builder Funds
product guarantees clients at least 75% of their
net contributions (net of withdrawals) at the
earlier of the date of their death or at the Asset
Builder Funds’ maturity date, which is selected
by the client. The portfolio consists of both
equities and fixed income with the equity
component consisting of a pool of large cap
Canadian equities and the fixed-income
component consisting of Canadian federal
government zero coupon treasuries and
government-backed floating rate notes. The
portion of the Asset Builder Funds’ portfolio
allocated to zero coupon treasuries are held in
sufficient quantity to satisfy the guarantees
payable at the maturity date of each Asset
Builder Fund. As a result, our potential loss
exposure is very low as it comes from the
guarantees payable upon the death of the client
prior to the maturity date.

The investment objective of the SRIF is to
provide income during retirement plus the
opportunity for modest capital appreciation. The
SRIF invests in a maximum of 25% equities with
the balance in fixed-income securities. The
product guarantees at least 75% of the clients
net contributions (net of withdrawals) at the
earlier of the date of their death or when the
client attains age 100. All accounts in the SRIF
are held as Registered Retirement Income Funds
which carry government mandated minimum
annual withdrawals. Similar to the Asset Builder
Funds, our potential exposure for loss associated
with the SRIF is very low as its investment
allocations are conservatively aligned with the
risks of the client contracts.

With the guarantee level at 75% and in light of
the time until the scheduled maturity of our
segregated funds contracts, we currently do not
believe it is necessary to allocate any corporate
capital as reserves for segregated fund contract
benefits.

ITEM 1. BUSINESS

Many of our Canadian clients invest in
segregated funds through a RRSP. Our Common
Sense Funds™ are also managed by AGF
Investments.

Fixed Indexed Annuities. We offer fixed
indexed annuity products in the U.S. through
Lincoln National, AIG, and Universal Life
Insurance Company (“Universal Life”) (Puerto
Rico). These products combine safety of
principal and guaranteed rates of return with
additional investment options tied to equity
market indices that allow for returns that move
based on the performance of an index. We
believe these and other fixed annuity products
give both our life and securities representatives
more ways to assist our clients with their
retirement planning needs.

Fixed Annuities. We sell fixed annuities
underwritten by MetLife Investors USA Life
Insurance Company and its affiliates in the U.S.
Our current offering includes a fixed premium
deferred annuity and a single premium
immediate annuity. The fixed premium deferred
annuity allows our clients to accumulate savings
on a tax deferred basis with safety of principal
and a guaranteed rate of return. The single
premium immediate annuity provides clients
with an immediate income alternative. In Puerto
Rico, we currently offer two annuity products: a
fixed annuity and a fixed bonus annuity
underwritten by Universal Life. These products
provide guarantees against loss with several
income options.

Investment and Savings Products
Revenue.
In the United States, we earn
revenue from our investment and savings
products business in three ways: commissions
and payments earned on the sale of such
products; fees and payments earned based upon
client asset values; and account-based revenue.
On the sale of mutual funds (not including
managed investments) and annuities, we earn a
dealer reallowance or commission on new
purchases as well as trail commissions on the
assets held in our clients’ accounts. We also
receive marketing and support fees from most
of our mutual fund and annuity providers. These
payments are typically a percentage of sales or a

Primerica 2016 Annual Report

ITEM 1. BUSINESS

percentage of the clients’ total asset values, or a
combination of both. For managed investments,
we receive an asset-based fee as compensation
for advisory services, as well as recordkeeping
and account maintenance fees, and marketing
and support fees from the mutual funds
involved in the program.

As the IRS approved non-bank custodian for the
funds noted above, PFS Investments receives
annual fees on a per-account basis for as long as
it services the account. As explained above, PSS
receives recordkeeping and account
maintenance fees for the transfer agent services
it provides to the four fund families noted in the
“Mutual Funds” section above. An individual
client account may include multiple fund
positions for which we earn recordkeeping fees.

Because the total amount of these fees
fluctuates with the number of such accounts and
positions within those accounts, the opening or
closing of accounts has a direct impact on our
revenues. From time to time, the fund
companies for whom we provide these services
request that accounts or positions with small
balances be closed.

In Canada, we earn revenue from the sales of
our investment and savings products in two
ways: commissions (or dealer reallowance) on
mutual fund sales and fees paid based upon
clients’ asset values (mutual fund trail
commissions and advisory fees from segregated
funds and Concert™ Series funds). On
segregated funds, we also earn deferred sales
charges for early withdrawals at an annual
declining rate within seven years of an investor’s
original contribution.

OtherDistributedProducts

We distribute other products, including prepaid
legal services, auto and homeowners’ insurance
referrals, credit information services, long-term
care insurance, and health insurance. In Canada,
we also offer mortgage loan referrals and
insurance offerings for small businesses. While
many of these products are Primerica-branded,
all of them are underwritten or otherwise
provided by a third party.

Freedom Lives Here™

We offer our U.S. and Canadian clients a
Primerica-branded prepaid legal services
program on a subscription basis that is
underwritten and provided by LegalShield. The
prepaid legal services program offers a network
of attorneys in each state, province or territory
to assist subscribers with legal matters such as
drafting wills, living wills and powers of attorney,
trial defense and motor vehicle-related matters.
We receive a commission based on our sales of
these subscriptions.

We have an arrangement with Answer
Financial, Inc. (“Answer Financial”), an
independent insurance agency, whereby our U.S.
sales representatives refer clients to Answer
Financial to receive multiple, competitive auto
and homeowners’ insurance quotes. Answer
Financial’s comparative quote process allows
clients to easily identify the underwriter that is
most competitively priced for their type of risk.
We receive commissions based on
completed auto and homeowners’ insurance
applications and pay our sales representatives
a flat referral fee for each completed application.

We offer credit information services in the
United States and Canada. Credit information
products allow clients to access their credit score
and other personal credit information. Clients
also have the capability of creating a
simple-to-understand plan for paying off their
debts with information from their credit file. Our
credit information products are co-branded with
and supported by a subsidiary of Equifax Inc.

We have an arrangement with LTCI Partners, LLC
(“LTCI Partners”), an independent brokerage
general agency specializing in long-term care
insurance, whereby our U.S. sales representatives
refer clients to LTCI Partners to receive a long-
term care insurance quote. Many of these
policies are underwritten and provided by
Genworth Life Insurance Company and its
affiliates and some by various other insurance
providers. We receive commissions based on the
annualized premium of placed and taken
policies.

We have a distribution agreement with
GoHealth, LLC (“GoHealth”), an operator of a
private health insurance marketplace that allows

U.S. consumers to enroll in health insurance
compliant with the Affordable Care Act. Our
representatives with health insurance licenses in
a limited number of states can sell clients a
health insurance policy provided by a number of
major carriers on GoHealth’s private exchange
platform. We receive commissions from health
insurance carriers for policies issued to clients
we enroll. These payments, which vary by health
insurance carrier and by state, are typically a
percentage of the policy premium or a flat
amount based on the number of members on a
policy.

In Canada, we have a referral program for
mortgage loan products offered by a third-party
lender, B2B Bank. Due to regulatory
requirements, our sales representatives in
Canada only refer clients to the lender and are
not involved in the loan application and closing
process.

In Canada, we offer insurance products,
including supplemental medical and dental,
accidental death, and disability, to small
businesses. These insurance products are
underwritten and provided by The Edge Benefits
Inc. and its affiliates. We receive a commission
based on our sales of these policies and any
subsequent renewals.

Prior to 2015, we offered student life insurance
and short-term disability benefit insurance,
which were underwritten through NBLIC. These
products were distributed solely by outside third
parties. In 2014, NBLIC sold its short-term
disability benefit business and novated all
policies in force to AmTrust North America, Inc.
and ceased the marketing and underwriting of
new student life insurance policies. NBLIC
continues to administer the existing block of
student life business, as well as other closed
blocks of insurance that were discontinued
several years ago.

Regulation

Our business is subject to extensive laws and
governmental regulations, including
administrative determinations, court decisions
and similar constraints. The purpose of the laws

ITEM 1. BUSINESS

and regulations affecting our business is
primarily to protect our clients and other
consumers. Many of the laws and regulations to
which we are subject are regularly re-examined,
and existing or future laws and regulations may
become more restrictive or otherwise adversely
affect our operations.

Insurance and securities regulatory authorities
periodically make inquiries regarding
compliance by us and our subsidiaries with
insurance, securities and other laws and
regulations regarding the conduct of our
insurance and securities businesses. At any given
time, a number of financial or market conduct
examinations of our subsidiaries may be
ongoing. We cooperate with such inquiries and
take corrective action when warranted.

Regulation of Our Insurance
Business. Primerica Life, as a Massachusetts
domestic insurer, is regulated by the
Massachusetts Division of Insurance and is
licensed to transact business in the United States
(except New York), the District of Columbia and
certain U.S. territories. NBLIC, as a New York
domestic insurer and a wholly owned subsidiary
of Primerica Life, is regulated by the New York
State Department of Financial Services and is
licensed to transact business in all 50 U.S. states,
the District of Columbia and the U.S. Virgin
Islands.

State insurance laws and regulations regulate all
aspects of our U.S. insurance business. Such
regulation is vested in state agencies having
broad administrative and, in some instances,
discretionary power dealing with many aspects
of our business, which may include, among other
things, premium rates and increases thereto,
reserve requirements, marketing practices,
advertising, privacy, policy forms, reinsurance
reserve requirements, acquisitions, mergers, and
capital adequacy.

Our U.S. insurance subsidiaries are required to
file certain annual, quarterly and periodic reports
with the supervisory agencies in the jurisdictions
in which they do business, and their business
and accounts are subject to examination by such
agencies at any time. These examinations
generally are conducted under National

Primerica 2016 Annual Report

ITEM 1. BUSINESS

Association of Insurance Commissioners (“NAIC”)
guidelines. Under the rules of these jurisdictions,
insurance companies are examined periodically
(generally every three to five years) by one or
more of the supervisory agencies on behalf of
the states in which they do business. Our most
recent examinations of the financial condition
and affairs of Primerica Life, NBLIC, Peach Re,
Inc. (“Peach Re”) and Vidalia Re, Inc. (“Vidalia
Re”) performed by the respective domiciliary
state insurance departments were completed
during 2016 with no findings or
recommendations noted.

Primerica Life Canada is federally incorporated
and provincially licensed and is required to file
periodic reports with Canadian regulatory
agencies. It transacts business in all Canadian
provinces and territories. Primerica Life Canada
is regulated federally by the Office of the
Superintendent of Financial Institutions Canada
(“OSFI”) and provincially by the Superintendents
of Insurance for each province and territory.
Canadian federal and provincial insurance laws
regulate all aspects of our Canadian insurance
business. OSFI regulates insurers’ corporate
governance, financial and prudential oversight,
and regulatory compliance, while provincial and
territorial regulators oversee insurers’ market
conduct practices and related compliance.

Our Canadian insurance subsidiary files quarterly
and annual financial statements prepared in
accordance with International Financial
Reporting Standards (“IFRS”) and other locally
accepted standards with OSFI in compliance with
legal and regulatory requirements. OSFI
conducts periodic detailed examinations of
insurers’ business and financial practices,
including the control environment, internal and
external auditing and minimum capital
adequacy, surpluses and related testing,
legislative compliance and appointed actuary
requirements. These examinations also address
regulatory compliance with anti-money
laundering practices, outsourcing, related-party
transactions, privacy and corporate governance.
Provincial regulators conduct periodic market
conduct examinations of insurers doing business
in their jurisdiction.

Freedom Lives Here™

In addition to federal and provincial oversight,
Primerica Life Canada is also subject to the
guidelines set out by the Canadian Life and
Health Insurance Association (“CLHIA”). CLHIA is
an industry association that works closely with
federal and provincial regulators to establish
market conduct guidelines and sound business
and financial practices addressing matters such
as sales representative suitability and screening,
insurance illustrations and partially guaranteed
savings products.

The laws and regulations governing our U.S. and
Canadian insurance businesses include
numerous provisions governing the marketplace
activities of insurers, including policy filings,
payment of insurance commissions, disclosures,
advertising, product replacement, sales and
underwriting practices and complaints and
claims handling. The state insurance regulatory
authorities in the United States and the federal
and provincial regulators in Canada generally
enforce these provisions through periodic
market conduct examinations.

In addition, most U.S. states and Canadian
provinces and territories, as well as the Canadian
federal government, have laws and regulations
governing the financial condition of insurers,
including standards of solvency, types and
concentration of investments, establishment and
maintenance of reserves, reinsurance and
requirements of capital adequacy. As discussed
previously, U.S. state insurance law and Canadian
provincial insurance law also require certain
licensing of insurers and their agents.

Insurance Holding Company Regulation;
Limitations on Dividends. The states in which our
U.S. insurance subsidiaries are domiciled have
enacted legislation and adopted regulations
regarding insurance holding company systems.
These laws require registration of, and periodic
reporting by, insurance companies domiciled
within the jurisdiction that control, or are
controlled by, other corporations or persons so as
to constitute an insurance holding company
system. These laws also affect the acquisition of
control of insurance companies as well as
transactions between insurance companies and
companies controlling them.

The Parent Company is a holding company that
has no significant operations. Our primary asset
is the capital stock of our subsidiaries, and our
primary liability is $375.0 million in principal
amount of senior unsecured notes (the “Senior
Notes”). As a result, we depend on dividends or
other distributions from our insurance and other
subsidiaries as the principal source of cash to
meet our obligations, including the payment of
interest on, and repayment of, principal of any
debt obligations.

ITEM 1. BUSINESS

The states in which our U.S. insurance
subsidiaries are domiciled impose certain
restrictions on our insurance subsidiaries’ ability
to pay dividends to us. In Canada, dividends can
be paid subject to the paying insurance
company’s continuing compliance with
regulatory requirements and upon notice to
OSFI. We determine the dividend capacity of our
insurance subsidiaries using statutory
accounting principles (“SAP”) promulgated by
the NAIC in the United States and using IFRS in
Canada.

The following table sets forth the statutory value of cash and securities dividends paid or payable by
our insurance subsidiaries:

Primerica Life

Primerica Life Canada

For additional information on dividend capacity
and restrictions, see Note 15 (Statutory
Accounting and Dividend Restrictions) to our
consolidated financial statements included
elsewhere in this report.

Policy and Contract Reserve Sufficiency
Analysis. Under the laws and regulations of
their jurisdictions of domicile, our U.S. insurance
subsidiaries are required to conduct annual
analyses of the sufficiency of their life insurance
statutory reserves. In addition, other U.S.
jurisdictions in which our U.S. subsidiaries are
licensed may have certain reserve requirements
that differ from those of their domiciliary
jurisdictions. In each case, a qualified actuary
must submit an opinion that states that the
aggregate statutory reserves, when considered
in light of the assets held with respect to such
reserves, make good and sufficient provision for
the associated contractual obligations and
related expenses of the insurer. If such an
opinion cannot be provided, then the affected
insurer must set up additional reserves by
moving funds from surplus. Our U.S. insurance
subsidiaries most recently submitted these
opinions without qualification as of
December 31, 2016 to applicable insurance
regulatory authorities.

Year ended December 31,

2016

2015

2014

$94,700

(In thousands)
$45,600

$235,000

22,342

16,950

13,434

Primerica Life Canada also is required to conduct
regular analyses of the sufficiency of its life
insurance statutory reserves. Life insurance
reserving and reporting requirements are
completed by Primerica Life Canada’s appointed
actuary. Materials provided by the appointed
actuary are filed with OSFI as part of our annual
filing and are subject to OSFI’s review. Based
upon this review, OSFI may institute remedial
action against Primerica Life Canada as OSFI
deems necessary. Primerica Life Canada has not
been subject to any such remediation or
enforcement by OSFI.

Surplus and Capital Requirements. U.S.
insurance regulators have the discretionary
authority, in connection with the ongoing
licensing of our U.S. insurance subsidiaries, to
limit or prohibit the ability of an insurer to issue
new policies if, in the regulators’ judgment, the
insurer is not maintaining a minimum amount of
surplus or is in hazardous financial condition.
Insurance regulators may also limit the ability of
an insurer to issue new life insurance policies
and annuity contracts above an amount based
upon the face amount and premiums of policies
of a similar type issued in the prior year. We do
not believe that the current or anticipated levels
of statutory surplus of our U.S. insurance

Primerica 2016 Annual Report

ITEM 1. BUSINESS

subsidiaries present a material risk that any such
regulator would limit the amount of new policies
that our U.S. insurance subsidiaries may issue.

The NAIC has established risk-based capital
(“RBC”) standards for U.S. life insurance
companies, as well as a model act to be applied
at the state level. The model act provides that
life insurance companies must submit an annual
RBC report to state regulators reporting their
RBC based upon four categories of risk: asset
risk, insurance risk, interest rate risk and business
risk. For each category, the capital requirement
is determined by applying factors to various
asset, premium and reserve items, with the
factor being higher for those items with greater
underlying risk and lower for less risky items. The
formula is intended to be used by insurance
regulators as an early warning tool to identify
possible weakly capitalized companies for
purposes of initiating further regulatory action. If
an insurer’s RBC falls below specified levels, then
the insurer would be subject to different degrees
of regulatory action depending upon the level.
These actions range from requiring the insurer
to propose actions to correct the capital
deficiency to placing the insurer under
regulatory control.

In Canada, OSFI has authority to request an
insurer to enter into a prudential agreement
implementing measures to maintain or improve
the insurer’s safety and soundness. OSFI also
may issue orders to an insurer directing it to
refrain from unsafe or unsound practices or to
take action to remedy financial concerns. OSFI
has neither requested that Primerica Life Canada
enter into any prudential agreement nor has
OSFI issued any order against Primerica Life
Canada.

In Canada, OSFI oversees an insurer’s minimum
capital requirement and determines the sum of
capital requirements for five categories of risk:
asset default risk, mortality/morbidity/lapse risks,
changes in interest rate environment risk,
segregated funds risk and foreign exchange risk.

NAIC Pronouncements and Reviews. The NAIC
promulgates model insurance laws and
regulations for adoption by the states in order to
standardize insurance industry accounting and

Freedom Lives Here™

reporting guidance. Although many state
regulations emanate from NAIC model statutes
and pronouncements, SAPs continue to be
established by individual state laws, regulations
and permitted practices. Certain changes to
NAIC model statutes and pronouncements,
particularly as they affect accounting issues, may
take effect automatically without affirmative
action by a given state. With respect to some
financial regulations and guidelines,
non-domiciliary states sometimes defer to the
interpretation of the insurance department of
the state of domicile. However, neither the
action of the domiciliary state nor the action of
the NAIC is binding on a non-domiciliary state.
Accordingly, a non-domiciliary state could
choose to follow a different interpretation.

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

Statutory Accounting Principles. SAP is a basis
of accounting developed by U.S. insurance
regulators to monitor and regulate the solvency
of insurance companies. In developing SAP,
insurance regulators were primarily concerned
with evaluating an insurer’s ability to pay all of
its current and future obligations to
policyholders. As a result, statutory accounting
focuses on conservatively valuing the assets and
liabilities of insurers, generally in accordance
with standards specified by the insurer’s
domiciliary jurisdiction. Uniform statutory
accounting practices are established by the NAIC
and generally adopted by regulators in the
various U.S. jurisdictions. These accounting
principles and related regulations determine,
among other things, the amounts our insurance
subsidiaries may ultimately pay to us as
dividends, and they differ in many instances
from U.S generally accepted accounting
principles (“U.S. GAAP”), which are designed to
measure a business on a going-concern basis.

Under U.S. GAAP, certain expenses are
capitalized when incurred and then amortized
over the life of the associated policies. The
valuation of assets and liabilities under U.S.
GAAP is based in part upon best estimate
assumptions made by the insurer. U.S. GAAP-
basis stockholders’ equity represents the
ownership interest in the U.S. GAAP-measured
net assets held by stockholders. As a result, the
values for assets, liabilities and equity reflected
in financial statements prepared in accordance
with U.S. GAAP will be different from those
reflected in financial statements prepared under
SAP.

State Insurance Guaranty Funds Laws. Under
most state insurance guaranty fund laws,
insurance companies doing business therein can
be assessed up to prescribed limits for
policyholder losses incurred by insolvent
companies. Most insurance guaranty fund laws
currently provide that an assessment may be
excused or deferred if it would threaten an
insurer’s own financial strength. In addition,
assessments may be partially offset by credits
against future state premium taxes.

In Canada, the

Additional Oversight in Canada.
Minister of Finance under the Insurance
Companies Act approved our indirect acquisition
of Primerica Life Canada in April 2010. The
Minister expects that a person controlling a
federal insurance company will provide ongoing
financial, managerial or operational support to
its subsidiary should such support prove
necessary. The Minister required us to sign a
support principle letter, which provides, without
limiting the scope of the support principle letter,
that this ongoing support may take the form of
additional capital, the provision of managerial
expertise or the provision of support in such
areas as risk management, internal control
systems and training. The provision of
the support principle letter is intended to ensure
that the person controlling the federal insurance
company is aware of the importance and
relevance of the support principle in the
consideration of the application. However, the
letter does not create a legal obligation on our
part to provide the support. Primerica Life

ITEM 1. BUSINESS

Canada is currently in compliance with the terms
of the support principle letter.

Other Regulatory Changes.
From time to time,
various jurisdictions make changes to the state
or provincial licensing examination process that
may make it more difficult for our sales
representatives to obtain their life insurance
licenses. For example, the insurance regulators in
the Canadian provinces and territories
implemented a new life insurance licensing
examination program across Canada in January
2016. Changes such as these could decrease the
ability of applicants to obtain their life insurance
licenses. Likewise, FINRA has announced a
restructuring of its representative-level
qualification examination program that marks a
conceptual change from FINRA’s current
securities examination program. FINRA has not
announced a specific timeframe for the
implementation of the new exam structure, but
has targeted an effective date of January 2018.
While the objective of the new program is to
improve efficiencies, if the changes create
barriers to entry that are not relevant to
assessing an applicant’s competence, the costs
significantly increase, or the program is
implemented without adequate transitions, the
restructured program could result in a decrease
in the number of registrants obtaining their
securities licenses in the United States. For more
information, see “Risk Factors” and “ITEM 7.
Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”

Regulation of Our Investment and Savings
Products Business. PFS Investments is
registered with, and regulated by, FINRA and the
Securities and Exchange Commission (“SEC”). It is
subject to regulation by the Municipal Securities
Rulemaking Board (the “MSRB”) with respect to
529 plans, by the Department of Labor (“DOL”)
with respect to certain retirement plans, and by
state securities agencies. PFS Investments
operates as an introducing broker-dealer and is
registered in all 50 U.S. states and certain
territories and with the SEC. As such, it performs
a review of investment recommendations made
by our representatives in the account opening
process, in accordance with FINRA requirements,
but it does not hold client accounts. U.S. client

Primerica 2016 Annual Report

ITEM 1. BUSINESS

funds are held by the mutual fund in which such
client funds are invested or by the annuity
underwriters in the case of variable annuities.

PFS Investments is required to file monthly
reports as well as annual audited financial
statements with the SEC pursuant to Section 17
of the Securities Exchange Act of 1934, as
amended (“Exchange Act”), and Rule 17a-5
thereunder. As part of filing these reports, PFS
Investments is subject to minimum net capital
requirements, as mandated by Rule 15c3-1 of
the Exchange Act.

The SEC rules and regulations that currently
apply to PFS Investments and our registered
representatives generally require that we make
suitable investment recommendations to our
customers and disclose conflicts of interest that
might affect the recommendations or advice we
provide. The Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the “Dodd-
Frank Act”) gave the SEC the power to impose
on broker-dealers a heightened standard of
conduct (fiduciary duty) that is currently
applicable only to investment advisors. As
required by the Dodd-Frank Act, in January
2011, the SEC staff submitted a report to
Congress in which it recommended that the SEC
adopt a fiduciary standard of conduct for
broker-dealers that is uniform with that of
investment advisors. The SEC has slated the rule
on its regulatory agenda for “long-term action”
without a specific timetable.

PFS Investments is also approved as a non-bank
custodian under Internal Revenue Service (“IRS”)
regulations and, in that capacity, may act as a
custodian or trustee for certain retirement
accounts. Our sales representatives who sell
securities products through PFS Investments are
required to be registered representatives of PFS
Investments. All aspects of PFS Investments’
business are regulated, including sales methods
and charges, trade practices, the use and
safeguarding of customer securities, capital
structure, recordkeeping, conduct and
supervision of its independent salespeople.

PFS Investments is also an SEC-registered
investment advisor and, under the name
Primerica Advisors, offers a managed

Freedom Lives Here™

investments, or mutual fund advisory, program.
In most states, our representatives are required
to obtain an additional license to offer this
program.

PSS is registered with the SEC as a transfer agent
and, accordingly, is subject to SEC rules and
examinations. Acting in this capacity, PSS and
third-party vendors employed by PSS are
responsible for certain client investment account
shareholder services.

On April 8, 2016, the DOL published a final
regulation (“the DOL Fiduciary Rule”), which
more broadly defines the circumstances under
which a person or entity may be considered a
fiduciary for purposes of the prohibited
transaction rules of the Employee Retirement
Income Security Act (“ERISA”) and Internal
Revenue Code (“IRC”) Section 4975. IRC
Section 4975 prohibits certain types of
compensation paid by third parties with respect
to transactions involving assets in qualified
accounts, including IRAs. In connection with the
DOL Fiduciary Rule, the DOL also issued new
exemptions and amended several existing
exemptions. On February 3, 2017, the President
of the United States issued a memorandum
directing the DOL to review the DOL Fiduciary
Rule to determine, based on certain factors,
whether the rule should be revised or rescinded.
The DOL Fiduciary Rule, which was set to
become “applicable” on April 10, 2017, may be
delayed for an unspecified period while the
Secretary of Labor prepares an updated
economic and legal analysis on the impact of the
DOL Fiduciary Rule.

PFSL Investments Canada is a mutual fund
dealer registered with and regulated by the
Mutual Fund Dealers Association of Canada (the
“MFDA”), the national self-regulatory
organization for the distribution side for the
Canadian mutual fund industry. It is also
registered with provincial and territorial
securities commissions throughout Canada. As a
registered mutual fund dealer, PFSL Investments
Canada performs the suitability review of mutual
fund investment recommendations, and like our
U.S. broker-dealer, it does not hold client
accounts.

PFSL Investments Canada is required to file
monthly and annual financial statements and
reports with the MFDA that are prepared to
comply with the prescribed MFDA reporting
requirements. The MFDA has established a risk
adjusted capital standard for mutual fund
dealers. Its formula is designed to provide
advance warning of a member encountering
difficulties. If a mutual fund dealer falls below
specified levels then restrictions would apply
until rectified, including not being able to act on
certain matters without prior written consent
from the MFDA.

PFSL Investments Canada sales representatives
are required to be registered in the provinces
and territories in which they do business,
including regulation by the Autorité des marchés
financiers in Quebec, and are also subject to
regulation by the MFDA. These regulators have
broad administrative powers, including the
power to limit or restrict the conduct of our
business and impose censures or fines for failure
to comply with the law or regulations.

PFSL Fund Management in Canada is registered
as an Investment Fund Manager in connection
with our Concert™ Series mutual funds and is
regulated by provincial securities commissions.

PFSL Fund Management is required to file
quarterly and annual financial statements with
the Ontario Securities Commission (“OSC”)
prepared to meet the requirements of National
Instrument 31-103, Registration Requirements,
Exemptions and Ongoing Registrant Obligations,
based on the financial reporting framework
specified in National Instrument 52-107,
Acceptable Accounting Principles and Auditing
Standards. PFSL Fund Management is required
to maintain a minimum level of capital and file
its quarterly and annual calculation of excess
working capital with the OSC. As an investment
fund manager, PFSL Fund Management is
required to file periodic reports with provincial
and territorial securities commissions
throughout Canada for its Concert™ Series
mutual funds. Such reports include semi-annual
and annual financial statements prepared in
accordance with IFRS.

ITEM 1. BUSINESS

As the segregated funds are separate accounts
of Primerica Life Canada, the segregated funds
are also regulated by OSFI and included as part
of the quarterly and annual financial statement
filings for Primerica Life Canada. In addition, the
segregated funds are also subject to the
guidelines set out by the CLHIA.

Other Laws and Regulations. The USA Patriot
Act of 2001 (the “Patriot Act”) contains anti-
money laundering and financial transparency
laws and mandates the implementation of
various regulations applicable to broker-dealers
and other financial services companies, including
insurance companies. The Patriot Act seeks to
promote cooperation among financial
institutions, regulators and law enforcement
entities in identifying parties that may be
involved in terrorism or money laundering.

U.S. federal and state laws and regulations
require financial institutions, including insurance
companies, to protect the security and
confidentiality of consumer financial information
and to notify consumers about their policies and
practices relating to their collection and
disclosure of consumer information and their
policies relating to protecting the security and
confidentiality of that information. Similarly,
federal and state laws and regulations also
govern the disclosure and security of consumer
health information. In particular, regulations
promulgated by the U.S. Department of Health
and Human Services regulate the disclosure and
use of protected health information by health
insurers and others (including certain life
insurers), the physical and procedural safeguards
employed to protect the security of that
information and the electronic storage and
transmission of such information. Congress and
state legislatures are expected to consider
additional legislation relating to privacy and
other aspects of consumer information.

The Financial Consumer Agency of Canada
(“FCAC”), a Canadian federal regulatory body, is
responsible for ensuring that federally regulated
financial institutions, which include Primerica Life
Canada and PFSL Investments Canada, comply
with federal consumer protection laws and
regulations, voluntary codes of conduct and their

Primerica 2016 Annual Report

ITEM 1. BUSINESS

own public commitments. The Financial
Transactions and Reports Analysis Centre of
Canada (“FINTRAC”) is Canada’s financial
intelligence unit. Its mandate includes ensuring
that entities subject to the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act
comply with reporting, recordkeeping and other
obligations under that act. We are also subject to
privacy laws under the jurisdiction of federal and
provincial privacy commissioners, anti-money
laundering laws enforced by FINTRAC and OSFI,
and the consumer complaints provisions of
federal insurance laws under the mandate of the
FCAC, which requires insurers to belong to a
complaints ombud-service and file a copy of their
complaints handling policy with the FCAC.

SegmentFinancialandGeographic
Disclosures

We have two primary operating segments –
Term Life Insurance and Investment and Savings
Products. The Term Life Insurance segment
includes underwriting profits on our in-force
book of term life insurance policies, net of
reinsurance, which are underwritten by our life
insurance company subsidiaries. The Investment
and Savings Products segment includes mutual
funds, managed investments and annuities
distributed through licensed broker-dealer
subsidiaries and includes segregated funds, an
individual annuity savings product that we
underwrite in Canada through Primerica Life
Canada. We also have a Corporate and Other
Distributed Products segment, which consists of
the majority of net investment income earned by
our invested asset portfolio, realized gains and
losses on invested assets, interest expense on
notes payable and reserve financing
transactions, and revenues and expenses related
to the distribution of non-core products.

See “Management’s Discussion and Analysis of
Financial Condition and Results of Operations –
Results of Operations” and Note 3 (Segment and
Geographical Information) to our consolidated
financial statements included elsewhere in this
report for more information concerning our
domestic and international operations and our
operating segments.

Freedom Lives Here™

For information on risks relating to our Canadian
operations, see “Risk Factors” and “Quantitative
and Qualitative Information About Market Risks
– Canadian Currency Risk.”

Competition

We operate in a highly competitive environment
with respect to the sale of financial products and
for retaining our more productive sales
representatives. Because we offer several
different financial products, we compete directly
with a variety of financial institutions, such as
insurance companies and brokers, banks, finance
companies, credit unions, broker-dealers, mutual
fund companies and other financial products
and services companies.

Competitors with respect to our term life
insurance products consist both of stock and
mutual insurance companies, as well as other
financial intermediaries. Competitive factors
affecting the sale of life insurance products
include the level of premium rates, benefit
features, risk selection practices, compensation
of sales representatives and financial strength
ratings from ratings agencies such as A.M. Best.

In offering our securities products, our sales
representatives compete with a range of other
advisors, broker-dealers and direct channels,
including wirehouses, regional broker-dealers,
independent broker-dealers, insurers, banks,
asset managers, registered investment advisors,
mutual fund companies and other direct
distributors. The mutual funds that we offer face
competition from other mutual fund families and
alternative investment products, such as
exchange-traded funds. Our annuity products
compete with products from numerous other
companies. Competitive factors affecting the
sale of annuity products include price, product
features, investment performance, commission
structure, perceived financial strength, claims-
paying ratings, service, and distribution
capabilities.

InformationTechnology

We built a sophisticated information technology
platform to support our clients, operations and

sales force. Located at our main campus in
Duluth, Georgia, our data center houses an
enterprise-class IBM mainframe that serves as
the repository for all client and sales force data
and operates as a database server for our
distributed environment. Our business
applications, many of which are proprietary, are
supported by application developers and data
center staff at our main campus. Our information
security team provides services that include
project consulting, threat management,
application and infrastructure assessments,
secure configuration management, and
information security administration. This
infrastructure also supports a combination of
local and remote recovery solutions for business
resumption in the event of a disaster.

We adopted a new Incident Response Plan in
August 2016. Under this Plan, our Incident
Response Team consists of employees from our
information security, legal, compliance, public
relations, and business teams. This Plan is
designed to help Primerica identify and
promptly respond to information security
incidents, contain and eradicate such incidents,
notify affected parties and, where appropriate,
notify government and regulatory authorities.
This Plan documents the roles and
responsibilities of Primerica personnel and third-
party vendors in responding to information
security incidents, including when and to whom
incidents should be reported based on level of
severity. On a semi-annual basis, the team
undertakes facilitator-led trainings and
simulations of information security incidents. We
have also purchased cyber insurance coverage,
which became effective in January 2017.

Employees
As of December 31, 2016, we had 1,787 full-time
employees in the United States and 239 full-time
employees in Canada. In addition, as of
December 31, 2016, we had 547 on-call
employees in the United States and 89 on-call
employees in Canada who provided services on
an as-needed hourly basis. None of our
employees is a member of any labor union, and
we have never experienced any business
interruption as a result of any labor disputes.

ITEM 1. BUSINESS

AvailableInformation

We make available free of charge on our website
(www.primerica.com) our annual reports on Form
10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act as
soon as reasonably practicable upon filing such
information with, or furnishing it to, the SEC.
Information included on our website is not
incorporated by reference into this report. The
Company’s reports are also available at the SEC’s
Public Reference Room at 100 F. Street, NE,
Washington, DC 20549, on the SEC’s website at
www.sec.gov, or by calling the SEC at
1-800-SEC-0330.

ITEM 1A. RISK FACTORS.

RisksRelatedtoOurDistribution
Structure

Our failure to continue to attract new
recruits, retain sales representatives or
license or maintain the licensing of our
sales representatives would materially
adversely affect our business, financial
condition and results of operations.

New sales representatives provide us with access
to new clients, enable us to increase sales and
provide the next generation of successful sales
representatives. As is typical with distribution
businesses, we experience a high rate of
turnover among our part-time sales
representatives, which requires us to attract,
retain and motivate a large number of sales
representatives. Recruiting is performed by our
current sales representatives, and the
effectiveness of recruiting is generally
dependent upon our reputation as a provider of
a rewarding and potentially lucrative income
opportunity, as well as the general competitive
and economic environment. Whether recruits are
motivated to complete their training and
licensing requirements and commit to selling
our products is largely dependent upon the
effectiveness of our compensation and
promotional programs, as well as the

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

competitiveness of such programs compared
with other companies, including other part-time
business opportunities and our recruits’ desire to
help middle-income families in their
communities become educated about their
finances and assist them in identifying products
that provide income protection and savings
opportunities.

If our new business opportunities and products
do not generate sufficient interest to attract new
recruits, motivate them to become licensed sales
representatives and maintain their licenses, and
incentivize them to sell our products and recruit
other new sales representatives, our business
would be materially adversely affected.

Certain key RVPs have large sales organizations
that include thousands of sales representatives.
These key RVPs are responsible for attracting,
motivating, supporting and assisting the sales
representatives in their sales organizations. The
loss of one or more key RVPs together with a
substantial number of their sales representatives
for any reason could materially adversely affect
our financial results and could impair our ability
to attract new sales representatives.

Furthermore, if we or any other businesses with
a similar distribution structure engage in
practices resulting in increased negative public
attention for our business model, the resulting
reputational challenges could adversely affect
our ability to attract new recruits. Companies
such as ours that use independent agents to sell
directly to customers can be the subject of
negative commentary on website postings,
social media and other non-traditional media.
This negative commentary can spread inaccurate
or incomplete information about distribution
companies in general or our company in
particular, which can make our recruiting more
difficult.

From time to time, various jurisdictions make
changes to the state or provincial licensing
examination process that may make it more
difficult for our sales representatives to obtain
their life insurance licenses. For example, the
insurance regulators in the Canadian provinces
and territories implemented a new life insurance
licensing examination program across Canada in

Freedom Lives Here™

January 2016. Changes such as these could
decrease the ability of applicants to obtain their
life insurance licenses. Likewise, FINRA has
announced a restructuring of its representative-
level qualification examination program that
marks a conceptual change from FINRA’s current
securities examination program. FINRA has not
announced a specific timeframe for the
implementation of the new exam structure, but
has targeted an effective date of January 2018.
While the objective of the new program is to
improve efficiencies, if the changes create
barriers to entry that are not relevant to
assessing an applicant’s competence, the costs
significantly increase, or the program is
implemented without adequate transitions, the
restructured program could result in a decrease
in the number of registrants obtaining their
securities licenses in the United States.

There are a number of laws and
regulations that could apply to our
distribution model, which could require us
to modify our distribution structure.

In the past, certain distribution models that use
independent agents to sell directly to customers
have been subject to challenge under various
laws, including laws relating to business
opportunities, franchising and unfair or
deceptive trade practices.

In general, state business opportunity and
franchise laws in the United States prohibit sales
of business opportunities or franchises unless
the seller provides potential purchasers with a
pre-sale disclosure document that has first been
filed with a designated state agency and grants
purchasers certain legal recourse against sellers
of business opportunities and franchises. Certain
Canadian provinces have enacted legislation
dealing with franchising, which typically requires
mandatory disclosure to prospective franchisees.

We have not been, and are not currently, subject
to business opportunity laws because the
amounts paid by our new representatives to us:
(i) are less than the minimum thresholds set by
many state and provincial statutes and (ii) are
not fees paid for the right to participate in a

business, but rather are for bona fide expenses
such as state and provincial-required insurance
examinations and pre-licensing training. We
have not been, and are not currently, subject to
franchise laws for similar reasons. However,
there is a risk that a governmental agency or
court could disagree with our assessment or that
these laws and regulations could change. In
addition, although we do not believe that the
Federal Trade Commission (“FTC”)‘s Business
Opportunity Rule applies to our company, it
could be interpreted in a manner inconsistent
with our interpretation. Becoming subject to
business opportunity or franchise laws or
regulations could require us to provide
additional disclosures and regulate the manner
in which we recruit our sales representatives that
may increase the expense of, or adversely
impact our recruitment of new sales
representatives.

There are various laws and regulations that
prohibit fraudulent or deceptive schemes known
as pyramid schemes. In general, a pyramid
scheme is defined as an arrangement in which
new participants are required to pay a fee to
participate in the organization and then receive
compensation primarily for recruiting other
persons to participate, either directly or through
sales of goods or services that are merely
disguised payments for recruiting others. The
application of these laws and regulations to a
given set of business practices is inherently fact-
based and, therefore, is subject to interpretation
by applicable enforcement authorities. Our sales
representatives are paid commissions and other
remuneration based on sales of our products
and services to bona fide purchasers, and for
this and other reasons we do not believe that we
are subject to laws regulating pyramid schemes.
Moreover, our sales representatives are not
required to purchase any of the products
marketed by us. However, even though we
believe that our distribution practices are
currently in compliance with, or exempt from,
these laws and regulations, there is a risk that a
governmental agency or court could disagree
with our assessment or that these laws and
regulations could change, which could require us
to restructure our operations in certain

ITEM 1A. RISK FACTORS

jurisdictions or result in other costs or fines.

There are also federal, state and provincial laws
of general application, such as the FTC Act, and
state or provincial unfair and deceptive trade
practices laws that could potentially be invoked
to challenge aspects of our recruiting of sales
representatives. In particular, our recruiting
efforts include promotional materials for recruits
that describe the potential business opportunity
available to them if they join our sales force.
These materials, as well as our other recruiting
efforts and those of our sales representatives,
are subject to scrutiny by the FTC and state and
provincial enforcement authorities with respect
to misleading statements, including misleading
earnings claims made to encourage potential
new recruits to join our sales force. If claims
made by us or by our sales representatives are
deemed to be unfair, deceptive, or misleading, it
could result in violations of the FTC Act or
comparable state and provincial statutes
prohibiting unfair or deceptive trade practices or
result in reputational harm.

Being subject to, or out of compliance with, the
aforementioned laws and regulations could
require us to change our distribution structure,
which could materially adversely affect our
business, financial condition and results of
operations.

There may be adverse tax, legal or
financial consequences if the independent
contractor status of our sales
representatives is overturned.

Our sales representatives are independent
contractors who operate their own businesses. In
the past, we have been successful in defending
our company in various contexts before courts
and governmental agencies against claims that
our sales representatives should be treated like
employees. Although we believe that we have
properly classified our representatives as
independent contractors, there is nevertheless a
risk that the IRS, the Canada Revenue Agency, a
court or other authority will take a different view.
Furthermore, the tests governing the

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

determination of whether an individual is
considered to be an independent contractor or
an employee are typically fact-sensitive and vary
from jurisdiction to jurisdiction. Laws and
regulations that govern the status and
misclassification of independent sales
representatives are subject to change or
interpretation.

The classification of workers as independent
contractors has been the subject of federal, state
and provincial legislative and regulatory interest
over the last several years, with proposals being
made that call for greater scrutiny of
independent contractor classifications and
greater penalties for companies who wrongly
classify workers as independent contractors
instead of employees. We cannot predict the
outcome of these legislative and regulatory
efforts.

If there is an adverse determination with respect
to the classification of some or all of our
independent contractors by a court or
governmental agency, we could incur significant
costs in complying with such laws and
regulations, including in respect of tax
withholding, social security payments, retirement
plan contributions and recordkeeping, employee
benefits, payment of wages or modification of
our business model, any of which could have a
material adverse effect on our business, financial
condition and results of operations. In addition,
there is the risk that we may be subject to
significant monetary liabilities arising from fines
or judgments as a result of any such actual or
alleged non-compliance with federal, state, or
provincial laws.

The Company’s or its independent sales
representatives’ violation of, or
non-compliance with, laws and regulations
and related claims and proceedings could
expose us to material liabilities.

Extensive federal, state, provincial and territorial
laws regulate our product offerings and our
relationships with our clients, imposing certain
requirements that our sales representatives must
follow. At any given time, we may have pending

Freedom Lives Here™

state, federal or provincial examinations or
inquiries of our investment and savings products
and insurance businesses. In addition to
imposing requirements that sales
representatives must follow in their dealings
with clients, these laws and regulations generally
require us to maintain a system of supervision
reasonably designed to ensure that our sales
representatives comply with the requirements to
which they are subject. We have policies and
procedures to comply with these laws and
regulations. However, despite these compliance
and supervisory efforts, the breadth of our
operations and the broad regulatory
requirements could result in oversight failures
and instances of non-compliance or misconduct
on the part of our sales representatives.

From time to time, we are subject to private
litigation as a result of alleged misconduct by
our sales representatives. Examples include
claims that a sales representative’s failure to
disclose underwriting-related information
regarding the insured on an insurance
application resulted in the denial of a life
insurance policy claim, and with respect to
investment and savings products sales, errors or
omissions that a sales representative made in
connection with the purchase or sale of a
securities product. Non-compliance with laws or
regulations by our sales representatives could
result in adverse findings in either examinations
or litigation and could subject us to sanctions,
monetary liabilities, restrictions on or the loss of
the operation of our business, or reputational
harm, any of which could have a material
adverse effect on our business, financial
condition and results of operations.

Any failure to protect the confidentiality of
client information could adversely affect
our reputation and have a material
adverse effect on our business, financial
condition and results of operations.

Pursuant to federal, state and provincial laws,
various government agencies have established
rules protecting the privacy and security of
personal information. In addition, most states

and some provinces have enacted laws, which
vary significantly from jurisdiction to jurisdiction,
to safeguard the privacy and security of personal
information. Many of our sales representatives
and employees have access to, and routinely
process, personal information of clients through
a variety of media, including the Internet and
software applications. We rely on various
internal processes and controls to protect the
confidentiality of client information that is
accessible to, or in the possession of, our
company, our employees and our sales
representatives. If a sales representative or
employee intentionally or unintentionally
discloses or misappropriates confidential client
information or our data is the subject of a
cybersecurity attack, or if we fail to maintain
adequate internal controls or our sales
representatives or employees fail to comply with
our policies and procedures, misappropriation or
intentional or unintentional inappropriate
disclosure or misuse of client information could
occur. Such internal control inadequacies or
non-compliance could materially damage our
reputation or lead to civil or criminal penalties,
which, in turn, could have a material adverse
effect on our business, financial condition and
results of operations.

RisksRelatedtoOurInsuranceBusiness
andReinsurance

We may face significant losses if our actual
experience differs from our expectations
regarding mortality or persistency.

We set prices for life insurance policies based
upon expected claim payment patterns derived
from assumptions we make about the mortality
rates, or likelihood of death, of our policyholders
in any given year. The long-term profitability of
these products depends upon how our actual
mortality rates compare to our pricing
assumptions. For example, if mortality rates are
higher than those assumed in our pricing
assumptions, we could be required to make
more death benefit payments under our life
insurance policies or to make such payments
sooner than we had projected, which may
decrease the profitability of our term life

ITEM 1A. RISK FACTORS

insurance products and result in an increase in
the cost of our subsequent reinsurance
transactions.

The prices and expected future profitability of
our life insurance products are also based, in
part, upon assumptions related to persistency.
Actual persistency that is lower than our
persistency assumptions could have an adverse
effect on profitability, especially in the early
years of a policy, primarily because we would be
required to accelerate the amortization of
expenses we deferred in connection with the
acquisition of the policy. Actual persistency that
is higher than our persistency assumptions could
have an adverse effect on profitability in the
later years of a block of policies because the
anticipated claims experience is higher in these
later years. If actual persistency is significantly
different from that assumed in our pricing
assumptions, our reserves for future policy
benefits may prove to be inadequate. We are
precluded from adjusting premiums on our
in-force business during the initial term of the
policies, and our ability to adjust premiums on
in-force business after the initial policy term is
limited to the maximum premium rates in the
policy.

Our assumptions and estimates regarding
mortality and persistency require us to make
numerous judgments and, therefore, are
inherently uncertain. We cannot determine with
precision the actual persistency or ultimate
amounts that we will pay for actual claim
payments on a block of policies, the timing of
those payments, or whether the assets
supporting these contingent future payment
obligations will increase to the levels we
estimate before payment of claims. If we
conclude that our future policy benefit reserves,
together with future premiums, are insufficient
to cover actual or expected claims payments and
the scheduled amortization of our deferred
policy acquisition costs (“DAC”), we would be
required to first accelerate our amortization of
DAC and then increase our future policy benefit
reserves in the period in which we make the
determination, which could materially adversely
affect our business, financial condition and
results of operations.

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

The occurrence of a catastrophic event
could materially adversely affect our
business, financial condition and results of
operations.

Our insurance operations are exposed to the risk
of catastrophic events, which could cause a large
number of premature deaths of our insureds. A
catastrophic event could also cause significant
volatility in global financial markets and disrupt
the economy. Although we have ceded a
significant majority of our mortality risk to
reinsurers, a catastrophic event could cause a
material adverse effect on our business, financial
condition and results of operations. Claims
resulting from a catastrophic event could cause
substantial volatility in our financial results for
any quarter or year and could also materially
harm the financial condition of our reinsurers,
which would increase the probability of default
on reinsurance recoveries. Our ability to write
new business could also be adversely affected.

In addition, most of the jurisdictions in which our
insurance subsidiaries are licensed to transact
business require life insurers to participate in
guaranty associations, which raise funds to pay
contractual benefits owed pursuant to insurance
policies issued by impaired, insolvent or failed
issuers. It is possible that a catastrophic event
could require extraordinary assessments on our
insurance companies, which could have a
material adverse effect on our business, financial
condition and results of operations.

Our insurance business is highly regulated,
and statutory and regulatory changes may
materially adversely affect our business,
financial condition and results of
operations.

Life insurance statutes and regulations are
generally designed to protect the interests of
the public and policyholders. Those interests
may conflict with the interests of our
stockholders. Currently, in the United States, the
power to regulate insurance resides almost
exclusively with the states. The laws of the
various U.S. jurisdictions grant state insurance

Freedom Lives Here™

regulators broad powers to regulate almost all
aspects of our insurance business. Much of this
state regulation follows model statutes or
regulations developed or amended by the NAIC,
which is composed of the insurance
commissioners of each U.S. jurisdiction. The
NAIC re-examines and amends existing model
laws and regulations (including holding
company regulations) in addition to determining
whether new ones are needed.

The Dodd-Frank Act created the Federal
Insurance Office and authorized it to, among
other things, study methods to modernize and
improve insurance regulation. We cannot predict
with certainty whether, or in what form, reforms
will be enacted and, if so, whether the enacted
reforms will materially affect our business.
Changes in federal statutes, including the
Gramm-Leach-Bliley Act and the McCarran-
Ferguson Act, financial services regulation and
federal taxation, in addition to changes to state
statutes and regulations, may be more restrictive
than current requirements or may result in
higher costs, and could materially adversely
affect our business, financial condition and
results of operations.

We are currently undergoing multi-state
treasurer unclaimed property audits by 30
jurisdictions focused on the life insurance claims
paying practices of our subsidiaries, Primerica
Life and NBLIC. Other jurisdictions may pursue
similar audits and litigation. The potential
outcome of such actions is difficult to predict
but could subject us to adverse consequences,
including, but not limited to, settlement
payments, additional payments to beneficiaries,
and additional escheatment of funds deemed
abandoned under state laws. We cannot
reasonably estimate the likelihood or the impact
of additional costs or liabilities that could result
from resolution of these matters, or the effect
these matters may have on the conduct of our
business, financial condition and results of
operations.

Federal and provincial insurance laws regulate all
aspects of our Canadian insurance business.
Changes to federal or provincial statutes and
regulations may be more restrictive than current

requirements or may result in higher costs,
which could materially adversely affect our
business, financial condition and results of
operations. If OSFI determines that our
corporate actions do not comply with applicable
Canadian law, Primerica Life Canada could face
sanctions or fines, and Primerica Life Canada
could be subject to increased capital
requirements or other requirements deemed
appropriate by OSFI.

We received approval from the Minister of
Finance (Canada) under the Insurance
Companies Act (Canada) in connection with our
indirect acquisition of Primerica Life Canada. The
Minister expects that a person controlling a
federal insurance company will provide ongoing
financial, managerial or operational support to
its subsidiary should such support prove
necessary, and has required us to sign a support
principle letter to that effect. This ongoing
support may take the form of additional capital,
the provision of managerial expertise or the
provision of support in such areas as risk
management, internal control systems and
training. However, the letter does not create a
legal obligation on the part of the person to
provide the support. In the event that OSFI
determines Primerica Life Canada is not
receiving adequate support from the Parent
Company under applicable Canadian law,
Primerica Life Canada may be subject to
increased capital requirements or other
requirements deemed appropriate by OSFI.

If there were to be extraordinary changes to
statutory or regulatory requirements in the
United States or Canada, we may be unable to
fully comply with or maintain all required
insurance licenses and approvals. Regulatory
authorities have relatively broad discretion to
grant, renew and revoke licenses and approvals.
If we do not have all requisite licenses and
approvals, or do not comply with applicable
statutory and regulatory requirements, the
regulatory authorities could preclude or
temporarily suspend us from carrying on some
or all of our insurance activities or impose fines
or penalties on us, which could materially
adversely affect our business, financial condition
and results of operations. We cannot predict

ITEM 1A. RISK FACTORS

with certainty the effect any proposed or future
legislation or regulatory initiatives may have on
the conduct of our business.

A decline in the regulatory capital ratios of
our insurance subsidiaries could result in
increased scrutiny by insurance regulators
and ratings agencies and have a material
adverse effect on our business, financial
condition and results of operations.

Each of our U.S. insurance subsidiaries is subject
to RBC standards (imposed under the laws of its
respective jurisdiction of domicile). The RBC
formula for U.S. life insurance companies
generally establishes capital requirements
relating to asset, insurance, interest rate and
business risks. Our U.S. insurance subsidiaries are
required to report their results of RBC
calculations annually to the applicable state
department of insurance and the NAIC. Our
Canadian life insurance subsidiary is subject to
minimum continuing capital and surplus
requirements (“MCCSR”), and Tier 1 capital ratio
requirements, and is required to provide its
MCCSR and Tier 1 capital ratio calculations to
the Canadian regulators. The capitalization of
our insurance subsidiaries is maintained at levels
in excess of the effective minimum requirements
of the NAIC in the United States and OSFI in
Canada. In any particular year, statutory capital
and surplus amounts and RBC and MCCSR ratios
may increase or decrease depending on a variety
of factors, including the amount of statutory
income or losses generated by our insurance
subsidiaries, the amount of additional capital our
insurance subsidiaries must hold to support
business growth, changes in their reserve
requirements, the value of securities in their
investment portfolios, the credit ratings of
investments held in their portfolios, changes in
interest rates, credit market volatility, changes in
consumer behavior, as well as changes to the
NAIC’s RBC formula or the MCCSR calculation of
OSFI. Many of these factors are outside of our
control.

Our financial strength and credit ratings are
significantly influenced by the statutory surplus

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

amounts and RBC and MCCSR ratios of our
insurance company subsidiaries. Ratings
agencies may change their internal models,
effectively increasing or decreasing the amount
of statutory capital our insurance subsidiaries
must hold to maintain their current ratings. In
addition, ratings agencies may downgrade the
invested assets held in our portfolio, which could
result in a reduction of our insurance
subsidiaries’ capital and surplus. Changes in
statutory accounting principles could also
adversely impact our insurance subsidiaries’
ability to meet minimum RBC, MCCSR and
statutory capital and surplus requirements. There
is no assurance that our insurance subsidiaries
will not need additional capital or, if needed,
that we will be able to provide it to maintain the
targeted RBC and MCCSR levels to support their
business operations.

The failure of any of our insurance subsidiaries
to meet its applicable RBC and MCCSR
requirements or minimum capital and surplus
requirements could subject it to further
examination or corrective action imposed by
insurance regulators, including limitations on its
ability to write additional business, supervision
by regulators or seizure or liquidation. Any
corrective action imposed could have a material
adverse effect on our business, financial
condition and results of operations. A decline in
RBC or MCCSR also limits the ability of our
insurance subsidiaries to pay dividends or make
distributions and could be a factor in causing
ratings agencies to downgrade the financial
strength ratings of all our insurance subsidiaries.
Such downgrades would have an adverse effect
on our ability to write new insurance policies
and, therefore, could have a material adverse
effect on our business, financial condition and
results of operations.

A significant ratings downgrade by a
ratings organization could materially
adversely affect our business, financial
condition and results of operations.

Each of our insurance subsidiaries, with the
exception of Peach Re and Vidalia Re, has been
assigned a financial strength rating by A.M. Best.

Freedom Lives Here™

Primerica Life currently also has an insurer
financial strength rating from Standard & Poor’s
and Moody’s. NBLIC, Primerica Life Canada,
Peach Re and Vidalia Re are not rated by
Standard & Poor’s and Moody’s.

The financial strength ratings of our insurance
subsidiaries are subject to periodic review using,
among other things, the ratings agencies’
proprietary capital adequacy models, and are
subject to revision or withdrawal at any time.
Insurance financial strength ratings are directed
toward the concerns of policyholders and are
not intended for the protection of stockholders
or as a recommendation to buy, hold or sell
securities. Our financial strength ratings will
affect our competitive position relative to other
insurance companies. If the financial strength
ratings of our insurance subsidiaries fall below
certain levels, some of our policyholders may
move their business to our competitors. In
addition, the models used by ratings agencies to
determine financial strength are different from
the capital requirements set by insurance
regulators.

Ratings organizations review the financial
performance and financial conditions of
insurance companies, and provide opinions
regarding financial strength, operating
performance and ability to meet obligations to
policyholders. A significant downgrade in the
financial strength ratings of any of our insurance
subsidiaries, or the announced potential for a
downgrade, could have a material adverse effect
on our business, financial condition and results
of operations by, among other things:

•

reducing sales of insurance products;

adversely affecting our relationships with
our sales representatives;

• materially increasing the amount of policy

cancellations by our policyholders;

•

requiring us to reduce prices to remain
competitive; and

adversely affecting our ability to obtain
reinsurance at reasonable prices or at all.

If the rating agencies or regulators change their
approach to financial strength ratings and

statutory capital requirements, we may need to
take action to maintain current ratings and
capital adequacy ratios, which could have a
material adverse effect on our business, financial
condition and results of operations.

In addition to financial strength ratings of our
insurance subsidiaries, the Parent Company
currently has investment grade credit ratings
from Standard & Poor’s, Moody’s, and A.M. Best
for its Senior Notes. These ratings are indicators
of a debt issuer’s ability to meet the terms of
debt obligations and are important factors in its
ability to access liquidity in the debt markets. A
rating downgrade by a rating agency can occur
at any time if the rating agency perceives an
adverse change in our financial condition, results
of operations or ability to service debt. If such a
downgrade occurs, it could have a material
adverse effect on our financial condition and
results of operations in many ways, including
adversely limiting our access to capital in the
unsecured debt market and potentially
increasing the cost of such debt.

The failure by any of our reinsurers or
reserve financing counterparties to
perform its obligations to us could have a
material adverse effect on our business,
financial condition and results of
operations.

We extensively use reinsurance in the United
States to diversify our risk and to manage our
loss exposure to mortality risk. Reinsurance does
not relieve us of our direct liability to our
policyholders, even when the reinsurer is liable
to us. We, as the insurer, are required to pay the
full amount of death benefits even in
circumstances where we are entitled to receive
payments from the reinsurer. Due to factors such
as insolvency, adverse underwriting results or
inadequate investment returns, our reinsurers
may not be able to pay the amounts they owe
us on a timely basis or at all. Further, reinsurers
might refuse or fail to pay losses that we cede to
them or might delay payment. Since death
benefit claims may be paid long after a policy is
issued, we bear credit risk with respect to our

ITEM 1A. RISK FACTORS

reinsurers. The creditworthiness of our reinsurers
may change before we can recover amounts to
which we are entitled. Any such failure to pay by
our reinsurers could have a material adverse
effect on our business, financial condition and
results of operations.

We also have in place coinsurance agreements
that we originally entered into at the time of our
IPO, pursuant to which we ceded between 80%
and 90% of the risks and rewards of our term life
insurance policies that were in force at year-end
2009. Under this arrangement, our existing
reinsurance agreements remain in place. Each
coinsurer entered into trust agreements with our
respective insurance subsidiaries and a trustee
pursuant to which the coinsurer placed assets
(primarily treasury and fixed-income securities) in
trust for such subsidiary’s benefit to secure the
coinsurer’s obligations to such subsidiary. Each
such coinsurance agreement requires each
coinsurer to maintain assets in trust sufficient to
give our subsidiary full credit for regulatory
purposes for the insurance, which amount will not
be less than the amount of the reserves for the
coinsured liabilities. Furthermore, our insurance
subsidiaries have the right to recapture the
business upon the occurrence of an event of
default under their respective coinsurance
agreement subject to any applicable cure periods.
While any such recapture would be at no cost to
us, such recapture would result in a substantial
increase in our insurance exposure and require us
to be fully responsible for the management of the
assets set aside to support statutory reserves. The
type of assets we might obtain as a result of a
recapture may not be as liquid as our current
invested asset portfolio and could result in an
unfavorable impact on our risk profile.

There can be no assurance that the relevant
coinsurer will pay the coinsurance obligations
owed to us now or in the future or that it will
pay these obligations on a timely basis. If any of
the coinsurers becomes insolvent, the trust
account to support the obligations of such
coinsurer is insufficient to pay such coinsurer’s
obligations to us and we fail to enforce our right
to recapture the business, it could have a
material adverse effect on our business, financial
condition and results of operations.

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

We have entered into transactions by which we
finance redundant statutory reserves of certain
issue years of our Term Life business. Under
these transactions, we pay a fee to financial
counterparties for their commitment to support
redundant reserves and provide corresponding
statutory reinsurance credit, allowing us to more
efficiently manage our capital. While we monitor
the credit quality and financial strength of these
counterparties, if their financial strength was
significantly impaired to the extent that their
support of our redundant reserves could no
longer be relied upon, it could have a material
adverse effect on our business, financial
condition, and results of operations.

RisksRelatedtoOurInvestmentsand
SavingsProductsBusiness

Our Investment and Savings Products
segment is heavily dependent on mutual
fund and annuity products offered by a
relatively small number of companies, and,
if these products fail to remain competitive
with other investment options or we lose
our relationship with one or more of these
companies, our business, financial
condition and results of operations may be
materially adversely affected.

We earn a significant portion of our earnings
through our relationships with a small group of
mutual fund and annuity companies. A decision
by one or more of these companies to alter or
discontinue their current arrangements with us
could materially adversely affect our business,
financial condition and results of operations. In
addition, if any of our investment and savings
products fail to achieve satisfactory investment
performance, our clients may seek higher
yielding alternative investment products, and we
could experience higher redemption rates.

In recent years there has been an increase in the
popularity of alternative investments, which we
do not currently offer on our brokerage
platform. These investment options typically
have low fee structures and provide some of the
attributes of mutual funds, such as risk

Freedom Lives Here™

diversification. If these products continue to gain
traction among our client base as viable
alternatives to mutual fund investments, our
investment and savings products revenues could
decline.

In addition to sales commissions and asset-
based compensation, a portion of our earnings
from investment and savings products comes
from recordkeeping services that we provide to
third parties and from fees earned for custodial
services that we provide to clients with
retirement plan accounts in the funds of these
mutual fund companies. We also receive
marketing and support fees from each of these
mutual fund companies. A decision by one or
more of these fund companies to alter or
discontinue their current arrangements with us
would materially adversely affect our business,
financial condition and results of operations.

The Company’s or its securities-licensed
sales representatives’ violations of, or
non-compliance with, laws and regulations
could expose us to material liabilities.

Our subsidiary broker-dealer and registered
investment advisor, PFS Investments, is subject
to federal and state regulation of its securities
business. These regulations cover sales practices,
trade suitability, supervision of registered
representatives, recordkeeping, the conduct and
qualification of officers and employees, net
capital requirements, business operations, the
rules and regulations of the MSRB and state blue
sky regulation. Investment advisory
representatives are generally held to a higher
standard of conduct than registered
representatives. Our subsidiary, PSS, is a
registered transfer agent engaged in the
recordkeeping business and is subject to SEC
regulation. Violations of laws or regulations
applicable to the activities of PFS Investments or
PSS, or violations by a third party with which PFS
Investments or PSS contracts, could subject us to
disciplinary actions and litigation and could
result in the imposition of cease and desist
orders, fines or censures, restitution to clients,
suspension or revocation of SEC registration,
suspension or expulsion from FINRA,

reputational damage and legal expense, any of
which could materially adversely affect our
business, financial condition and results of
operations.

Our Canadian broker-dealer subsidiary, PFSL
Investments Canada and its sales representatives
are subject to the securities laws of the
provinces and territories of Canada in which we
sell our mutual fund products and those of third
parties and to the rules of the MFDA, the self-
regulatory organization governing mutual fund
dealers. PFSL Investments Canada is subject to
periodic review by both the MFDA and the
provincial and territorial securities commissions
to assess its compliance with, among other
things, applicable capital requirements and sales
practices and procedures. These regulators have
broad administrative powers, including the
power to limit or restrict the conduct of our
business for failure to comply with applicable
laws or regulations. Possible sanctions that could
be imposed include the suspension of individual
sales representatives, limitations on the activities
in which the dealer may engage, suspension or
revocation of the dealer registration, the ability
to withhold licenses or to impose restrictive
terms and conditions on the licenses of sales
representatives, censure or fines, any of which
could materially adversely affect our business,
financial condition and results of operations.

If heightened standards of conduct or
more stringent licensing requirements,
such as those proposed by the SEC and
those adopted by the DOL, are imposed
on us or our sales representatives, or
selling compensation is reduced as a result
of new legislation or regulations, it could
have a material adverse effect on our
business, financial condition and results of
operations.

Our U.S. sales representatives are subject to
federal and state regulation as well as state
licensing requirements. PFS Investments, which
is regulated as a broker-dealer, and our U.S.
sales representatives are currently subject to
general anti-fraud limitations under the

ITEM 1A. RISK FACTORS

Exchange Act and SEC rules and regulations, as
well as other conduct standards prescribed by
FINRA. These standards generally require that
broker-dealers and their sales representatives
disclose conflicts of interest that might affect the
advice or recommendations they provide and
require them to make suitable investment
recommendations to their customers. In January
2011 under the authority of the Dodd-Frank Act,
which gives the SEC the power to impose on
broker-dealers a heightened standard of
conduct that is currently applicable only to
investment advisers, the SEC staff submitted a
report to Congress in which it recommended
that the SEC adopt a fiduciary standard of
conduct for broker-dealers that is uniform with
that of investment advisors. The SEC has slated
the rule on its regulatory agenda for “long-term
action” without a specific timetable.

On April 8, 2016, the DOL published a final rule
(the “DOL Fiduciary Rule”), which more broadly
defines the circumstances under which a person
or entity may be considered a fiduciary for
purposes of the prohibited transaction rules of
the ERISA and IRC Section 4975. IRC
Section 4975 prohibits certain types of
compensation paid by third parties with respect
to transactions involving assets in qualified
accounts, including IRAs. Simultaneously with
publication of the DOL Fiduciary Rule, the DOL
issued new, and amended existing, exemptions
intended, among other things, to allow advisers
and their firms to continue to receive common
forms of compensation that would otherwise be
prohibited due to the DOL Fiduciary Rule,
provided the conditions of the exemptions are
met. On February 3, 2017, the President of the
United States issued a memorandum directing
the DOL to review the DOL Fiduciary Rule to
determine, based on certain factors, whether the
rule should be revised or rescinded. The DOL
Fiduciary Rule, which was set to become
“applicable” on April 10, 2017, may be delayed
for an unspecified period while the Secretary of
Labor prepares an updated economic and legal
analysis on the impact of the DOL Fiduciary Rule.

If it were to become applicable in its current form,
we believe that the DOL Fiduciary Rule would
necessitate certain changes to our qualified plan

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

business in order for us to continue to help
investors save for retirement. Because of the
uncertainty of the status of the DOL Fiduciary
Rule, we have not yet determined the extent to
which we would make necessitated
compensation, product or other changes to our
qualified investment and savings plan business,
nor whether we would make such changes
consistent across our non-qualified investment
and savings business. While we have incurred,
and would expect to continue to incur, increased
costs, we cannot quantify the collective impact of
those costs and other changes on the Company.
IRAs and other qualified accounts are a core
component of the Investment and Savings
Products segment of our business and accounted
for a significant portion of the total revenue of
this segment for the year ended December 31,
2016. Changes resulting from the DOL Fiduciary
Rule could make it more difficult for us and our
sales representatives to profitably serve the
middle-income market and could result in a
reduction in the number of IRAs and qualified
accounts that we serve, which could materially
adversely affect the amount of revenue that we
generate from this line of business and ultimately
could result in a decline in the number of our
securities-licensed sales representatives.

Heightened standards of conduct as a result of
either of the above items or another similar
proposed rule or regulation could also increase
the compliance and regulatory burdens on our
representatives, and could lead to increased
litigation and regulatory risks, changes to our
business model, a decrease in the number of our
securities-licensed representatives and a
reduction in the products we offer to our clients,
any of which could have a material adverse
effect on our business, financial condition and
results of operations.

If our suitability policies and procedures
were deemed inadequate, it could have a
material adverse effect on our business,
financial condition and results of
operations.

We review the account applications that we
receive for our investment and savings products

Freedom Lives Here™

for suitability. While we believe that the policies
and procedures we implement to help our sales
representatives assist clients in making
appropriate and suitable investment choices are
reasonably designed to achieve compliance with
applicable securities laws and regulations, it is
possible that the SEC, FINRA, state securities
regulators or MFDA may not agree. Further, we
could be subject to regulatory actions or private
litigation, which could materially adversely affect
our business, financial condition and results of
operations.

Our sales force support tools may fail to
appropriately identify financial needs or
suitable investment products.

Our support tools are designed to educate
potential and existing clients, help identify their
financial needs, and generally introduce the
potential benefits of our product offerings. The
assumptions and methods of analyses
embedded in our support tools could be
challenged and subject us to regulatory action
or private litigation, which could materially
adversely affect our business, financial condition
and results of operations.

Non-compliance with applicable
regulations could lead to revocation of our
subsidiary’s status as a non-bank
custodian.

PFS Investments is a non-bank custodian of
retirement accounts, as permitted under Treasury
Regulation 1.408-2. A non-bank custodian is an
entity that is not a bank and that is permitted by
the IRS to act as a custodian for retirement plan
account assets of our clients. The IRS retains
authority to revoke or suspend that status if it
finds that PFS Investments is unwilling or unable
to administer retirement accounts in a manner
consistent with the requirements of the
applicable regulations. Revocation of PFS
Investments’ non-bank custodian status would
affect its ability to earn revenue for providing
such services and, consequently, could materially
adversely affect our business, financial condition
and results of operations.

As our securities sales increase, we
become more sensitive to performance of
the equity markets.

A significant portion of our investment sales and
assets under management are comprised of
North American equity-based products. The
multi-year growth in equity valuations has
increased proportionally the Company’s revenue
and product income derived from the sale of
these products. A significant correction in the
North American equity markets that decreases
the company’s assets under management, or a
protracted long-term downturn in equity market
performance that has a negative effect on the
Company’s sales of securities products, could
have an adverse effect on our business, financial
condition and results of operations.

OtherRisksRelatedtoOurBusiness

Credit deterioration in, and the effects of
interest rate fluctuations on, our invested
asset portfolio and other assets that are
subject to changes in credit quality and
interest rates could materially adversely
affect our business, financial condition and
results of operations.

A large percentage of our invested asset
portfolio is invested in fixed-income securities.
As a result, credit deterioration and interest rate
fluctuations could materially affect the value of
and earnings generated by our invested asset
portfolio. Fixed-income securities decline in
value if there is no active trading market for the
securities or the market’s impression of, or the
ratings agencies’ views on, the credit quality of
an issuer worsens. During periods of declining
market interest rates, we must invest the cash
we receive as interest, return of principal on our
investments and cash from operations in lower-
yielding, high-grade instruments or in lower-
credit instruments to maintain comparable
returns. Issuers of fixed-income securities could
also decide to prepay their obligations to
borrow at lower market rates, which would
increase our reinvestment risk. If interest rates
generally increase, the market value of our fixed

ITEM 1A. RISK FACTORS

rate income portfolio decreases. Additionally, if
the market value of any security in our invested
asset portfolio decreases, we may realize losses
if we deem the value of the security to be other-
than-temporarily impaired. We also have an
asset on deposit with a reinsurer backing a 10%
coinsurance agreement entered into at the time
of our IPO. The fair value of this asset is
influenced by fluctuation in credit spreads and
interest rates, and changes in fair value are
recognized in income. To the extent that any
fluctuations in fair value or interest rates are
significant or we recognize impairments that are
material, it could have a material adverse effect
on our business, financial condition and results
of operations.

Valuation of our investments and the
determination of whether a decline in the
fair value of our invested assets is other-
than-temporary are based on estimates
that may prove to be incorrect.

U.S. GAAP requires that when the fair value of
any of our invested assets declines and such
decline is deemed to be other-than-temporary,
we recognize a loss in either our statement of
income or in other comprehensive income based
on certain criteria in the period that such
determination is made. The determination of the
fair value of certain invested assets, particularly
those that do not trade on a regular basis,
requires an assessment of available data and the
use of assumptions and estimates. Once it is
determined that the fair value of an asset is
below its carrying value, we must determine
whether the decline in fair value is other-than-
temporary, which is based on subjective factors
and involves a variety of assumptions and
estimates.

There are certain risks and uncertainties
associated with determining whether declines in
market value are other-than-temporary. These
include significant changes in general economic
conditions and business markets, trends in
certain industry segments, interest rate
fluctuations, rating agency actions, changes in
significant accounting estimates and
assumptions and legislative actions. In the case

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

of mortgage- and asset-backed securities, there
is added uncertainty as to the performance of
the underlying collateral assets. To the extent
that we are incorrect in our determination of the
fair value of our investment securities or our
determination that a decline in their value is
other-than-temporary, we may realize losses
that never actually materialize or may fail to
recognize losses within the appropriate
reporting period.

Changes in accounting standards can be
difficult to predict and could adversely
impact how we record and report our
financial condition and results of
operations.

Our accounting policies and methods are
fundamental to how we record and report our
financial condition and results of operations. U.S.
GAAP continues to evolve and, as a result, will
change the financial accounting and reporting
standards that govern the preparation of our
financial statements. These changes can be hard
to anticipate and implement and can materially
impact how we record and report our financial
condition and results of operations. For example,
the Financial Accounting Standards Board’s
(“FASB”) recently published an exposure draft
that proposes significant changes in the
methodology for measuring future policy
benefits and deferred acquisition costs on our
consolidated balance sheets as well as the
timing of when we recognize the impact from
changes in insurance contract assumptions in
our statement of income and statement of other
comprehensive income. This proposed
accounting standard, in addition to other
financial reporting standard changes being
discussed by the FASB and the SEC, could
adversely impact both our financial condition
and results of operations as reported on a U.S.
GAAP basis.

Additionally, the Company’s insurance company
subsidiaries prepare statutory financial
statements in accordance with accounting
principles designated by regulators in the
jurisdictions in which they are domiciled. The
financial statements of our U.S. insurance

Freedom Lives Here™

subsidiaries are prepared in accordance with
statutory accounting principles prescribed or
permitted by state insurance departments and
the NAIC. Statutory accounting principles,
including actuarial methodologies for estimating
reserves, are subject to continuous evaluation by
the NAIC and state insurance departments. For
example, the implementation of principle-based
reserving standards for benefit reserves has
been adopted by most state insurance
departments effective in 2017, but has not yet
been adopted by Massachusetts or New York,
where two of our U.S. insurance subsidiaries are
domiciled. Similarly, our Canadian life insurance
subsidiary is required to prepare statutory
financial statements in accordance with IFRS, as
prescribed by the Office of the Superintendent
of Financial Institutions in Canada, which are
subject to future changes. The statutory financial
statements of our insurance company
subsidiaries, which are used to determine
dividend capacity and risk-based capital, could
be adversely affected by future changes
implemented by jurisdictional insurance
departments. Therefore, the ability of our
insurance companies to comply with regulatory
minimum capital requirements and ultimately
pay dividends to the Parent Company could be
adversely impacted.

The effects of economic down cycles in the
United States and Canada could materially
adversely affect our business, financial
condition and results of operations.

Our business, financial condition and results of
operations have been materially adversely
affected by economic downturns in the United
States and Canada. Economic downturns, which
are often characterized by higher
unemployment, lower family income, lower
valuation of retirement savings accounts, lower
corporate earnings, lower business investment
and lower consumer spending, have adversely
affected the demand for the term life insurance,
investment and savings and other financial
products that we sell. Future economic down
cycles could adversely affect new sales and
cause clients to liquidate mutual funds and other

investments sold by our sales representatives.
This could cause a decrease in the asset value of
client accounts, reduce our trailing commission
revenues and result in other-than-temporary-
impairments in our invested asset portfolio. In
addition, we may experience an elevated
incidence of lapses or surrenders of insurance
policies, and some of our policyholders may
choose to defer paying insurance premiums or
stop paying insurance premiums altogether.
Further, volatility in equity markets or downturns
could discourage purchases of the investment
products that we distribute and could have a
materially adverse effect on our business,
including our ability to recruit and retain sales
representatives.

We are subject to various federal, state
and provincial laws and regulations in the
United States and Canada, changes in
which or violations of which may require us
to alter our business practices and could
materially adversely affect our business,
financial condition and results of
operations.

In the United States, we are subject to many
regulations, including the Gramm-Leach-Bliley Act
and its implementing regulations, including
Regulation S-P, the Fair Credit Reporting Act, the
Right to Financial Privacy Act, the Foreign Corrupt
Practices Act, the Sarbanes-Oxley Act, the
Telemarketing and Consumer Fraud and Abuse
Prevention Act, the Telephone Consumer
Protection Act, the FTC Act, the Health Insurance
Portability and Accountability Act (HIPAA) and the
Electronic Funds Transfer Act. We are also subject
to anti-money laundering laws and regulations,
including the Bank Secrecy Act, as amended by
the Patriot Act, which requires us to develop and
implement customer identification and risk-based
anti-money laundering programs, report
suspicious activity and maintain certain records.
Further, we are required to follow certain
economic and trade sanctions programs that are
administered by the Office of Foreign Asset
Control that prohibit or restrict transactions with
suspected countries, their governments, and in
certain circumstances, their nationals.

ITEM 1A. RISK FACTORS

In Canada, we are subject to provincial and
territorial regulations, including consumer
protection legislation that pertains to unfair and
misleading business practices, provincial and
territorial credit reporting legislation that
provides requirements in respect of obtaining
credit bureau reports and providing notices of
decline, the Personal Information Protection and
Electronic Documents Act, the Competition Act,
the Corruption of Foreign Public Officials Act,
the Telecommunications Act and certain
Canadian Radio-television and
Telecommunications Commission Telecom
Decisions in respect of unsolicited
telecommunications. We are also subject to the
Proceeds of Crime (Money Laundering) and
Terrorist Financing Act and its accompanying
regulations, which require us to develop and
implement anti-money laundering policies and
procedures relating to customer indemnification,
reporting and recordkeeping, develop and
maintain ongoing training programs for
employees, perform a risk assessment on our
business and clients and institute and document
a review of our anti-money laundering program
at least once every two years. We are also
required to follow certain economic and trade
sanctions and legislation that prohibit us from,
among other things, engaging in transactions
with, and providing services to, persons on lists
created under various federal statutes and
regulations and blocked persons and foreign
countries and territories subject to Canadian
sanctions administered by Foreign Affairs and
International Trade Canada and the Department
of Public Safety Canada.

Changes in, or violations of, any of these laws or
regulations may require additional compliance
procedures, or result in enforcement
proceedings, sanctions or penalties, which could
have a material adverse effect on our business,
financial condition and results of operations.

Litigation and regulatory investigations and
actions may result in financial losses and
harm our reputation.

We face a risk of litigation and regulatory
investigations and actions in the ordinary course

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

of operating our businesses. From time to time,
we are subject to private litigation as a result of
alleged sales representative misconduct or
alleged failure of the Company to follow
applicable insurance, securities or other laws or
regulations. For example, we may become
subject to lawsuits alleging, among other things,
issues relating to sales or underwriting practices,
product design and disclosure, delay of benefits,
and product pricing. In addition, we are subject
to litigation arising out of our general business
activities. For example, we have a large sales
force and we could face claims by current or
former sales representatives arising out of their
relationship with us as independent contractors
or regarding compensation-related issues. If we
become subject to any such litigation, the
associated legal expense and any judgment or
settlement of the claims could have a material
adverse effect on our business, financial
condition and results of operations.

We are also routinely subject to regulatory
inquiries, such as information requests,
subpoenas and books and record examinations,
from state, provincial and federal regulators and
other authorities and from time to time,
regulatory investigations as a result of alleged
sales representative misconduct or alleged
failure of the Company to follow applicable laws
or regulations. A substantial legal liability or a
significant regulatory action against us could
have a material adverse effect on our business,
financial condition and results of operations.

Moreover, even if we ultimately prevail in any
litigation, regulatory action or investigation, we
could suffer significant reputational harm and
we could incur significant legal expenses, either
of which could have a material adverse effect on
our business, financial condition and results of
operations. In addition, increased regulatory
scrutiny and any resulting investigations or
proceedings could result in new legal precedents
and industry-wide regulations or practices that
could materially adversely affect our business,
financial condition and results of operations.

Freedom Lives Here™

The current legislative and regulatory
climate with regard to financial services
may adversely affect our business, financial
condition, and results of operations.

The volume of legislative and regulatory activity
relating to financial services has increased
substantially in recent years, and we expect that
the level of enforcement actions and
investigations by federal, state and provincial
regulators will increase correspondingly. The
same factors that have contributed to legislative,
regulatory and enforcement activity at the
federal level are likely to contribute to
heightened activity at the state and provincial
level. If we or our sales representatives become
subject to new requirements or regulations, it
could result in increased litigation, regulatory
risks, changes to our business model, a decrease
in the number of our securities-licensed
representatives or a reduction in the products
we offer to our clients or the profits we earn,
which could have a material adverse effect on
our business, financial condition and results of
operations.

Regulators could adopt laws or interpret existing
laws in a way that would require retroactive
changes to our business, accounting practices,
or redundant reserve financing structures. Any
such retroactive changes could have a material
adverse effect on our business, financial
condition and results of operations.

The inability of our subsidiaries to pay
dividends or make distributions or other
payments to us in sufficient amounts
would impede our ability to meet our
obligations and return capital to our
stockholders.

Operations of the Company are conducted by its
subsidiaries. As such, Primerica, Inc. is a holding
company that has no significant operations. Our
primary asset is the capital stock of our
subsidiaries and our primary liability is our
Senior Notes. We rely primarily on dividends and
other payments from our subsidiaries to meet
our operating costs, other corporate expenses,

Senior Note obligations, as well as to return
capital to our stockholders. The ability of our
subsidiaries to pay dividends to us depends on
their earnings, covenants contained in existing
and future financing or other agreements and
on regulatory restrictions. The ability of our
insurance subsidiaries to pay dividends will
further depend on their statutory income and
surplus. If the cash we receive from our
subsidiaries pursuant to dividend payments and
tax sharing arrangements is insufficient for us to
fund our obligations or if a subsidiary is unable
to pay dividends to us, we may be required to
raise cash through the incurrence of debt, the
issuance of equity or the sale of assets. However,
given the historic volatility in the capital markets,
there is no assurance that we would be able to
raise cash by these means.

The jurisdictions in which our insurance
subsidiaries are domiciled impose certain
restrictions on their ability to pay dividends to
us. In the United States, these restrictions are
based, in part, on the prior year’s statutory
income and surplus. In general, dividends up to
specified levels are considered ordinary and may
be paid without prior approval. Dividends in
larger amounts are subject to approval by the
insurance commissioner of the state of domicile.
In Canada, dividends can be paid, subject to the
paying insurance company continuing to meet
the regulatory requirements for capital adequacy
and liquidity and upon 15 days’ minimum notice
to OSFI. No assurance is given that more
stringent restrictions will not be adopted from
time to time by jurisdictions in which our
insurance subsidiaries are domiciled, and such
restrictions could have the effect, under certain
circumstances, of significantly reducing
dividends or other amounts payable to us by our
subsidiaries without prior approval by regulatory
authorities. In addition, in the future, we may
become subject to debt covenants or other
agreements that limit our ability to return capital
to our stockholders. The ability of our insurance
subsidiaries to pay dividends to us is also limited
by our need to maintain the financial strength
ratings assigned to us by the ratings agencies.

If any of our subsidiaries were to become
insolvent, liquidate or otherwise reorganize, we,

ITEM 1A. RISK FACTORS

as sole stockholder, will have no right to proceed
against the assets of that subsidiary.
Furthermore, with respect to our insurance
subsidiaries, we, as sole stockholder, will have no
right to cause the liquidation, bankruptcy or
winding-up of the subsidiary under the
applicable liquidation, bankruptcy or winding-up
laws, although, in Canada, we could apply for
permission to cause liquidation. The applicable
insurance laws of the jurisdictions in which each
of our insurance subsidiaries is domiciled would
govern any proceedings relating to that
subsidiary. The insurance authority of that
jurisdiction would act as a liquidator or
rehabilitator for the subsidiary. Both creditors of
the subsidiary and policyholders (if an insurance
subsidiary) would be entitled to payment in full
from the subsidiary’s assets before we, as the
sole stockholder, would be entitled to receive
any distribution from the subsidiary.

If the ability of our insurance or non-insurance
subsidiaries to pay dividends or make other
distributions or payments to us is materially
restricted by regulatory requirements,
bankruptcy or insolvency, or our need to
maintain our financial strength ratings, or is
limited due to operating results or other factors,
it could materially adversely affect our ability to
fund our obligations and return capital to our
stockholders.

A significant change in the competitive
environment in which we operate could
negatively affect our ability to maintain or
increase our market share and profitability.

We face competition in all of our business lines.
Our competitors include financial services
companies, banks, investment management
firms, broker-dealers, insurance companies,
insurance brokers and direct sales companies. In
many of our product offerings, we face
competition from competitors that may have
greater market share or breadth of distribution,
offer a broader range of products, services or
features, assume a greater level of risk, have
lower profitability expectations, have lower fee
and expense ratios, have higher financial
strength ratings or offer more robust digital

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

tools and self-service capabilities than we do.
More recently, significant capital has been
invested in direct-to-consumer offerings,
including wealth management, retirement and
life insurance products. To the extent these
entrants create a significant change in the
competitive environment, our ability to maintain
or increase our market share and profitability
could be materially adversely affected.

The loss of key employees and sales force
leaders could negatively affect our financial
results and impair our ability to implement
our business strategy.
Our success substantially depends on our ability
to attract and retain key members of our senior
management team. The efforts, personality and
leadership of our senior management team have
been, and will continue to be, critical to our
success. The loss of service of our senior
management team due to disability, death,
retirement or some other cause could reduce
our ability to successfully motivate our sales
representatives, or implement our business plan
which could have a material adverse effect on
our business, financial condition and results of
operations. Although our senior executive
officers have entered into employment
agreements with us, there is no assurance that
they will complete the term of their employment
agreements or that they or the Company will
renew them upon expiration.

In addition, the loss of key RVPs for any reason
could negatively affect our financial results,
impair our ability to attract new sales
representatives and hinder future growth.

If one of our significant information
technology systems fails, if its security is
compromised, or if the Internet becomes
disabled or unavailable, our business,
financial condition and results of
operations may be materially adversely
affected.
Our business is highly dependent upon the
effective operation of our information
technology systems and third-party technology

Freedom Lives Here™

systems, networks and clouds to record, process,
transmit and store information, including
sensitive customer and proprietary information.
We rely on these systems throughout our
business for a variety of functions including to
conduct many of our business activities and
transactions with our customers, representatives,
vendors and other third parties, to prepare our
financial statements and to communicate with
our Board of Directors. Our information
technology systems and applications run a
variety of third-party and proprietary software,
including POL (our secure Intranet website
designed to be a support system for our sales
force), the Primerica App, our insurance
administration system, Virtual Base Shop (our
secure Intranet-based paperless field office
management system for RVPs), TurboApps (our
point-of-sale tool that streamlines the
application process for our insurance product),
our FNA tool, our licensing decision and support
system, and our compensation system. Our
business also relies on the use of electronic
mobile devices by employees, representatives
and other third parties such as laptops, tablets
and smartphones, which are particularly
vulnerable to loss and theft.

Maintaining the integrity of these systems and
networks is critical to the success of our business
operations, including the retention of our
representatives and customers, and to the
protection of our proprietary information and
our customers’ confidential and personal
information. We could experience a failure of
one or more of these systems or could fail to
complete all necessary data reconciliation or
other conversion controls when implementing
new software systems. In addition, despite the
implementation of security and back-up
measures, our information technology systems
may be vulnerable to physical or electronic
intrusions, viruses or other attacks, programming
errors and similar disruptions.

We are subject to international, federal and state
regulations, and in some cases contractual
obligations, that require us to establish and
maintain policies and procedures designed to
protect sensitive customer, employee, sales
representative and third-party information. We

have implemented and maintain security
measures, including industry-standard
commercial technology, designed to protect
against breaches of security sales and other
interference with our systems and networks
resulting from attacks by third parties, including
hackers, and from employee or representative
error or malfeasance. We continually assess our
ability to monitor and respond to such threats.
We also require third-party vendors, who in the
provision of services to us are provided with or
process information pertaining to our business
or our customers, to meet certain information
security standards. Despite the measures we
have taken and may in the future take to
address and mitigate cybersecurity and
technology risks, we cannot assure that our
systems and networks will not be subject to
breaches or interference. Any such breaches or
interference by third parties or by our sales
representatives or employees that may occur in
the future including the failure of any one of
these systems for any reason, could cause
significant interruptions to our operations, which
could have a material adverse effect on our
business, financial condition and results of
operations.

Anyone who is able to circumvent our security
measures and penetrate our information
technology systems could access, view,
misappropriate, alter, or delete information in
the systems, including personally-identifiable
client information and proprietary business
information. In addition, an increasing number
of jurisdictions require that clients be notified if
a security breach results in the disclosure of
personally-identifiable client information, which
could exacerbate the harm to our business,
financial condition or results of operations. We
cannot be certain that advances in criminal
capabilities, discovery of new vulnerabilities,
attempts to exploit vulnerabilities in our systems,
data thefts, physical system or network break-ins
or inappropriate access, or other developments
will not compromise or breach the technology or
other security measures protecting the networks
and systems used in connection with our
business.

ITEM 1A. RISK FACTORS

Operating system failures, ineffective system
implementation, loss of the Internet or the
compromise of security with respect to internal,
external or third-party operating systems or
portable electronic devices could subject us to
significant civil and criminal liability, harm our
reputation, interrupt our business operations,
deter people from purchasing our products,
require us to incur significant technical, legal and
other expenses, and adversely affect our internal
control over financial reporting, business,
financial condition, or results of operations.

The current legislative and regulatory
climate with regard to cybersecurity may
adversely affect our business, financial
condition, and results of operations.

Various international, federal and state
legislative and regulatory bodies are considering
or have considered, proposed, or adopted new
standards and rules regarding protection of
personally-identifiable information. Such laws or
regulations could require us to implement new
technologies or revise and maintain policies and
procedures designed to protect sensitive
customer, employee, representative and third-
party information. Being subject to, or out of
compliance with, the aforementioned laws and
regulations could result in material costs, fines,
penalties or litigation, which could materially
adversely affect our business, financial condition
and results of operations.

In the event of a disaster, our business
continuity plan may not be sufficient, which
could have a material adverse effect on
our business, financial condition and
results of operations.

Our infrastructure supports a combination of
local and remote recovery solutions for business
resumption in the event of a disaster. In the
event of either a campus-wide destruction or the
inability to access our main campus in Duluth,
Georgia, our business recovery plan provides for
a limited number of our employees to perform
their work functions via a dedicated business
recovery site located 25 miles from our main

Primerica 2016 Annual Report

ITEM 1A. RISK FACTORS

campus or by remote access from an employee’s
home. However, in the event of campus-wide
destruction, our business recovery plan may be
inadequate, and our employees and sales
representatives may be unable to carry out their
work, which could have a material adverse effect
on our business, financial condition and results
of operations.

We may be materially adversely affected
by currency fluctuations in the United
States dollar versus the Canadian dollar.

The Canadian dollar is the functional currency
for our Canadian subsidiaries and our financial
results, reported in U.S. dollars, are affected by
changes in the currency exchange rate. The
assets, liabilities, revenues, and expenses of our
Canadian subsidiaries are generally all
denominated in Canadian dollars. However, the
Canadian dollar financial statements of our
Canadian subsidiaries are translated into U.S.
dollars in our consolidated financial statements.
Therefore, significant exchange rate fluctuations
between the U.S. dollar and the Canadian dollar
could have a material adverse effect on our
financial condition and results of operations. A
weaker Canadian dollar relative to the U.S. dollar
would result in lower levels of reported
revenues, expenses, net income, assets, liabilities
and accumulated other comprehensive income
as translated in our U.S. dollar reporting
currency financial statements. In addition, our
net investment in our Canadian subsidiaries is
significantly affected by fluctuations in the
exchange rate between the U.S. dollar and the
Canadian dollar.

The market price of our common stock
may fluctuate.

The stock market in general, and the market for
companies in the financial services industry in
particular, have experienced extreme price and
volume fluctuations that have often been
unrelated or disproportionate to the operating
performance of these companies. Also, broad
market and industry factors may negatively
affect the market price of our common stock,
regardless of our actual operating performance.

Freedom Lives Here™

Our stock could be subject to wide fluctuations
in price in response to various factors, many of
which are beyond our control, that include the
following:

•

fluctuations in stock market prices and
trading volumes of similar companies, and
general market conditions and overall
fluctuations in U.S. equity markets;

low trading volume and short interest
positions in our common stock;

• our ability to meet or exceed our own

forecasts or expectations of analysts or
investors;

•

changes in our securities analysts’ estimates
of our future financial performance;

variations in our quarterly operating results;

changes in federal and state laws and
regulations, or changes in the ways that
laws and regulations are interpreted and
applied;

changes, or the expectation of changes, in
federal law or policy under the new
Presidential administration beginning in
January 2017;

the initiation, pendency or outcome of
litigation, regulatory reviews and
investigations, and any adverse publicity
related thereto;

actions by the NYSE, or uncertainty related
to possible actions by the NYSE, related to
the continued listing of our common stock;

• negative media reports with respect to us

and/or our industry;

•

the loss of key personnel;

• general economic conditions; and

• other risks and uncertainties described in

these risk factors.

ITEM 1B. UNRESOLVED STAFF
COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

We lease all of our office, warehouse, printing,
and distribution properties. Our executive and
home office operations for substantially all of
our domestic U.S. operations (except New York)
are located in Duluth, Georgia, in a build-to-suit
facility completed in 2013. The initial lease term
for the facility is 15 years.

We also lease continuation of business, print/
distribution, and warehouse space in or around
Duluth, Georgia, under leases expiring in
February 2018, June 2018 and June 2023,
respectively.

NBLIC subleases general office space in Long
Island City, New York, under a sublease expiring
in March 2020.

In Canada, we lease general office space in
Mississauga, Ontario, under a lease expiring in
April 2018 and warehouse and printing
operation space in Mississauga, Ontario, under a
separate lease also expiring in April 2018.

Each of these leased properties is used by both
of our operating segments, with the exception of
our NBLIC office space, which is not used by our
Investment and Savings Products segment.

We believe that our existing facilities in the U.S.
and Canada are adequate for our current
requirements and for our operations in the
foreseeable future.

For additional details on our operating leases,
see “Management’s Discussion and Analysis of
Financial Condition and Results of Operations –

Name

Age

Position

Glenn J. Williams

57 Chief Executive Officer

ITEM 2. PROPERTIES.

Liquidity and Capital Resources – Contractual
Obligations.”

ITEM 3.

LEGAL PROCEEDINGS.

We are involved from time to time in legal
disputes, regulatory inquiries and arbitration
proceedings in the normal course of business.
Additional information regarding certain legal
proceedings to which we are a party is described
under “Contingent Liabilities” in Note 16
(Commitments and Contingent Liabilities) to our
consolidated financial statements included
elsewhere in this report, and such information is
incorporated herein by reference. As of the date
of this report, we do not believe any pending
legal proceeding to which Primerica or any of its
subsidiaries is a party is required to be disclosed
pursuant to this item.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM X. EXECUTIVE OFFICERS AND
CERTAIN SIGNIFICANT EMPLOYEES OF
THE REGISTRANT

Our executive officers are elected or appointed
by our Board of Directors.

The name, age at February 27, 2017, and
position of each of our executive officers and
certain significant employees are presented
below. These officers comprise our senior
management team.

William A. Kelly

Gregory C. Pitts

Alison S. Rand

Peter W. Schneider

Michael C. Adams

Chess E. Britt

Jeffrey S. Fendler

Alexis P. Ginn

President of PFS Investments

Executive Vice President and Chief Operating Officer

Executive Vice President and Chief Financial Officer

President

Executive Vice President and Chief Business Technology Officer

Executive Vice President and Chief Marketing Officer

Executive Vice President and Chief Compliance and Risk Officer

Executive Vice President and General Counsel

Primerica 2016 Annual Report

ITEM X. EXECUTIVE OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES OF THE REGISTRANT

Set forth below is biographical information
concerning our executive officers.

Glenn J. Williams has served as Chief Executive
Officer since April 2015. He served as President
from 2005 to April 2015; as Executive Vice
President from 2000 to 2005; and in various
capacities at our company since 1981.
Mr. Williams earned his B.S. in education from
Baptist University of America in 1981.

William A. Kelly has served as President of PFS
Investments, a subsidiary of Primerica, since
2005 and in various capacities at our company
since 1985. Mr. Kelly graduated from the
University of Georgia in 1979 with a B.B.A. in
accounting.

Gregory C. Pitts has served as Executive Vice
President and Chief Operating Officer since
December 2009, as Executive Vice President
since 1995 with responsibilities within the Term
Life Insurance and Investment and Savings
Products segments and information technology
division and in various capacities at our
company since 1985. Mr. Pitts earned his B.S.B.A.
in general business from the University of
Arkansas in 1985. He serves on the Boy Scouts of
America Atlanta Area Council.

Alison S. Rand has served as Executive Vice
President and Chief Financial Officer since 2000
and in various capacities at our company since
1995. Prior to 1995, Ms. Rand worked in the
audit department of KPMG LLP. Ms. Rand earned
her B.S. in accounting from the University of
Florida in 1990 and is a certified public
accountant. She is a board member of the
Atlanta Children’s Shelter, the Partnership
Against Domestic Violence, Cool Girls, Inc. and
Junior Achievement of Georgia. She also serves
on the Terry College of Business Executive
Education CFO Roundtable Advisory Board.

Peter W. Schneider has served as President since
April 2015. He served as Executive Vice
President, General Counsel, and Chief
Administrative Officer from 2000 to April 2015
and as Corporate Secretary from 2000 through
January 2014. He worked at the law firm of

Freedom Lives Here™

Rogers & Hardin LLP as a partner from 1988 to
2000. Mr. Schneider earned both his B.S. in
political science and industrial relations in 1978
and his J.D. in 1981 from the University of North
Carolina at Chapel Hill. He serves on the boards
of directors of the Northwest YMCA and the
Carolina Center for Jewish Studies.

Set forth below is biographical information
concerning certain significant employees.

Michael C. Adams has served as Chief Business
Technology Officer since April 2010, as Executive
Vice President responsible for business
technology since 1998 and in various capacities
at our company since 1980. Mr. Adams earned
his B.A. in business and economics from Hendrix
College in 1978.

Chess E. Britt has served as Chief Marketing
Officer since April 2010, as Executive Vice
President responsible for marketing
administration and field communication since
1995 and in various capacities at our company
since 1982. Mr. Britt earned his B.A. in business
administration from the University of Georgia in
1978. He serves on the board of directors of the
Gwinnett Chamber of Commerce.

Jeffrey S. Fendler has served as Executive Vice
President and Chief Compliance and Risk Officer
of our company since February 2014. He served
as President of Primerica Life, a subsidiary of
Primerica, from 2005 through January 2014 and
in various capacities at our company since 1980.
Mr. Fendler received a B.A. in economics from
Tulane University.

Alexis P. Ginn has served as our Executive Vice
President and General Counsel since May 2015
and as Executive Vice President and Deputy
General Counsel from July 1998 to May 2015.
She has served in various legal capacities with
Primerica since 1991. Ms. Ginn began her career
as a trial attorney in the Civil Division of the
Department of Justice. She received her Bachelor
of Science with honors from Tufts University and
her J.D. from George Washington University Law
School where she was on the law review and a
member of the Order of the Coif.

PART II

ITEM 5. MARKET FOR REGISTRANT’S
COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.

QuarterlyCommonStockPricesand
Dividends

The common stock of Primerica, Inc. (“Primerica”,
“we”, “us” or the “Parent Company”) is listed for
trading on the New York Stock Exchange (“NYSE”)
under the symbol “PRI”. The quarterly high and
low sales prices for our common stock as
reported on the NYSE and the dividends paid per
quarter for the periods indicated were as follows:

High

Low

Dividend

$73.05 $52.75

$0.18

59.34

58.81

46.86

49.69

42.74

37.09

0.18

0.17

$53.08 $44.18

$0.16

46.77

51.21

55.24

40.36

43.40

49.19

0.16

2016
4th quarter

3rd quarter

2nd quarter

1st quarter

2015
4th quarter

3rd quarter

2nd quarter

1st quarter

Dividends

We paid quarterly dividends to our stockholders
totaling approximately $33.4 million and
$32.8 million in 2016 and 2015, respectively.

As of January 31, 2017, we had 82 holders of
record of our common stock. In the first quarter
of 2017, we declared a quarterly dividend to
shareholders of $0.19 per share. We currently
expect to continue to pay quarterly cash
dividends to holders of our common stock. Our
payment of cash dividends is at the discretion of
our Board of Directors in accordance with
applicable law after taking into account various
factors, including our financial condition,
operating results, current and anticipated cash

needs and plans for growth. Under Delaware
law, we can only pay dividends either out of
surplus or out of the current or the immediately
preceding year’s earnings. Therefore, no
assurance is given that we will continue to pay
any dividends to our common stockholders, or
as to the amount of any such dividends.

We are a holding company and have no
operations. Our primary asset is the capital stock
of our operating subsidiaries. The states in which
our U.S. insurance company subsidiaries are
domiciled impose certain restrictions on our
insurance subsidiaries’ ability to pay dividends to
us. Our Canadian subsidiary can pay dividends
subject to meeting regulatory requirements for
capital adequacy and liquidity with appropriate
minimum notice to the Office of the
Superintendent of Financial Institutions Canada.
In addition, in the future, we may become
subject to agreements that limit our ability to
pay dividends. For more information regarding
dividend restrictions on our insurance
subsidiaries, see Note 15 (Statutory Accounting
and Dividend Restrictions) to our consolidated
financial statements included elsewhere in this
report.

IssuerPurchasesofEquitySecurities

Depending on market conditions, shares may be
repurchased from time to time at prevailing
market prices through open market or privately
negotiated transactions. On August 13, 2015,
our Board of Directors authorized a share
repurchase program for up to $200.0 million of
our outstanding common stock during 2016.
This share repurchase program was completed
as of December 31, 2016. On November 17,
2016 the Board of Directors authorized a new
share repurchase program for up to
$200.0 million of our outstanding common stock
for purchases through June 30, 2018.
Repurchases under this new program began in
January 2017.

The Parent Company has no obligation to
repurchase any shares. Subject to applicable
corporate securities laws, repurchases may be

Primerica 2016 Annual Report

ITEM 5. COMMON STOCK AND STOCKHOLDER MATTERS

made at such times and in such amounts as
management deems appropriate. Repurchases
under a publicly announced program can be

discontinued at any time if management
believes additional repurchases are not
warranted.

During the quarter ended December 31, 2016, we repurchased shares of our common stock as follows:

Period

October 1-31, 2016

November 1-30, 2016

December 1-31, 2016

Total

Total number of
shares purchased(1)

Average price paid
per share(1)

246,649

98,133

25,512

370,294

$54.73

55.01

69.75

$55.84

Total number of shares
purchased as part of
publicly announced
plans or programs

Approximate dollar
value of shares that
may yet be
purchased under the
plans or programs(2)

246,649

90,383

1,135

338,167

4,989,746

200,089,180

200,000,000

$200,000,000

(1) Consists of (a) repurchases of 32,127 shares at an average price of $68.38 arising from share-based compensation tax

withholdings and stock option exercises and (b) open market repurchases of shares under the share repurchase program
approved by our Board of Directors.
In November 2016, the Company’s Board of Directors authorized $200.0 million of share repurchases through June 30, 2018.

(2)

For more information on our share repurchases,
see Note 12 (Stockholders’ Equity) to our
consolidated financial statements included
elsewhere in this report.

SecuritiesAuthorizedforIssuance
underEquityCompensationPlans

We have two compensation plans under which
our equity securities are authorized for issuance.

The Primerica, Inc. Amended and Restated 2010
Omnibus Incentive Plan was approved by our
stockholders in May 2011. The Primerica, Inc.
Stock Purchase Plan for Agents and Employees
was approved by our sole stockholder in March
2010. The following table sets forth certain
information relating to these equity
compensation plans at December 31, 2016.

Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights

Weighted average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available
for future issuance

Equity compensation plans approved by

stockholders:
Primerica, Inc. Amended and Restated

2010 Omnibus Incentive Plan

Primerica, Inc. Stock Purchase Plan for

Agents and Employees

Total

Equity compensation plans not
approved by stockholders

601,669(1)

$44.75(2)

901,122(3)

—

601,669

—

$44.75

1,986,291(4)

2,887,413

n/a

(1) Consists of 438,265 and 145,019 shares to be issued in connection with unvested restricted stock units (“RSUs”) and

outstanding stock options, respectively. Also includes 18,385 of shares to be issued to certain executive officers in
connection with outstanding performance stock units (“PSUs”) if the Company achieves the targeted level of performance
specified in the award agreement over a three-year period that commenced on January 1, 2016. See Note 12 (Stockholders
Equity) and Note 14 (Share-based Transactions) to our consolidated financial statements included elsewhere in this report
for more information on the equity awards outstanding.

Freedom Lives Here™

ITEM 5. COMMON STOCK AND STOCKHOLDER MATTERS

(2) Represents the weighted average exercise price of the 145,019 stock options outstanding.
(3) The number of shares of our common stock 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) Represents shares of our common stock, which have already been issued and are outstanding, available to be purchased by
employees and agents under the plan. The number of outstanding shares available to be purchased is 2,500,000 less the
cumulative number of outstanding shares purchased to date under the plan.

StockPerformanceTable(1)

The following graph compares the performance
of our common stock to the Standard & Poor’s
(“S&P”) MidCap 400 Index and the S&P 500
Insurance Index by assuming $100 was invested
in each investment option as of December 31,
2011. The S&P MidCap 400 Index measures the

performance of the United States middle market
capitalization (“mid-cap”) equities sector. The
S&P 500 Insurance Index is a capitalization-
weighted index of domestic equities of
insurance companies traded on the NYSE and
NASDAQ. Our common stock is included in the
S&P MidCap 400 index.

Total Return Performance

e
u
a
V
x
e
d
n
I

$350

$300

$250

$200

$150

$100

$50

1
1
0
2
1
3
2
1

2
1
0
2
1
3
2
1

3
1
0
2
1
3
2
1

4
1
0
2
/

1
3
2
1

5
1
0
2
/

1
3
2
1

6
1
0
2
/

1
3
2
1

Primerica, Inc.

S&P 500 Insurance

S&P MidCap 400

Period Ended

Index

12/31/2011

12/31/2012

12/31/2013

12/31/2014

12/31/2015

12/31/2016

Primerica, Inc.

S&P 500 Insurance

S&P MidCap 400

$100.00

$130.28

$188.56

$240.89

$212.46

$315.14

100.00

119.09

117.88

174.72

157.37

189.20

172.74

193.60

168.98

227.63

204.03

(1) The stock performance table is not deemed “soliciting material” or subject to Section 18 of the Securities Exchange Act of

1934.

Primerica 2016 Annual Report

ITEM 6. SELECTED FINANCIAL DATA

ITEM 6. SELECTED FINANCIAL DATA.

The selected financial data should be read in conjunction with the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated
financial statements and accompanying notes included elsewhere in this report.

Year ended December 31,

2016

2015

2014

2013

2012

(In thousands, except per-share amounts)

Statements of income data

Revenues:

Direct premiums
Ceded premiums

Net premiums

Commissions and fees
Net investment income
Realized investment gains (losses), including
other-than-temporary impairment losses

Other, net

Total revenues
Benefits and expenses:
Benefits and claims
Amortization of deferred policy acquisition

costs

Sales commissions
Insurance expenses
Insurance commissions
Interest expense
Other operating expenses

$ 2,444,268 $ 2,345,444 $ 2,301,332 $ 2,265,191 $ 2,231,032
(1,663,753)

(1,644,158)

(1,600,559)

(1,595,220)

(1,616,817)

843,709
541,686
79,025

4,088
50,576

750,224
537,146
76,509

684,515
527,166
86,473

621,033
471,803
88,752

(1,738)
42,058

(261)
39,203

6,246
39,584

567,279
429,044
100,804

11,382
41,992

1,519,084

1,404,199

1,337,096

1,227,418

1,150,501

367,655

339,315

311,417

279,931

254,048

180,582
272,815
132,348
17,783
28,691
181,615

157,727
274,893
123,030
16,340
33,507
168,406

144,378
268,775
113,871
15,353
34,570
173,010

129,183
232,237
103,748
16,530
35,018
185,765

118,598
204,569
89,081
21,724
33,101
163,258

Total benefits and expenses

1,181,489

1,113,218

1,061,374

982,412

884,379

Income from continuing operations before

income taxes

Income taxes

337,595
118,181

290,981
101,110

275,722
95,888

245,006
86,305

266,122
92,813

Income from continuing operations

219,414

189,871

179,834

158,701

173,309

Income from discontinued operations, net

of income taxes

Net income

—

1,578

4,024

497

$ 219,414 $ 189,871 $ 181,412 $ 162,725 $ 173,806

Basic earnings per share:
Continuing operations
Discontinued operations

Basic earnings per share

Diluted earnings per share:
Continuing operations
Discontinued operations

Diluted earnings per share

Dividends declared per share

Freedom Lives Here™

4.59 $
—

4.59 $

4.59 $
—

4.59 $

3.70 $
—

3.70 $

3.70 $
—

3.70 $

3.26 $
0.03

3.29 $

3.26 $
0.03

3.29 $

2.80 $
0.07

2.87 $

2.76 $
0.07

2.83 $

0.70 $

0.64 $

0.48 $

0.44 $

2.76
0.01

2.77

2.70
0.01

2.71

0.24

ITEM 6. SELECTED FINANCIAL DATA

December 31,

2016

2015

2014

2013

2012

(In thousands)

Balance sheet data

Investments (excluding the
held-to-maturity security)

Cash and cash equivalents
Due from reinsurers
Deferred policy acquisition costs, net
Total assets
Future policy benefits
Notes payable
Total liabilities
Stockholders’ equity

$ 1,875,631 $ 1,813,283 $ 1,848,316 $ 1,835,403 $ 1,956,536
112,216
4,005,194
1,066,422
10,336,483
4,850,488
371,466
9,061,067
1,275,416

211,976
4,193,562
1,713,065
11,438,943
5,673,890
372,919
10,217,569
1,221,374

148,983
4,055,054
1,208,466
10,328,641
5,063,103
371,826
9,106,613
1,222,027

152,294
4,110,628
1,500,259
10,610,783
5,431,711
372,552
9,465,011
1,145,772

191,997
4,115,533
1,351,180
10,735,929
5,264,608
372,187
9,490,803
1,245,126

Primerica 2016 Annual Report

ITEM 7. MD&A

ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Management’s Discussion and Analysis of
Financial Condition and Results of Operations
(“MD&A”) is intended to inform the reader
about matters affecting the financial condition
and results of operations of Primerica, Inc. (the
“Parent Company”) and its subsidiaries
(collectively, “we,” “us” or the “Company”) for the
three-year period ended December 31, 2016. As
a result, the following discussion should be read
in conjunction with the consolidated financial
statements and accompanying notes that are
included herein. This discussion contains
forward-looking statements that constitute our
plans, estimates and beliefs. These forward-
looking statements involve numerous risks and
uncertainties, including, but not limited to, those
discussed in “Risk Factors”. Actual results may
differ materially from those contained in any
forward-looking statements.

This MD&A is divided into the following
sections:

• Business Trends and Conditions

•

Factors Affecting Our Results

• Critical Accounting Estimates

• Results of Operations

•

Financial Condition

Liquidity and Capital Resources

BusinessTrendsandConditions

The relative strength and stability of financial
markets and economies in the United States and
Canada affect our growth and profitability. Our
business is, and we expect will continue to be,
influenced by a number of industry-wide and
product-specific trends and conditions.
Economic conditions, including unemployment
levels and consumer confidence, influence
investment and spending decisions by middle-
income consumers, who are generally our
primary clients. These conditions and factors

Freedom Lives Here™

also impact prospective recruits’ perceptions of
the business opportunity that becoming a
Primerica sales representative offers, which can
drive or dampen recruiting. Consumer spending
and borrowing levels affect how consumers
evaluate their savings and debt management
plans. In addition, interest rates and equity
market returns impact consumer demand for the
savings and investment products we distribute.
Our customers’ perception of the strength of the
capital markets will influence their decisions to
invest in the investment and savings products
we distribute. The financial and distribution
results of our operations in Canada, as reported
in U.S. dollars, are affected by changes in the
currency exchange rate. The Canadian dollar
exchange rate increased modestly in 2016 when
compared with 2015 while it decreased sharply
in 2015 when compared with 2014. Therefore,
the Canadian dollar exchange rate had less
impact on the results of our business in 2016
compared to 2015 for all amounts translated
and reported in U.S. dollars. The effects of these
trends and conditions are discussed below and
in the Results of Operations section.

Size of our Independent Sales Force.

Our ability to increase the size of our
independent sales force is largely based on the
success of our sales force’s recruiting efforts as
well as training and motivating recruits to get
licensed to sell life insurance. We believe that
recruitment and licensing levels are important to
sales force trends, and growth in recruiting and
licensing is usually indicative of future growth in
the overall size of the sales force. Recruiting
changes do not always result in commensurate
changes in the size of our licensed sales force
because new recruits may obtain the requisite
licenses at rates above or below historical levels.

Regulatory changes can also impact the size of
our independent sales force. For example, the
insurance regulators in Canada implemented a
new life insurance licensing examination
program in January 2016 that requires applicants
to complete increased examination requirements
in order to obtain a life insurance sales license
and has the potential to decrease the number of

applicants who obtain their life insurance
licenses in Canada. However, we have
undertaken efforts to adapt our licensing
process to the new program in order to mitigate
any adverse effect that these increased
examination requirements could have on the
size of our Canadian life-licensed sales force. We
have not observed a meaningful decline in the
number of new life-licensed agents in Canada
since the program became effective at the
beginning of 2016.

New recruits increased in 2016 to 262,732 from
228,115 in 2015 and 190,439 in 2014 primarily
due to growth in the size of our sales force,
resulting in more agents available to actively
recruit, and is complemented by positive
momentum in our business. The size of our life-
licensed sales force increased to 116,827 sales

ITEM 7. MD&A

representatives at December 31, 2016 from
106,710 at December 31, 2015 and 98,358 at
December 31, 2014, primarily due to the
increase in recruiting in recent periods, as well as
our strong focus on training of new sales
representatives to become licensed to sell life
insurance.

Term Life Insurance Product Sales and
Face Amount In Force.

The average number of life-licensed sales
representatives and the number of term life
insurance policies issued, as well as the average
monthly rate of new policies issued per life-
licensed sales representative (historically
between 0.18 and 0.22), were as follows:

Year ended December 31,

Average number of life-licensed sales representatives
Number of new policies issued
Average monthly rate of new policies issued per life-licensed sales

representative

2016

2015

2014
111,843 101,660
96,780
298,244 260,059 220,984

0.22

0.21

0.19

The increase in new life insurance policies issued
in 2016 from 2015 reflected the positive impact
of strong growth in the size of our life-licensed
sales force in recent periods. Productivity,
measured by the average monthly rate of new
policies issued per life-licensed sales
representative continues to be at the higher end

of our historical range due to the positive sales
momentum generated within our independent
sales force. The number of new life insurance
policies also increased in 2015 compared to
2014 mostly due to the factors discussed above
in the comparison of 2016 to 2015.

The changes in the face amount of our in-force book of term life insurance policies were as follows:

% of
beginning
balance

2016

Year ended December 31,

% of
beginning
balance
(Dollars in millions)

2015

% of
beginning
balance

2014

$693,194

$681,927

$674,868

Face amount in force, beginning of period
Net change in face amount:

Issued face amount
Terminations
Foreign currency

89,869
(57,238)
2,560

13%
(8)%
*

79,111
(53,580)
(14,264)

Net change in face amount

35,191

11,267

12%
(8)%
(2)%

69,574
(54,962)
(7,553)

7,059

10%
(8)%
(1)%

Face amount in force, end of period

$728,385

$693,194

$681,927

Less than 1%.

Primerica 2016 Annual Report

ITEM 7. MD&A

The face amount of term life insurance policies
in force increased 5% during 2016 compared to
a 2% growth during 2015 primarily due to the
positive impact of strong new policy sales issued
and stable persistency levels, which allowed
issued face amount to outpace policy
terminations face amount. As a percentage of
the beginning face amount in force, issued face
amount continued to grow due to higher sales,
while terminations face amount remained
consistent with the prior year. Overall, the
increase in total face amount of policies in force
as of December 31, 2016 compared to
December 31, 2015 was primarily driven by the
volume growth in new policies issued. Our
average issued face amount in 2016 was also
consistent with 2015 at approximately $241,500
and $241,700, respectively.

In 2015, the face amount of term life insurance
policies in force increased compared with 2014
also as a result of the higher number of policies
issued combined with policy terminations
remaining stable. However, the magnitude of the
increase in face amount in 2015 versus 2014 was
mitigated due to the year-over-year impact of a
much stronger U.S. dollar in relation to the
Canadian dollar, which reduced the translated
face amount of existing Canadian policies in
force. In 2015, our average issued face amount
of approximately $241,700 in 2015 decreased as
compared with approximately $244,600 in 2014
primarily due to the translation impact of the
weaker Canadian dollar.

Investment and Savings Product Sales, Asset Values and Accounts. Investment and savings
products sales and average client asset values were as follows:

Product sales:

Retail mutual funds

Annuities and other

Total sales-based revenue

generating product sales

Managed investments

Segregated funds and other

Year ended December 31,

2016 vs. 2015
change

2016

2015

2014

2015 vs. 2014
change

(Dollars in millions)

$ 3,279 $ 3,259 $ 3,210

$ 20

1% $

1,813

2,004

1,971

(191)

(10)%

5,092

5,263

5,181

(171)

212

290

247

347

258

243

(35)

(57)

(3)%

(14)%

(16)%

(11)

(4)%

104

43%

Total product sales

$ 5,594 $ 5,857 $ 5,682

$(263)

(4)% $ 175

Average client asset values:

Retail mutual funds

Annuities and other

Managed investments

Segregated funds

$30,566 $30,429 $29,939

$ 137

$ 490

14,880

14,258

13,268

1,720

2,262

1,518

2,272

1,238

2,491

622

202

(10)

13%

23%

990

280

(219)

(9)%

Total average client asset values

$49,428 $48,477 $46,936

$ 951

2% $1,541

Less than 1%.

Freedom Lives Here™

The rollforward of asset values in client accounts was as follows:

ITEM 7. MD&A

Asset values, beginning of period
Net change in asset values:

Inflows

Redemptions

Net inflows

Change in market value, net

Foreign currency, net

Net change in asset values

Year ended December 31,

% of
beginning
balance

2015

% of
beginning
balance

(Dollars in millions)
$48,656

2014

$44,990

2016

$47,354

% of
beginning
balance

5,594

12%

5,857

12%

5,682

13%

(4,620)

(10)%

(4,843)

(10)%

(4,823)

(11)%

974
3,758

254

4,986

2%
8%

1,014
(859)

(1,457)

11%

(1,302)

2%
(2)%

(3)%

859
3,555

(748)

3,666

2%
8%

(2)%

Asset values, end of period

$52,340

$47,354

$48,656

Average number of fee-generating positions was as follows:

Average number of fee-generating

positions (1):
Recordkeeping and custodial
Recordkeeping only

Total average number of fee-

generating positions

Year ended December 31,

2016 vs. 2015
change

2016

2015

2014

2015 vs. 2014
change

(Positions in thousands)

2,201
677

2,150
653

2,015
607

51
24

2%
4%

135
46

7%
8%

2,878

2,803

2,622

181

(1) We receive recordkeeping fees by mutual fund positions. An individual client account may include multiple mutual fund

positions. We may also receive fees earned for custodial services that we provide to clients with retirement plan accounts
that hold positions in these mutual funds.

Product sales. The decrease in investment and
savings product sales in 2016 from 2015 was
largely attributed to an industry-wide weakness
in variable annuity sales, partially offset by
positive sales in U.S. retail mutual fund and fixed
indexed annuity sales. Our annuity sales activity
has been consistent with an industry-wide shift
from variable annuities to fixed indexed
annuities while positive market performance in
recent periods has increased demand for U.S.
retail mutual funds.

In 2015, investment and savings product sales
increased from 2014 as favorable market
conditions, most notably in the first half of the

year, drove customer demand for our product
sales. The year-over-year increase in investment
and savings products was partially offset by the
translation impact of the weaker Canadian dollar
in relation to the U.S. dollar.

Average client asset values. Average client asset
values increased in 2016 from 2015 largely due
to favorable market performance throughout the
year and continued net positive inflows.

The growth in average client asset values in 2015
can be attributed to the impact of positive net
investment inflows during 2015 and favorable
market performance during the first half of 2015.
The positive effect of these items on average

Primerica 2016 Annual Report

ITEM 7. MD&A

client asset values was partially offset by the
foreign currency translation impact of the
weaker Canadian dollar as well as the negative
impact of market volatility in the second half of
2015.

Rollforward of client asset values. Client asset
values increased during 2016 compared to a
decrease during 2015 primarily due to an
increase in market value and continued net
inflows from product sales, which outpaced
redemptions. Also contributing to the increase in
client asset values was the positive impact of the
translated value of client assets in Canada due to
the strengthening of the Canadian dollar relative
to the U.S. dollar.

The decrease in client asset values during 2015
was largely due to the currency translation
impact of the lower Canadian dollar on Canadian
client assets as well as negative market
performance in the second half of 2015. The
impact of these items was partially offset by
positive net investment inflows.

Average number of fee-generating
positions. The average number of
fee-generating positions increased in 2016 from
2015 primarily due to the cumulative effect of
product sales of mutual funds and managed
accounts investments that are serviced on the
Company’s recordkeeping and custodial services
platform.

The average number of fee-generating positions
increased in 2015 from 2014 primarily due to the
addition of a mutual fund provider on our
recordkeeping and custodial services platform
during the first quarter of 2015 as well as growth
in our mutual funds and managed accounts
business.

Regulatory changes on business
trends. Regulatory changes can also impact our
product sales. On April 8, 2016, the Department
of Labor (“DOL”) published a final regulation
(“the DOL Fiduciary Rule”), which more broadly
defines the circumstances under which a person
or entity may be considered a fiduciary for
purposes of the prohibited transaction rules of
the Employee Retirement Income Security Act

Freedom Lives Here™

and Internal Revenue Code (“IRC”) Section 4975.
IRC Section 4975 prohibits certain types of
compensation paid by third parties with respect
to transactions involving assets in qualified
accounts, including individual retirement
accounts (“IRAs”). In connection with the DOL
Fiduciary Rule, the DOL also issued new
exemptions and amended several existing
exemptions. On February 3, 2017, the President
of the United States issued a memorandum
directing the DOL to review the DOL Fiduciary
Rule to determine, based on certain factors,
whether the rule should be revised or rescinded.
The DOL Fiduciary Rule, which was set to
become “applicable” on April 10, 2017, may be
delayed for an unspecified period while the
Secretary of Labor prepares an updated
economic and legal analysis on the impact of the
DOL Fiduciary Rule.

IRAs and other qualified accounts are an
important component of the investment and
savings products we distribute. If it were to
become applicable in its current form, we
believe that the DOL Fiduciary Rule would
necessitate certain changes to our qualified plan
business in order for us to continue to help
investors save for retirement. Because of the
uncertainty of the status of the DOL Fiduciary
Rule, we have not yet finalized our plans or
determined the extent and nature of those
changes. Additionally, we have not determined
the extent to which we would make necessitated
compensation, product or other changes to our
qualified plan business, nor whether we would
make such changes consistent across our
non-qualified business. As a result, we are
currently unable to quantify the impact on our
business, financial position or results of
operations. During the year ended December 31,
2016, average client assets held in U.S. qualified
retirement plans accounted for an estimated
59% of total average client account assets.
During the year ended December 31, 2016,
product sales of assets held in U.S. qualified
retirement plans accounted for approximately
56% of total investment and savings product
sales.

FactorsAffectingOurResults

Term Life Insurance Segment. Our Term Life
Insurance segment results are primarily driven
by sales volumes, the accuracy of our pricing
assumptions, terms and use of reinsurance, and
expenses.

Sales and policies in force. Sales of term policies
and the size and characteristics of our in-force
book of policies are vital to our results over the
long term. Premium revenue is recognized as it
is earned over the term of the policy, and
eligible acquisition expenses are deferred and
amortized ratably with the level premiums of the
underlying policies. However, because we incur
significant cash outflows at or about the time
policies are issued, including the payment of
sales commissions and underwriting costs,
changes in life insurance sales volume will have a
more immediate effect on our cash flows.

Historically, we have found that while sales
volume of term life insurance products between
fiscal periods may vary based on a variety of
factors, the productivity of our individual sales
representatives generally remains within a
relatively narrow range (i.e., an average monthly
rate of new policies issued per life-licensed sales
representative between 0.18 and 0.22), and,
consequently, our sales volume over the longer
term generally correlates to the size of our sales
force.

Pricing assumptions. Our pricing methodology
is intended to provide us with appropriate profit
margins for the risks we assume. We determine
pricing classifications based on the coverage
sought, such as the size and term of the policy,
and certain policyholder attributes, such as age
and health. In addition, we generally utilize
unisex rates for our term life insurance policies.
The pricing assumptions that underlie our rates
are based upon our best estimates of mortality,
persistency and interest rates at the time of
issuance, sales force commission rates, issue and
underwriting expenses, operating expenses and
the characteristics of the insureds, including the
distribution of sex, age, underwriting class,
product and amount of coverage. Our results

ITEM 7. MD&A

will be affected to the extent there is a variance
between our pricing assumptions and actual
experience.

• Persistency. Persistency is a measure of
how long our insurance policies stay in
force. As a general matter, persistency that
is lower than our pricing assumptions
adversely affects our results over the long
term because we lose the recurring revenue
stream associated with the policies that
lapse. Determining the near-term effects of
changes in persistency is more complicated.
When actual persistency is lower than our
pricing assumptions, we must accelerate the
amortization of deferred policy acquisition
costs (“DAC”). The resultant increase in
amortization expense is offset by a
corresponding release of reserves
associated with lapsed policies, which
causes a reduction in benefits and claims
expense. The future policy benefit reserves
associated with any given policy will change
over the term of such policy. As a general
matter, future policy benefit reserves are
lowest at the inception of a policy term and
rise steadily to a peak before declining to
zero at the expiration of the policy term.
Accordingly, depending on when the lapse
occurs in relation to the overall policy term,
the reduction in benefits and claims
expense may be greater or less than the
increase in amortization expense, and,
consequently, the effects on earnings for a
given period could be positive or negative.
Persistency levels will impact results to the
extent actual experience deviates from the
persistency assumptions used to price our
products.

• Mortality. Our profitability will fluctuate to
the extent actual mortality rates differ from
those used in our pricing assumptions. We
mitigate a significant portion of our
mortality exposure through reinsurance.

•

Interest Rates. We use an assumption for
future interest rates that initially reflects the
current low interest rate environment
gradually increasing to a level consistent
with historical experience. Both DAC and the

Primerica 2016 Annual Report

ITEM 7. MD&A

future policy benefit reserve liability
increase with the assumed interest rate.
Since DAC is higher than the future policy
benefit reserve liability in the early years of
a policy, a lower assumed interest rate
generally will result in lower profits. In the
later years, when the future policy benefit
reserve liability is higher than DAC, a lower
assumed interest rate generally will result in
higher profits. These assumed interest rates,
which like other pricing assumptions are
locked in at issue, impact the timing but not
the aggregate amount of DAC and future
policy benefit reserve changes. We allocate
net investment income generated by the
investment portfolio to the Term Life
Insurance segment in an amount equal to
the assumed net interest accreted to the
segment’s U.S. generally accepted
accounting principles (“U.S. GAAP”)-
measured future policy benefit reserve
liability less DAC. All remaining net
investment income, and therefore the
impact of actual interest rates, is attributed
to the Corporate and Other Distributed
Products segment.

Reinsurance. We use reinsurance extensively,
which has a significant effect on our results of
operations. Since the mid-1990s, we have
reinsured between 60% and 90% of the mortality
risk on our U.S. term life insurance policies on a
quota share yearly renewable term (“YRT”) basis.
In Canada, historically, we utilized reinsurance
arrangements similar to the U.S. in certain years
and reinsured only face amounts above
$500,000 in other years. However, in the first
quarter of 2012, we entered into a YRT
reinsurance arrangement in Canada similar to
our U.S. program. YRT reinsurance permits us to
set future mortality at contractual rates by policy
class. To the extent actual mortality experience is
more or less favorable than the contractual rate,
the reinsurer will earn incremental profits or bear
the incremental cost, as applicable. In contrast to
coinsurance, which is intended to eliminate all
risks (other than counterparty risk of the
reinsurer) and rewards associated with a
specified percentage of the block of policies
subject to the reinsurance arrangement, the YRT

Freedom Lives Here™

reinsurance arrangements we enter into are
intended only to reduce volatility associated with
variances between estimated and actual
mortality rates.

In 2010, as part of our corporate reorganization
and the initial public offering of our common
stock, we entered into significant coinsurance
transactions (the “IPO coinsurance transactions”)
with entities then affiliated with Citigroup, Inc.
(collectively, the “IPO coinsurers”) and ceded
between 80% and 90% of the risks and rewards
of our term life insurance policies that were in
force at year-end 2009. We continue to
administer all policies subject to these
coinsurance agreements.

The effect of our reinsurance arrangements on
ceded premiums and benefits and expenses on
our statement of income follows:

• Ceded premiums. Ceded premiums are the

premiums we pay to reinsurers. These
amounts are deducted from the direct
premiums we earn to calculate our net
premium revenues. Similar to direct
premium revenues, ceded coinsurance
premiums remain level over the initial term
of the insurance policy. Ceded YRT
premiums increase over the period that the
policy has been in force. Accordingly, ceded
YRT premiums generally constitute an
increasing percentage of direct premiums
over the policy term.

• Benefits and claims. Benefits and claims
include incurred claim amounts and
changes in future policy benefit reserves.
Reinsurance reduces incurred claims in
direct proportion to the percentage ceded.
Coinsurance also reduces the change in
future policy benefit reserves in direct
proportion to the percentage ceded, while
YRT reinsurance does not significantly
impact the change in these reserves.

• Amortization of DAC. DAC, and therefore

amortization of DAC, is reduced on a pro-rata
basis for the coinsured business, including the
business reinsured with the IPO coinsurers.
There is no impact on amortization of DAC
associated with our YRT contracts.

•

Insurance expenses

Insurance expenses.
are reduced by the allowances received
from coinsurance. There is no impact on
insurance expenses associated with our YRT
contracts.

We may alter our reinsurance practices at any
time due to the unavailability of YRT reinsurance
at attractive rates or the availability of
alternatives to reduce our risk exposure. We
presently intend to continue ceding
approximately 90% of our U.S. and Canadian
mortality risk on new business.

Expenses. Results are also affected by variances
in client acquisition, maintenance and
administration expense levels.

Investment and Savings Products
Segment. Our Investment and Savings
Products segment results are primarily driven by
sales, the value of assets in client accounts for
which we earn ongoing management, marketing
and support, and distribution fees, and the
number of recordkeeping and custodial-fee
generating positions we administer.

Sales. We earn commissions and fees, such as
dealer re-allowances, and marketing and
support fees, based on sales of mutual fund
products and annuities. Sales of investment and
savings products are influenced by the overall
demand for investment products in the United
States and Canada, as well as by the size and
productivity of our sales force. We generally
experience seasonality in our Investment and
Savings Products segment results due to our
high concentration of sales of retirement
account products. These accounts are typically
funded in February through April, coincident
with our clients’ tax return preparation season.
While we believe the size of our sales force is a
factor in driving sales volume in this segment,
there are a number of other variables, such as
economic and market conditions, which may
have a significantly greater effect on sales
volume in any given fiscal period.

Asset values in client accounts. We earn
marketing and support fees as well as
distribution fees (trail commissions or, with
respect to U.S. mutual funds, 12b-1 fees) on

ITEM 7. MD&A

mutual fund and annuity assets in the United
States and Canada. In the United States, we also
earn investment advisory fees on assets in the
managed investments program. In Canada, we
earn management fees on certain mutual fund
assets and on the segregated funds for which we
serve as investment manager. Asset values are
influenced by new product sales, ongoing
contributions to existing accounts, redemptions
and the change in market values in existing
accounts. While we offer a wide variety of asset
classes and investment styles, our clients’
accounts are primarily invested in equity funds.

Positions. We earn recordkeeping fees for
administrative functions we perform on behalf of
several of our retail and managed mutual fund
providers. An individual client account may
include multiple fund positions for which we
earn recordkeeping fees. We may also receive
fees earned for non-bank custodial services that
we provide to clients with retirement plan
accounts.

Sales mix. While our investment and savings
products all provide similar long-term economic
returns to the Company, our results in a given
fiscal period will be affected by changes in the
overall mix of products within these categories.
Examples of changes in the sales mix that
influence our results include the following:

•

sales of annuity products in the United
States will generate higher revenues in the
period such sales occur than sales of other
investment products that either generate
lower upfront revenues or, in the case of
managed investments and segregated
funds, no upfront revenues;

sales of a higher proportion of managed
investments and segregated funds products
will generally extend the time over which
revenues can be earned because we are
entitled to higher revenues based on assets
under management for these accounts in
lieu of upfront revenues; and

sales of a higher proportion of mutual fund
products and the composition of the fund
families sold will impact the timing and
amount of revenue we earn given the

Primerica 2016 Annual Report

ITEM 7. MD&A

marketing, support, recordkeeping and
custodial services we provide for the various
mutual fund products we distribute.

Corporate and Other Distributed Products
Segment. We earn revenues and pay
commissions and referral fees for various other
insurance products, prepaid legal services and
other financial products, all of which are
originated by third parties. National Benefit Life
Insurance Company (“NBLIC”) also has in-force
policies from several discontinued lines of
insurance. At the beginning of 2014, NBLIC sold
its short-term statutory disability benefit
insurance business to AmTrust North America,
Inc., and the net gain recognized on the sale was
reported as discontinued operations in 2014.
Also during 2014, NBLIC ceased the marketing
and underwriting of new student life insurance
policies but it continues to administer the
existing block of student life business.

Corporate and Other Distributed Products
segment net investment income reflects actual
net investment income realized by the Company
less the amount allocated to our Term Life
Insurance segment based on the assumed net
interest accreted to the segment’s U.S. GAAP-
measured future policy benefit reserve liability
less DAC. Actual net investment income
reflected in the Corporate and Other Distributed
Products segment is impacted by the size and
performance of our invested asset portfolio,
which can be influenced by interest rates, credit
spreads, and the mix of invested assets.

The Corporate and Other Distributed Products
segment is also affected by corporate income
and expenses not allocated to our other
segments, general and administrative expenses
(other than expenses that are allocated to our
Term Life Insurance or Investment and Savings
Products segments), interest expense on notes
payable and reserve financing transactions as
well as realized gains and losses on our invested
asset portfolio.

Capital Structure. Our financial results are
affected by our capital structure, which includes
our senior unsecured notes (the “Senior Notes”)
and common stock. See Note 10 (Debt), Note 12

Freedom Lives Here™

(Stockholders’ Equity) and Note 16
(Commitments and Contingent Liabilities) to our
consolidated financial statements included
elsewhere in this report for more information on
changes in our capital structure.

Foreign Currency. The Canadian dollar is the
functional currency for our Canadian subsidiaries
and our consolidated financial results, reported
in U.S. dollars, are affected by changes in the
currency exchange rate. As such, the translated
amount of revenues, expenses, assets and
liabilities attributable to our Canadian
subsidiaries will be higher or lower in periods
where the Canadian dollar appreciates or
weakens relative to the U.S. dollar, respectively.
While the Canadian dollar spot rate relative to
the U.S. dollar has improved during 2016, it
remains lower as compared with 2014 due to the
significant decline in the value of the Canadian
dollar relative to the U.S. dollar in 2015.

The year-over-year increase in the year-end
exchange rates used by the Company to
translate our Canadian dollar functional currency
assets and liabilities into U.S. dollars was 4% in
2016 from 2015 and it decreased by 17% from
2015 to 2014. The year-over-year decrease in
the average exchange rates used by the
Company to translate our Canadian dollar
functional currency revenues and expenses into
U.S. dollars was 4% in 2016 from 2015 and 14%
in 2015 from 2014.

See “Results of Operations” and “Financial
Condition” and “Quantitative and Qualitative
Disclosures About Market Risk – Canadian
Currency Risk” and Note 3 (Segment and
Geographical Information) to our consolidated
financial statements included elsewhere in this
report for more information on our Canadian
subsidiaries and the impact of foreign currency
on our financial results.

CriticalAccountingEstimates
We prepare our financial statements in
accordance with U.S GAAP. These principles are
established primarily by the Financial Accounting
Standards Board. The preparation of financial
statements in conformity with U.S. GAAP

requires us to make estimates and assumptions
based on currently available information when
recording transactions resulting from business
operations. Our significant accounting policies
are described in Note 1 (Description of Business,
Basis of Presentation, and Summary of
Significant Accounting Policies) to our
consolidated financial statements included
elsewhere in this report. The most significant
items on our consolidated balance sheets are
based on fair value determinations, accounting
estimates and actuarial determinations, which
are susceptible to changes in future periods and
could affect our results of operations and
financial position.

The estimates that we deem to be most critical
to an understanding of our results of operations
and financial position are those related to DAC,
future policy benefit reserves and corresponding
amounts due from reinsurers, income taxes, and
the valuation of investments. The preparation
and evaluation of these critical accounting
estimates involve the use of various assumptions
developed from management’s analyses and
judgments. Subsequent experience or use of
other assumptions could produce significantly
different results.

Deferred Policy Acquisition Costs. We defer
incremental direct costs of successful contract
acquisitions that result directly from and are
essential to the contract transaction(s) and that
would not have been incurred had the contract
transaction(s) not occurred. These costs include
commissions and policy issue expenses.
Deferrable term life insurance policy acquisition
costs are amortized over the initial premium-
paying period of the related policies in
proportion to premium income and include
assumptions made by us regarding persistency,
expenses, interest rates and claims, which are
updated on new business to reflect recent
experience. These assumptions may not be
modified, or unlocked on in-force term life
insurance business, unless recoverability testing
deems estimated future cash flows to be
inadequate. DAC is subject to recoverability
testing annually and when circumstances
indicate that recoverability is uncertain.

ITEM 7. MD&A

If actual lapses are different from pricing
assumptions for a particular period, DAC
amortization for that period will be affected. If
the rate of policies that lapse is 1% higher than
the rate of policies that we expected to lapse in
our original pricing assumptions, approximately
1% more of the existing DAC balance will be
amortized, which would have been equal to
approximately $16.3 million as of December 31,
2016 (assuming such lapses were distributed
proportionately among policies of all durations).
We believe that a lapse rate in the number of
policies that is 1% higher than the rate assumed
in our pricing assumptions is a reasonably
possible variation. Higher lapses in the early
durations would have a greater effect on DAC
amortization since the DAC balances are higher
at the earlier durations. Due to the inherent
uncertainties in making assumptions about
future events, materially different experience
from expected results in persistency could result
in a material increase or decrease of DAC
amortization in a particular period.

Deferrable acquisition costs for Canadian
segregated funds are amortized over the life of
the policies in relation to the present value of
estimated gross profits expected to be realized
over the life of the underlying policies. The gross
profits and resulting DAC amortization will vary
with actual and anticipated fund returns,
redemptions, commissions and expenses. DAC
from our Canadian segregated funds reflects
approximately 3% of our total DAC, and DAC
amortization on these segregated funds reflects
approximately 3% of our total DAC amortization
for the year ended December 31, 2016.

For additional information on DAC, see Note 1
(Description of Business, Basis of Presentation,
and Summary of Significant Accounting Policies)
and Note 7 (Deferred Policy Acquisition Costs) to
our consolidated financial statements included
elsewhere in this report.

Liabilities for future policy

Future Policy Benefit Reserves and
Reinsurance.
benefits on our term life insurance products
have been computed using a net level method
and include assumptions as to mortality,
persistency, interest rates, and other

Primerica 2016 Annual Report

ITEM 7. MD&A

assumptions based on our historical experience,
modified as necessary for new business to reflect
anticipated trends and to include provisions for
possible adverse deviation. Reserves related to
reinsured policies are accounted for using
assumptions consistent with those used to
determine the future policy benefit reserves and
are included in Due from reinsurers in our
consolidated balance sheets. Similar to the term
life insurance DAC discussion above, we do not
modify the assumptions used to establish future
policy benefit reserves during the policy term
unless recoverability testing deems them to be
inadequate and there is no remaining DAC
associated with the underlying policies. Our
results depend significantly upon the extent to
which our actual experience is consistent with
the assumptions we used in determining our
future policy benefit reserves. Our future policy
benefit reserve assumptions and estimates
require significant judgment and, therefore, are
inherently uncertain.

If the rate of policies that lapse is 1% higher than
the rate of policies that we expected to lapse in
our pricing assumptions, approximately 1%
more of the future policy benefit reserves will be
released, which would have been equal to
approximately $54.6 million (assuming such
lapses were distributed proportionately among
policies of all durations), partially offset by the
release of the corresponding due from
reinsurers asset of approximately $38.6 million
as of December 31, 2016, which decreases over
time with the run-off of policies subject to the
IPO coinsurance transactions. Higher lapses in
later durations would have a greater effect on
the release of future policy benefit reserves since
the future policy benefit reserves are higher at
the later durations.

We cannot determine with precision the ultimate
amounts that we will pay for actual claims or the
timing of those payments.

Income Taxes. We account for income taxes
using the asset and liability method. We
recognize deferred tax assets and liabilities for
the future tax consequences attributable to
(i) temporary differences between the financial
statement carrying amounts of existing assets
and liabilities and their respective tax bases and
(ii) operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to
taxable income in the years in which those
temporary differences are expected to be
recovered or settled. We recognize the effect on
deferred tax assets and liabilities of a change in
tax rates in income in the period that includes
the enactment date. Deferred tax assets are
recognized subject to management’s judgment
that realization is more likely than not applicable
to the periods in which we expect the temporary
difference will reverse.

In light of the multiple tax jurisdictions in which
we operate, our tax returns are subject to routine
audit by the Internal Revenue Service and other
taxation authorities. These audits at times may
produce alternative views regarding particular tax
positions taken in the year(s) of review. As a
result, the Company records uncertain tax
positions, which requires recognition at the time
when it is deemed more likely than not that the
position in question will be upheld. Although
management believes that the judgment and
estimates involved are reasonable and that the
necessary provisions have been recorded,
changes in circumstances or unexpected events
could adversely affect our financial position,
results of operations, and cash flows.

For additional information on income taxes, see
Note 1 (Description of Business, Basis of
Presentation, and Summary of Significant
Accounting Policies) and Note 11 (Income Taxes)
to our consolidated financial statements
included elsewhere in this report.

For additional information on future policy
benefits and reinsurance, see Note 1 (Description
of Business, Basis of Presentation, and Summary
of Significant Accounting Policies) and Note 6
(Reinsurance) to our consolidated financial
statements included elsewhere in this report.

Invested Assets. We hold primarily fixed-
maturity securities, including bonds and
redeemable preferred stocks, and equity securities,
including common and non-redeemable preferred
stock. We have classified these invested assets as
available-for-sale, except for the securities of our

Freedom Lives Here™

U.S. broker-dealer subsidiary, which we have
classified as trading securities. We also hold a
credit-enhanced note, which we classified as a
held-to-maturity security that was issued in
exchange for a surplus note with an equal principal
amount as part of a redundant reserve financing
transaction. All of these securities are carried at fair
value, except for the held-to-maturity security,
which is carried at amortized cost. Unrealized gains
and losses on available-for-sale securities, except
for other-than-temporary impairments (“OTTI”)
discussed below, are included as a separate
component of other comprehensive income in our
statements of comprehensive income. Changes in
fair value of trading securities are included in net
investment income in the accompanying
consolidated statements of income in the period in
which the change occurred.

Fair value.
Fair value is the price that would be
received upon the sale of an asset in an orderly
transaction between market participants at the
measurement date. Fair value measurements are
based upon observable and unobservable
inputs. Observable inputs reflect market data
obtained from independent sources, while
unobservable inputs reflect our view of market
assumptions in the absence of observable
market information. We classify and disclose all
invested assets carried at fair value in one of the
three fair value measurement categories
prescribed by U.S. GAAP.

As of each reporting period, we classify all
invested assets in their entirety based on the
lowest level of input that is significant to the fair
value measurement. Significant levels of
estimation and judgment are required to
determine the fair value of certain of our
investments. The factors influencing these
estimations and judgments are subject to
change in subsequent reporting periods.

OTTI. The determination of whether a decline
in fair value of available-for-sale securities below
amortized cost is other-than-temporary is
subjective. Furthermore, this determination can
involve a variety of assumptions and estimates,
particularly for invested assets that are not
actively traded in established markets. We
evaluate a number of quantitative and
qualitative factors when determining the

ITEM 7. MD&A

impairment status of individual securities,
including issuer-specific risks as well as relevant
macroeconomic risks.

For available-for-sale securities in an unrealized
loss position that we intend to sell or would
more-likely-than-not be required to sell before
the expected recovery of the amortized cost
basis, we recognize an impairment charge for
the difference between amortized cost and fair
value as a realized investment loss in our
statements of income. For available-for-sale
fixed maturity securities in an unrealized loss
position for which we have no intent to sell and
believe that it is not more-likely-than-not that
we will be required to sell before the expected
recovery of the amortized cost basis, only the
amount related to the principal cash flows not
expected to be received over the remaining term
of the security, or the credit loss component, of
the difference between cost and fair value is
recognized as a realized investment loss in our
statements of income, while the remainder is
recognized in other comprehensive income in
our statements of comprehensive income.

OTTI analyses that we perform involve the use of
estimates, assumptions, and subjectivity. If these
factors or future events change, we could
experience material OTTI in future periods, which
could adversely affect our financial condition,
results of operations and the size and quality of
our invested assets portfolio.

For additional information on our invested
assets, see Note 1 (Description of Business, Basis
of Presentation, and Summary of Significant
Accounting Policies), Note 4 (Investments) and
Note 5 (Fair Value of Financial Instruments) to
our consolidated financial statements included
elsewhere in this report.

ResultsofOperations

Revenues. Our revenues consist of the
following:

• Net premiums. Reflects direct premiums
payable by our policyholders on our
in-force insurance policies, primarily term
life insurance, net of reinsurance premiums
that we pay to reinsurers.

Primerica 2016 Annual Report

ITEM 7. MD&A

• Commissions and fees. Consists primarily

of dealer re-allowances earned on the sales
of investment and savings products, trail
commissions and management fees based
on the asset values of client accounts,
marketing and support fees from product
originators, custodial fees for services
rendered in our capacity as nominee on
client retirement accounts funded by mutual
funds on our servicing platform,
recordkeeping fees for mutual funds on our
servicing platform and fees associated with
the sale of other distributed products.

• Net investment income. Represents

income, net of investment-related expenses,
generated by our invested asset portfolio,
which consists primarily of interest income
earned on fixed-maturity investments.
Investment income recorded on our
held-to-maturity invested asset and the
offsetting interest expense recorded for our
surplus note are included in net investment
income.

• Realized investment gains (losses), including
OTTI. Primarily reflects the difference
between amortized cost and amounts
realized on the sale of invested assets, as
well as OTTI charges.

• Other, net. Reflects revenues generated
primarily from the fees charged for access
to our proprietary sales force support
system, as well as revenues from the sale of
other miscellaneous items.

Benefits and Expenses. Our operating
expenses consist of the following:

• Benefits and claims. Reflects the benefits

and claims payable on insurance policies, as
well as changes in our reserves for future
policy claims and reserves for other benefits
payable, net of reinsurance.

• Amortization of DAC. Represents the

amortization of capitalized costs directly
associated with the sale of an insurance
policy or segregated fund, including sales
commissions, medical examination and
other underwriting costs, and other eligible
policy issuance costs.

Freedom Lives Here™

•

Sales commissions. Represents
commissions to our sales representatives in
connection with the sale of investment and
savings products and products other than
insurance products.

Insurance expenses. Reflects
non-capitalized insurance expenses,
including staff compensation, technology
and communications, insurance sales force-
related costs, printing, postage and
distribution of insurance sales materials,
outsourcing and professional fees, premium
taxes, amortization of our definite-lived
intangible asset and other corporate and
administrative fees and expenses related to
our insurance operations. Insurance
expenses also include both indirect policy
issuance costs and costs associated with
unsuccessful efforts to acquire new policies.

Insurance commissions. Reflects sales
commissions in respect of insurance
products that are not eligible for deferral.

Interest expense. Reflects interest on our
notes payable, the financing charges related
to an issued letter of credit, fees paid for the
credit enhancement feature on our
held-to-maturity invested asset, and a
finance charge incurred pursuant to one of
our coinsurance agreements with an IPO
coinsurer.

• Other operating expenses. Consists

primarily of expenses that are unrelated to
the distribution of insurance products,
including staff compensation, technology
and communications, various sales force-
related costs, printing, postage and
distribution of sales materials, outsourcing
and professional fees, amortization of our
definite-lived intangible asset and other
corporate and administrative fees and
expenses.

ITEM 7. MD&A

directly attributable to a specific operating
segment based on the relative sizes of our life-
licensed and securities-licensed independent
sales forces. These allocated items include fees
charged for access to our proprietary sales force
support application and costs incurred for field
technology, supervision, training and certain

other costs. We also allocate certain technology
and occupancy costs to our operating segments
based on estimated usage. Costs that are not
directly charged or allocated to our two primary
operating segments are included in our
Corporate and Other Distributed Products
segment.

Primerica 2016 Annual Report

ITEM 7. MD&A

Primerica, Inc. and Subsidiaries Results. Our results of operations for the years ended
December 31, 2016, 2015, and 2014 were as follows:

Year ended December 31,

2016 vs. 2015
change

2015 vs. 2014
change

2016

2015

2014

(Dollars in thousands)

Revenues:

Direct premiums
Ceded premiums

Net premiums

Commissions and fees
Investment income net of
investment expenses
Interest expense on surplus

note

Net investment income
Realized investment gains

(losses), including other-than-
temporary impairment losses

Other, net

$ 2,444,268 $ 2,345,444 $ 2,301,332 $ 98,824
5,339

(1,600,559)

(1,616,817)

(1,595,220)

4% $ 44,112
(21,597)
*

843,709
541,686

750,224
537,146

684,515
527,166

93,485 12% 65,709
9,980
1%

4,540

2%
(1)%

10%
2%

97,905

89,557

89,955

8,348

(398)

(18,880)

(13,048)

(3,482)

5,832 45%

9,566 275%

79,025

76,509

86,473

2,516

3% (9,964)

(12)%

4,088
50,576

(1,738)
42,058

(261)
39,203

5,826 335%
8,518 20%

1,477 566%
7%
2,855

Total revenues

1,519,084

1,404,199

1,337,096 114,885

8% 67,103

Benefits and expenses:
Benefits and claims
Amortization of DAC
Sales commissions
Insurance expenses
Insurance commissions
Interest expense
Other operating expenses

367,655
180,582
272,815
132,348
17,783
28,691
181,615

339,315
157,727
274,893
123,030
16,340
33,507
168,406

311,417
144,378
268,775
113,871
15,353
34,570
173,010

28,340
8% 27,898
22,855 14% 13,349
(1)% 6,118
(2,078)
9,159
8%
9,318
1,443
987
9%
(4,816) (14)% (1,063)
8% (4,604)
13,209

9%
9%
2%
8%
6%
(3)%
(3)%

Total benefits and expenses

1,181,489

1,113,218

1,061,374

68,271

6% 51,844

Income from continuing
operations before
income taxes

Income taxes on continuing

operations

Income from
continuing
operations

Income from discontinued

operations, net of income
taxes

337,595

290,981

275,722

46,614 16% 15,259

118,181

101,110

95,888

17,071 17%

5,222

219,414

189,871

179,834

29,543 16% 10,037

—

1,578

—

(1,578) (100)%

Net income

$ 219,414 $ 189,871 $ 181,412 $ 29,543 16% $ 8,459

Less than 1%

Freedom Lives Here™

Total revenues. Total revenues increased in
2016 from 2015 largely due to incremental
premiums on term life insurance policies that are
not subject to the IPO coinsurance transactions
as well as direct premiums growth reflecting the
increase in the number of new policies issued in
recent periods. Commissions and fees from our
Investment and Savings Products segment
increased modestly in 2016 compared to 2015
primarily due to higher asset-based revenues
driven by the increase in average client asset
values and higher account-based revenues
primarily driven by an increase in our account-
based fee structure on U.S. qualified accounts,
offset by lower sales-based revenues due to
weakness in variable annuity sales.

Net investment income increased in 2016 from
2015 as increasing prices on fixed-income
investments led to an approximately $4.7 million
higher total return on the deposit asset backing
the 10% coinsurance agreement that is subject
to deposit method accounting. This increase was
partially offset by approximately $2.1 million of
lower investment income due to lower yield on a
slightly larger invested asset portfolio. Interest
expense on surplus note line item will fluctuate
from period to period along with the principal
amount of our surplus note (the “Surplus Note”)
based on the balance of reserves being
contractually supported under a redundant
reserve financing transaction used by our Vidalia
Re, Inc. (“Vidalia Re”) captive insurance company.
Investment income earned on our
held-to-maturity invested asset completely
offsets the interest expense on Surplus Note line
item, thereby eliminating any impact on net
investment income. For more information on the
Surplus Note, see Note 10 (Debt) and for
additional information on the redundant reserve
financing transaction used by Vidalia Re, see
Note 4 (Investments) to our consolidated
financial statements included elsewhere in this
report.

Realized investment gains (losses), including
OTTI losses, increased primarily due to higher
realized investment gains we recognized in the
second quarter of 2016 from the sale of certain
securities where the Company was able to
reduce its exposure to specific issuers, as well as

ITEM 7. MD&A

a lower amount of impairments on certain
investments in our invested asset portfolio.

Other, net revenues increased during 2016
compared to 2015 largely due to the increase in
fees for our proprietary sales force support
system, consistent with subscriber growth. We
allocate fees collected for our proprietary sales
force support system between our Term Life
Insurance segment and our Investment and
Savings Products segment based on the
estimated number of sales force representatives
that are licensed to sell products in each
respective segment.

During 2015, total revenues increased from 2014
primarily due to incremental premiums on term
life insurance policies not subject to the IPO
coinsurance transactions and higher direct
premiums reflecting the increase in new policy
sales in recent periods. Also contributing to the
year-over-year increase in revenues in 2015
versus 2014 were higher commissions and fees
generated from our Investment and Savings
Products segment as a result of investment and
savings product sales growth and client asset
values growth.

Partially offsetting the increase in revenues in
2015 from 2014 was a decline in net investment
income, which was mostly attributed to lower
yield on invested assets, lower total return on
the deposit asset underlying the 10%
coinsurance agreement, and lower income from
called fixed-income securities. Increases in
realized investment losses recognized in 2015
compared to 2014 also negatively impacted
revenue as we recognized a higher amount of
impairments on certain investments in our
invested asset portfolio, most notably in the
fourth quarter of 2015, which we deemed to be
other-than-temporarily impaired as a result of
factors specific to the issuer or our intent to sell
the investment in the near term. Also offsetting
the year-over-year increase in revenues in 2015
was the translation impact of the weaker
Canadian dollar in relation to the U.S. dollar.
Measured in constant currency by translating
2015 Canadian local currency revenues using the
average 2014 exchange rate, the year-over-year
impact from the decrease in exchange rates

Primerica 2016 Annual Report

ITEM 7. MD&A

negatively impacted revenues in 2015 by
approximately $36.2 million.

Total benefits and expenses. Total benefits and
expenses increased in 2016 from 2015 reflecting
growth in premium-related expenses, which
include benefits and claims, amortization of DAC
and insurance expenses. Also contributing to the
increase in insurance expenses and other
operating expenses was higher spending of
approximately $10.4 million for our proprietary
sales force support system’s mobile application
as well as accommodating increased capacity for
the growth in subscribers, higher employee-
related costs of approximately $4.3 million, and
costs related to preparing for the
implementation of the DOL Fiduciary Rule of
approximately $3.3 million. These increases were
partially offset by the decline in interest expense
incurred on our 10% coinsurance agreement
which is discussed further in Note 6
(Reinsurance) to our consolidated financial
statements included elsewhere in this report.

The increase in total benefits and expenses in
2015 from 2014 was in line with the increase in
total revenues. The growth in benefits and
claims, amortization of DAC, and insurance
expenses was generally consistent with the
percentage increase in net premiums. In
addition, the increase in sales commissions was
largely in line with the percentage increase in
commissions and fees revenues. Similar to
revenues, the impact of Canadian foreign
exchange rates partially offset the increase in
total benefits and expenses. In 2015, total
benefits and expenses of our Canadian
subsidiaries translated into U.S. dollars was
approximately $26.1 million lower than 2014 as
measured on a constant currency basis.

Income taxes. Our effective income tax rate was
relatively consistent each year at 35.0%, 34.7%,
and 34.8% in 2016, 2015, and 2014, respectively.

For additional information, see the discussions
of results of operations by segment below.

Freedom Lives Here™

Term Life Insurance Segment. Our results for the Term Life Insurance segment for the years ended
December 31, 2016, 2015, and 2014 were as follows:

ITEM 7. MD&A

Revenues:

Direct premiums

Ceded premiums

Net Premiums

Allocated net investment income

Other, net

Total revenues

Benefits and expenses:
Benefits and claims

Amortization of DAC

Insurance expenses

Insurance commissions

Year ended December 31,

2016 vs. 2015
change

2015 vs. 2014
change

2016

2015

2014

(Dollars in thousands)

$ 2,413,340 $ 2,313,133 $ 2,266,649 $100,207 4% $ 46,484

(1,591,133)

(1,584,952)

(1,605,965)

6,181

(21,013)

(1)%

822,207

728,181

660,684

94,026 13% 67,497 10%

7,634

36,541

5,987

29,790

4,444

27,257

1,647 28%

1,543 35%

6,751 23%

2,533

866,382

763,958

692,385 102,424 13% 71,573 10%

350,640

172,812

125,268

4,301

322,232

147,980

116,290

4,247

295,332

28,408 9% 26,900

133,331

24,832 17% 14,649 11%

107,617

8,978 8%

8,673

4,004

54 1%

243

Total benefits and expenses

653,021

590,749

540,284

62,272 11% 50,465

Income from continuing
operations before
income taxes

$ 213,361 $ 173,209 $ 152,101 $ 40,152 23% $ 21,108 14%

Less than 1%

Net premiums. Direct premiums grew in 2016
from 2015 largely due to the increase in the
number of new policies issued in recent periods.
The change in ceded premiums reflected our
increasing non-level YRT ceded premiums and
the run-off of business subject to the IPO
coinsurance transactions. The sustained impact
of growth in direct premiums and the run-off of
business subject to the IPO coinsurance
transactions resulted in net premiums growing
faster than direct premiums.

The increase in net premiums in 2015 from 2014
was largely due to the factors discussed above in
the comparison of 2016 to 2015. In addition, the
weaker Canadian dollar caused lower direct
premium growth and a higher run-off of the
Canadian business subject to the IPO
coinsurance transactions, which negatively
impacted net premiums in 2015 by
approximately $14.0 million compared with 2014
when measured on a constant currency basis.

Benefits and claims. The increase in benefits
and claims in 2016 from 2015 was primarily
driven by the growth in net premiums. However,
benefits and claims increased at a slower rate
than net premiums primarily due to disabled life
premium waiver claims experience during 2016
being an estimated $5 million lower than
historical levels, YRT rate reductions negotiated
for 2014 and later issue years and modestly
lower persistency. Death claims were relatively
consistent with historical experience.

In comparing 2015 to 2014, benefits and claims
also grew in line with net premiums due to YRT
rate reductions negotiated for 2014 and later
issue years partially offset by persistency
improvements in 2015 versus 2014. Death claims
for both 2015 and 2014 were in-line with
historical averages.

Amortization of DAC. The amortization of DAC
increased for 2016 from 2015 largely due to
growth in net premiums. The increase in DAC

Primerica 2016 Annual Report

ITEM 7. MD&A

amortization was higher than the increase in net
premiums reflecting modestly lower persistency
than the prior year as well as a higher amount of
commissions deferred in recent periods.

The increase in amortization of DAC in 2015
compared to 2014 was also impacted by a
higher amount of commissions deferred in
recent periods, resulting in a rate of DAC
amortization in excess of the growth in net
premiums. This increase was mostly offset by
improved persistency in 2015.

Insurance expenses. Growth in the business and
the run-off of expense allowances related to the
IPO coinsurance transactions resulted in a year-
over-year increase in insurance expenses of
approximately $4.4 million in 2016 compared
with 2015. Increased spending associated with
our proprietary sales force support system’s
mobile application also contributed to the
increase in insurance expenses by approximately
$8.5 million. During 2015, we reallocated certain
employee-related expenses from the Term Life
Insurance segment to the Corporate and Other
Distributed Products segment due to the change
in the Company’s management structure that
occurred in April 2015. The approximately

$3.3 million full-year effect of the reallocated
expenses, when combined with higher employee
merit and headcount expenses in 2016 of
approximately $2.3 million, resulted in a net
decrease of approximately $1.0 million in the
segment’s employee-related expenses in 2016
versus 2015. Furthermore, several miscellaneous
cost saving items in 2016 that aggregated to
approximately $3.0 million in lower insurance
expenses affected the year-over-year change.

In comparing 2015 to 2014, the growth in the
business and the run-off of expense allowances
related to the IPO coinsurance transactions
resulted in a year-over-year increase in
insurance expenses of approximately
$5.5 million. Costs related to our proprietary
sales force support system’s mobile application
increased by approximately $2.8 million in 2015
versus 2014. Higher employee-related costs
increased insurance expenses by approximately
$1.8 million in 2015 but were largely offset by a
reduction in the translated amount of Canadian
functional currency insurance expenses as a
result of the weaker Canadian dollar compared
with 2014.

Freedom Lives Here™

Revenues:

Commissions and fees:

Sales-based revenues

Asset-based revenues

Expenses:

Amortization of DAC

Insurance commissions

Sales commissions:

Sales-based

Asset-based

Other operating expenses

Investment and Savings Products Segment. Our results of operations for the Investment and
Savings Products segment for the years ended December 31, 2016, 2015, and 2014 were as follows:

ITEM 7. MD&A

Year ended December 31,

2016 vs. 2015
change

2015 vs. 2014
change

2016

2015

2014

(Dollars in thousands)

$227,320 $237,384 $237,757 $(10,064)

(4)% $ (373)

237,604

231,919

225,799

Account-based revenues

50,861

44,497

40,477

Other, net

8,836

7,536

7,069

Total revenues

524,621

521,336

511,102

3,285

1% 10,234

5,685

6,364

1,300

14%

17%

6,120

4,020 10%

467

6,148

11,456

7,952

9,841

8,734

8,799

(1,804)

(23)%

(782)

(9)%

1,615

16%

1,042 12%

160,674

167,883

168,207

(7,209)

(4)%

(324)

99,639

102,348

95,485

94,092

88,974

90,371

4,154

8,256

6,511

3,721

Total expenses

380,265

375,253

365,085

5,012

1% 10,168

Income from continuing

operations before income
taxes

$144,356 $146,083 $146,017 $ (1,727)

(1)% $

Less than 1%

Commissions and fees. Sales-based revenues
decreased in 2016 compared to 2015 primarily
driven by lower variable annuity sales. Asset-
based revenues increased in 2016 compared to
2015 due to the increase in average client asset
values, which was indicative of favorable market
performance combined with continued net
positive inflows. Account-based revenues also
increased in 2016 compared to 2015 primarily
due to an increase in our account-based fee
structure on U.S. qualified accounts, which
accounted for a year-over-year increase of
approximately $4.1 million, as well as the
increase in the average number of
fee-generating positions in mutual funds and

managed accounts investments that are serviced
on the Company’s recordkeeping and custodial
services platform.

The increase in commissions and fees in 2015
from 2014 was largely attributable to growth in
average client asset values as discussed earlier in
the “Investment and Savings Product Sales,
Asset Values and Accounts” section. Account-
based revenue increased largely due to the
increase in the average number of fee
generating accounts from the addition of a
mutual fund provider on our recordkeeping and
custodial services platform during 2015. Sales-
based revenues were flat on a year-over-year
basis as modest growth in sales-based revenue

Primerica 2016 Annual Report

ITEM 7. MD&A

generating product sales was offset by a shift in
product sales mix to product offerings with
lower sales-based commission rates.

Amortization of DAC. Amortization of DAC on
our Canadian segregated funds product
decreased in 2016 from 2015 largely due to the
impact of favorable segregated funds market
performance. The effect of lower redemption
estimates for the 2016 annual update of
assumptions based on emerging experience was
in line with 2015 and therefore did not impact
the year-over-year comparison of DAC
amortization.

In 2015, amortization of DAC on our Canadian
segregated funds product was lower compared
to 2014 due to the translation impact from the
decline in the Canadian exchange rate, which
reduced amortization by approximately
$1.7 million. The year-over-year decline in DAC
amortization was partially offset by the lower
adjustment (approximately $1.0 million in 2015
compared to approximately $2.4 million in 2014)
to reduce amortization reflecting updated
assumptions of future redemptions based on
emerging experience.

Insurance commissions. The increase in
insurance commissions in 2016 from 2015 was
largely driven by a change in trail commission
rate earned by the sales force on our Canadian
segregated funds during the second quarter of
2015.

Insurance commissions increased in 2015
compared with 2014 largely due to the factor
discussed above in the comparison of 2016 to
2015. Partially offsetting the increase was the
impact of approximately $1.5 million that the
year-over-year decline in Canadian exchange
rates had on the translated balance of insurance
commissions reported.

Sales commissions. The decline in sales-based
commissions was in line with the decline in
sales-based revenue. The increase in asset-based
commissions slightly outpaced the increase in
asset-based revenue primarily due to the change
in product mix.

The decrease in sales-based commissions in
2015 from 2014 was relatively consistent with
the decline in sales-based revenues. The increase
in asset-based commissions outpaced the
increase in asset-based revenues primarily due
to the translation impact of the weaker Canadian
dollar in relation to the U.S. dollar on Canadian
segregated funds revenue included in asset-
based revenue.

Other operating expenses. Other operating
expenses increased in 2016 from 2015 largely
due to $3.3 million of higher costs related to
preparation for the DOL Fiduciary Rule. In
addition, increased spending associated with our
proprietary sales force support system’s mobile
application resulted in approximately
$2.4 million of higher operating expenses in
2016. Also contributing to the growth in
operating expenses in 2016 as compared with
2015 were higher employee-related costs of
approximately $0.9 million.

The increase in other operating expenses in
2015 from 2014 was primarily due to higher
costs associated with the growth in the business.
The year-over-year percentage growth in other
operating expenses exceeded the percentage
growth in total revenues due to several other
business initiatives with the largest being
approximately $0.9 million in higher spending
on our proprietary sales force support system’s
mobile application.

Freedom Lives Here™

Corporate and Other Distributed Products Segment. Our results of operations for the Corporate
and Other Distributed Products segment for the years ended December 31, 2016, 2015, and 2014 were
as follows:

ITEM 7. MD&A

Year ended December 31,

2016 vs. 2015
change

2015 vs. 2014
change

2016

2015

2014

(Dollars in thousands)

$ 30,928 $ 32,311 $ 34,683 $(1,383)

(4)% $ (2,372)

(9,426)

(10,268)

(10,852)

(842)

(8)%

(584)

(7)%

(5)%

21,502

25,901

22,043

23,346

23,831

23,133

(541)

(2)% (1,788)

(8)%

2,555

11%

213

Revenues:

Direct premiums

Ceded premiums

Net Premiums

Commissions and fees

Allocated investment income net

of investment expenses

90,271

83,570

85,511

Interest expense on surplus note

(18,880)

(13,048)

(3,482)

6,701

5,832

45%

(1,941)

(2)%

9,566 275%

Allocated net investment

income

Realized investment gains

(losses), including other-than-
temporary impairment losses

Other, net

71,391

70,522

82,029

869

1% (11,507)

(14)%

4,088

5,199

(1,738)

4,732

(261)

5,826 335%

1,477 566%

4,877

467

10%

(145)

(3)%

Total revenues

128,081

118,905

133,609

9,176

8% (14,704)

(11)%

Benefits and expenses:
Benefits and claims

Amortization of DAC

Insurance expenses

Insurance commissions

Sales commissions

Interest expense

Other operating expenses

17,015

17,083

16,085

(68)

998

1,622

7,080

2,026

12,502

28,691

79,267

1,795

6,740

2,252

11,525

33,507

74,314

2,313

6,254

2,550

(173)

(10)%

(518)

(22)%

340

486

(226)

(10)%

(298)

(12)%

11,594

977

(69)

34,570

(4,816)

(14)% (1,063)

(1)%

(3)%

82,639

4,953

(8,325)

(10)%

(8,789)

(6)%

Total benefits and expenses

148,203

147,216

156,005

987

Loss from continuing
operations before
income taxes

$ (20,122) $ (28,311) $ (22,396) $(8,189)

(29)% $ 5,915

26%

Less than 1%

Total revenues. Total revenues increased in
2016 from 2015 partly due to commissions and
fees revenue from stronger sales of other
fee-based distributed products. Net premiums
for the closed blocks of business issued by our
NBLIC subsidiary decreased slightly due to the
run-off of NBLIC’s non-term life insurance block

of business. The increase in allocated net
investment income as well as realized
investment gains (losses) was driven by the same
factors discussed earlier in “Total revenues”
under the consolidated “Primerica, Inc. and
Subsidiaries Results” section.

Primerica 2016 Annual Report

ITEM 7. MD&A

The decrease in total revenues in 2015 from
2014 was primarily attributable to the decline in
allocated net investment income and the
increase in realized investment gains (losses)
discussed earlier in “Total revenues” under the
consolidated “Primerica, Inc. and Subsidiaries
Results” section. Total revenue also decreased
due to lower premiums attributable to the
continued run-off of NBLIC’s non-term life
insurance closed block, which included the
student life insurance business that ceased
writing new policies in 2014.

Total Benefits and Expenses. Total benefits and
expenses increased in 2016 from 2015 primarily
due to higher employee-related costs in other
operating expenses of approximately
$4.4 million, which includes the full-year effect of
reallocated employee-related expenses of
approximately $3.3 million between segments in
the second quarter of 2015 as described earlier
in the Term Life Insurance segment discussion.
The increase was partially offset by the reduction
in the interest expense incurred on our 10%
coinsurance agreement. For more information
on the interest expense incurred on our 10%
coinsurance agreement, see Note 6
(Reinsurance) to our consolidated financial
statements included elsewhere in this report.

The decrease in total benefits and expenses in
2015 from 2014 was primarily due to reduced
other operating expenses of approximately
$4.2 million reflecting the recognition of
transition expenses for our former co-CEOs in
2014 that resulted from the modification of their
employment terms, including ending their
employment on April 1, 2015 instead of in
August 2015. In addition, other operating
expenses were reduced by approximately
$4.0 million in 2015 versus 2014 as a sales force
technology project associated with a non-core
product offering ended and its related
developed software was written off in 2014.

FinancialCondition

asset portfolio funded by premiums from our
term life insurance business does not involve the
substantial asset accumulations and spread
requirements that exist with other non-term life
insurance products. As a result, the profitability
of our term life insurance business is not as
sensitive to the impact that interest rates have
on our invested asset portfolio and investment
income as the profitability of other companies
that distribute non-term life insurance products.

We follow a conservative investment strategy
designed to emphasize the preservation of our
invested assets and provide adequate liquidity
for the prompt payment of claims. To meet
business needs and mitigate risks, our
investment guidelines provide restrictions on our
portfolio’s composition, including limits on asset
type, per issuer limits, credit quality limits,
portfolio duration, limits on the amount of
investments in approved countries and
permissible security types. We also manage and
monitor our allocation of investments to limit
the accumulation of any disproportionate
concentrations of risk among industry sectors or
issuer countries outside of the U.S. and Canada.
In addition, as of December 31, 2016, we did not
hold any country of issuer concentrations
outside of the U.S. or Canada that represented
more than 5% of the fair value of our
available-for-sale invested asset portfolio or any
industry concentrations of corporate bonds that
represented more than 10% of the fair value of
our available-for-sale invested asset portfolio.

We may also direct our investment managers to
invest some of our invested asset portfolio in
currencies other than the U.S. dollar. For
example, a portion of our portfolio is invested in
assets denominated in Canadian dollars, which,
at minimum, would equal our reserves for
policies denominated in Canadian dollars.
Additionally, to ensure adequate liquidity for
payment of claims, we take into account the
maturity and duration of our invested asset
portfolio and our general liability profile.

Investments. Our insurance business is
primarily focused on selling term life insurance,
which does not include an investment
component for the policyholder. The invested

We also hold within our invested asset portfolio
a credit enhanced note (“LLC Note”) issued by a
limited liability company owned by a third-party
service provider which is classified as a

Freedom Lives Here™

held-to-maturity security. The LLC Note, which is
scheduled to mature on December 31, 2029, was
obtained in exchange for a surplus note of equal
principal amount issued by Vidalia Re, a special
purpose financial captive insurance company
and wholly owned subsidiary of Primerica Life.
For more information on the LLC Note, see Note
4 (Investments) to our consolidated financial
statements included elsewhere in this report.

We have an investment committee composed of
members of our senior management team that is
responsible for establishing and maintaining our
investment guidelines and supervising our
investment activity. Our investment committee
regularly monitors our overall investment results
and our compliance with our investment objectives
and guidelines. We use a third-party investment
advisor to assist us in the management of our
investing activities. Our investment advisor reports
to our investment committee.

ITEM 7. MD&A

Our invested asset portfolio is subject to a
variety of risks, including risks related to general
economic conditions, market volatility, interest
rate fluctuations, liquidity risk and credit and
default risk. Investment guideline restrictions
have been established to minimize the effect of
these risks but may not always be effective due
to factors beyond our control. Interest rates are
highly sensitive to many factors, including
governmental monetary policies, domestic and
international economic and political conditions
and other factors beyond our control. A
significant increase in interest rates could result
in significant losses, realized or unrealized, in the
value of our invested asset portfolio.
Additionally, with respect to some of our
investments, we are subject to prepayment and,
therefore, reinvestment risk.

Details on asset mix (excluding our held-to-maturity security) were as follows:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Mortgage- and asset-backed securities

Equity securities

Trading securities

Cash and cash equivalents

Total

Less than 1%.

December 31, 2016

December 31, 2015

Fair
value

Cost or
amortized
cost

Fair
value

Cost or
amortized
cost

65%

14%

10%

64%

14%

11%

67%

13%

68%

13%

100%

Primerica 2016 Annual Report

ITEM 7. MD&A

The composition and duration of our portfolio will vary depending on several factors, including the
yield curve and our opinion of the relative value among various asset classes. The year-end average
rating, duration and book yield of our fixed-maturity portfolio (excluding our held-to-maturity security)
were as follows:

Average rating of our fixed-maturity portfolio

Average duration of our fixed-maturity portfolio

December 31, 2016 December 31, 2015

A-

3.9 years

4.0 years

Average book yield of our fixed-maturity portfolio

4.21%

4.40%

Ratings for our investments in fixed-maturity securities are determined using Nationally Recognized
Statistical Rating Organizations designations and/or equivalent ratings. The distribution of our
investments in fixed-maturity securities (excluding our held-to-maturity security) by rating, including
those classified as trading securities, were as follows:

December 31, 2016

December 31, 2015

Amortized
cost

(Dollars in thousands)

$ 295,873

17% $ 292,169

161,594

387,072

798,156

93,533

23%

46%

5,787

125,682

386,140

801,732

89,301

377

17%

23%

47%

$1,742,015 100% $1,695,401

100%

AAA

BBB

Below investment grade

Not rated

Total

Less than 1%.

Freedom Lives Here™

The ten largest holdings within our invested asset portfolio (excluding our held-to-maturity security)
were as follows:

ITEM 7. MD&A

Issuer

Government of Canada

National Rural Utilities Cooperative

General Electric Co

Wells Fargo & Co

Iberdrola SA

National Fuel Gas Co

Anheuser-Busch InBev SA/NV

Australia & New Zealand Banking

TransCanada Corp

US Bancorp

December 31, 2016

Fair value

Cost or
amortized
cost

Unrealized
gain (loss)

Credit
rating

24,130 $

(Dollars in thousands)
23,167

$ 963

11,472

10,037

9,201

8,832

8,653

8,207

7,916

7,810

7,687

10,271

1,201

9,627

8,980

8,474

8,070

7,800

7,880

7,540

7,381

410

221

358

583

407

270

306

AAA

AA+

BBB+

BBB

A-

A+

A-

A+

Total — ten largest holdings

$ 103,945 $

99,190

$4,755

Total — fixed-maturity and equity securities

$1,844,715 $1,778,884

Percent of total fixed-maturity and equity securities

For additional information on our invested asset
portfolio, see Note 4 (Investments) and Note 5
(Fair Value of Financial Instruments) to our
consolidated financial statements included
elsewhere in this report.

Other Significant Assets and Liabilities. The
balances of and changes in other significant
assets and liabilities were as follows:

Assets:

Due from reinsurers

December 31,

2016

2015

Change

(Dollars in thousands)

$4,193,562 $4,110,628 $ 82,934

Deferred policy acquisition costs, net

1,713,065

1,500,259

212,806 14%

Liabilities:

Future policy benefits

Due from reinsurers. Due from reinsurers
reflects future policy benefit and claim reserves
due from third-party reinsurers, including the
IPO coinsurers. Such amounts are reported as
due from reinsurers rather than offsetting future
policy benefits. The year-over-year increase at
year-end 2016 was primarily driven by the

$5,673,890 $5,431,711 $242,179

timing of reinsurance payments received for
monthly reinsurance claims at year end.

Deferred policy acquisition costs, net. The
increase in DAC was primarily a result of
incremental commissions and expenses deferred
as a result of new business in 2016, which was
not subject to the IPO coinsurance agreements.

Primerica 2016 Annual Report

ITEM 7. MD&A

Future policy benefits. The increase in future
policy benefits was primarily a result of the
growth in our in-force book of business.

For additional information, see the notes to our
consolidated financial statements included
elsewhere in this report.

LiquidityandCapitalResources

Dividends and other payments to the Parent
Company from its subsidiaries are our principal
sources of cash. The amount of dividends paid
by the subsidiaries is dependent on their capital
needs to fund future growth and applicable
regulatory restrictions. The primary uses of funds
by the Parent Company include the payments of
stockholder dividends, interest on notes payable,
general operating expenses, and income taxes,
as well as repurchases of shares outstanding.
During 2016, our life insurance underwriting
companies declared and paid ordinary dividends
of $117.0 million to the Parent Company. See
Note 15 (Statutory Accounting and Dividend
Restrictions) to our consolidated financial
statements included elsewhere in this report for
more information on insurance subsidiary
dividends and statutory restrictions. In addition,
our non-life insurance subsidiaries declared and
paid dividends of approximately $72.5 million to
the Parent Company in 2016. At December 31,
2016, the Parent Company had cash and
invested assets of approximately $68.0 million.

The Parent Company’s subsidiaries generate
operating cash flows primarily from term life
insurance premiums (net of premiums ceded to
reinsurers), income from invested assets,
commissions and fees collected from the
distribution of investment and savings products
as well as other financial products. The

subsidiaries’ principal operating cash outflows
include the payment of insurance claims and
benefits (net of ceded claims recovered from
reinsurers), commissions to our sales force,
insurance and other operating expenses, interest
expense for future policy benefit reserves
financing transactions, and income taxes.

The distribution and underwriting of term life
insurance requires upfront cash outlays at the
time the policy is issued as we pay a substantial
majority of the sales commission during the first
year following the sale of a policy and incur
costs for underwriting activities at the inception
of a policy’s term. During the early years of a
policy’s term, we generally receive level term
premiums in excess of claims paid. We invest the
excess cash generated during earlier policy years
in fixed-maturity and equity securities held in
support of future policy benefit reserves. In later
policy years, cash received from the maturity or
sale of invested assets is used to pay claims in
excess of level term premiums received.

Historically, cash flows generated by our
businesses, primarily from our existing block of
term life policies and our investment and savings
products, have provided us with sufficient
liquidity to meet our operating requirements.
We anticipate that cash flows from our
businesses will continue to provide sufficient
operating liquidity over the next 12 months.

We may seek to enhance our liquidity position
or capital structure through borrowings from
third-party sources, sales of debt or equity
securities, reserve financings or some
combination of these sources. Additionally, we
believe that cash flows from our businesses and
potential sources of funding will sufficiently
support our long-term liquidity needs.

Freedom Lives Here™

Cash Flows. The components of the changes in cash and cash equivalents were as follows:

ITEM 7. MD&A

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash

Year ended December 31,

2016

2015

2014

(In thousands)
$ 292,167 $ 259,089 $ 237,332

(47,923)

(58,465)

(15,645)

(185,134)

(235,268)

(175,883)

572

(5,059)

(2,789)

Change in cash and cash equivalents

$ 59,682 $ (39,703) $ 43,015

Operating activities. The increase in operating
cash flows in 2016 from 2015 was partially the
result of an increase in cash received from the
collection of premium revenues in excess of
benefits and claims paid in our Term Life
Insurance segment. Growth in direct premiums
as well as the additional layering of net
premiums from term life insurance policies not
subject to the IPO coinsurance transactions has
continued to generate positive incremental cash
flows after payments are made for policy
acquisition costs during the first year that
policies are issued. In addition, the timing of
remittances for monthly reinsurance premiums
to reinsurers as well as the timing impact of
when outstanding checks were paid from our
bank disbursement accounts at year end
contributed to the increase in operating cash
flows in 2016 as compared with 2015. Also
contributing to the increase in operating cash
flows in 2016 versus 2015 was lower cash
income taxes in Canada relative to income tax
expense incurred due to the timing of
remittances to Canadian tax authorities. The
year-over-year growth in new life insurance
policies issued resulted in higher cash payments
for DAC (net of income tax deductions) in 2016
as compared with 2015, which partially offset the
year-over-year increase in operating cash flows.

The largest item contributing to the increase in
net cash provided by operating activities in 2015
from 2014 was also driven by the impact of an
additional year of term life insurance policies
issued subsequent to the IPO coinsurance
transactions. The year-over-year growth in new
life insurance policies issued resulted in higher
cash payments for DAC in 2015 as compared

with 2014, which partially offset the year-over-
year increase in operating cash flows.

Investing activities. The decrease in cash used
in investing activities in 2016 from 2015 was
primarily driven by lower purchases of fixed-
maturity securities as the Company accumulated
a higher balance of short-term cash equivalent
investments at the end of the year in pursuit of
opportunities to reinvest in a rising interest rate
environment. The decrease in cash used was
partially offset by higher capital expenditures in
2016 for our information technology
infrastructure.

The use of cash in investing activities increased
in 2015 from 2014 primarily due to the purchase
of available-for-sale investments with proceeds
obtained from operating activities combined
with the lower level of investments that matured
or were called in 2015. The year-over-year
change was partially offset by the accumulation
of cash from sales of available-for-sale securities
to fund our larger and accelerated share
repurchases during 2015 compared to 2014.

Financing activities. Net cash used in financing
activities during 2016 decreased compared to
2015 as we utilized the additional $50 million of
capacity authorized in our share repurchase
programs in 2015 compared with 2016.

Cash used in financing activities during 2015
increased compared to 2014 primarily due to a
larger amount of shares that were repurchased,
which the Company increased in 2015 given our
assessment of the market prices for which we
had been able to execute our share repurchases.
In addition, an increase in the dividends per

Primerica 2016 Annual Report

ITEM 7. MD&A

share from 2014 to 2015 contributed to a higher
amount of cash used in financing activities.

Risk-Based Capital (“RBC”). The National
Association of Insurance Commissioners (“NAIC”)
has established 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
the insurance regulatory authorities. The RBC
Model Act requires that life insurers annually
submit a report to state regulators regarding
their RBC based upon four categories of risk:
asset risk; insurance risk; interest rate risk and
business risk. The capital requirement for each is
determined by applying factors that vary based
upon the degree of risk to various asset,
premiums and policy benefit reserve items. The
formula is an early warning tool to identify
possible weakly capitalized companies for
purposes of initiating further regulatory action.

As of December 31, 2016, our U.S. life insurance
subsidiaries had statutory capital substantially in
excess of the applicable statutory requirements
to support existing operations and to fund
future growth. Primerica Life’s RBC ratio
remained well positioned to support existing
operations and fund future growth.

In Canada, an insurer’s minimum capital
requirement is overseen by the Office of the
Superintendent of Financial Institutions (“OSFI”)
and determined as the sum of the capital
requirements for five categories of risk: asset
default risk; mortality/morbidity/lapse risks;
changes in interest rate environment risk;
segregated funds risk; and foreign exchange risk.
As of December 31, 2016, Primerica Life Canada
was in compliance with Canada’s minimum
capital requirements as determined by OSFI.

For more information regarding statutory capital
requirements and dividend capacities of our
insurance subsidiaries see Note 15 (Statutory
Accounting and Dividend Restrictions) to our
consolidated financial statements included
elsewhere in this report for more information.

Redundant Reserve Financings. The Model
Regulation entitled Valuation of Life Insurance
Policies, commonly known as Regulation XXX,
requires insurers to carry statutory policy benefit

Freedom Lives Here™

reserves for term life insurance policies with
long-term premium guarantees which are often
significantly in excess of the future policy benefit
reserves that insurers deem necessary to satisfy
claim obligations (“redundant policy benefit
reserves”). Accordingly, many insurance
companies have sought ways to reduce their
capital needs by financing redundant policy
benefit reserves through bank financing,
reinsurance arrangements and other financing
transactions.

We have established Peach Re, Inc. (“Peach Re”)
and Vidalia Re as special purpose financial
captive insurance companies and wholly owned
subsidiaries of Primerica Life. Primerica Life has
ceded certain term life policies issued prior to
2011 to Peach Re as part of a Regulation XXX
redundant reserve financing transaction (the
“Peach Re Redundant Reserve Financing
Transaction”) and has ceded certain term life
policies issued in 2011, 2012, 2013 and 2014 to
Vidalia Re as part of a Regulation XXX redundant
reserve financing transaction (the “Vidalia Re
Redundant Reserve Financing Transaction”).
These redundant reserve financing transactions
allow us to more efficiently manage and deploy
our capital. The NAIC has adopted a model
regulation for determining reserves using a
principle-based approach (“principle-based
reserves” or “PBR”), which is designed to reflect
each insurer’s own experience in calculating
reserves and move away from a standardized
reserving formula. PBR has been adopted by
almost all state insurance departments effective
in 2017, but has not yet been adopted by
Massachusetts or New York, where two of our
U.S. insurance subsidiaries are domiciled. If
adopted, the new principle-based reserve
regulation will greatly reduce the statutory
policy benefit reserve requirements, but will only
apply for business issued after the effective
date. We may explore expanding our existing
redundant reserve financing transactions or
establishing new transactions for business sold
prior to the effective date of any principle-based
reserve regulation. See Note 4 (Investments),
Note 10 (Debt) and Note 16 (Commitments and
Contingent Liabilities) to our consolidated
financial statements included elsewhere in this

report for more information on these redundant
reserve financing transactions.

Notes Payable. The Company has
$375.0 million of publicly-traded, Senior Notes
outstanding issued at a price of 99.843% with an
annual rate of 4.75%, payable semi-annually in
arrears on January 15 and July 15. The Senior
Notes mature July 15, 2022.

We were in compliance with the covenants of
the Senior Notes at December 31, 2016. No
events of default(s) occurred on the Senior
Notes during the year ended December 31,
2016.

Financial Ratings. As of December 31, 2016,
the investment grade credit ratings for our
Senior Notes were as follows:

Agency

Moody’s

Senior Notes rating

Baa2, stable outlook

Standard & Poor’s

A-, stable outlook

A.M. Best Company

a-, stable outlook

As of December 31, 2016, Primerica Life’s
financial strength ratings were as follows:

Agency

Moody’s

Financial strength rating

A2, stable outlook

Standard & Poor’s

AA-, stable outlook

A.M. Best Company

A+, stable outlook

ITEM 7. MD&A

Securities Lending. We participate in
securities lending transactions with brokers to
increase investment income with minimal risk.
See Note 4 (Investments) to our consolidated
financial statements included elsewhere in this
report for additional information.

Short-Term Borrowings. We had no short-
term borrowings as of or during the year ended
December 31, 2016.

Surplus Note. Vidalia Re issued a Surplus Note
in exchange for the LLC Note as a part of the
Vidalia Re Redundant Reserve Financing
Transaction. The Surplus Note has a principal
amount equal to the LLC Note and is scheduled
to mature on December 31, 2029. For more
information on the Surplus Note, see Note 10
(Debt) to our consolidated financial statements
included elsewhere in this report.

Off-Balance Sheet Arrangements. Our
off-balance sheet arrangements as of
December 31, 2016 consisted of the letter of
credit issued under the credit facility agreement
with Deutsche Bank (the “Credit Facility
Agreement”) and associated with the Peach Re
Redundant Reserve Financing Transaction as
described in Note 16 (Commitments and
Contingent Liabilities) to our consolidated
financial statements included elsewhere in this
report.

Primerica 2016 Annual Report

ITEM 7. MD&A

Contractual Obligations. Our contractual obligations, including payments due by period, were as follows:

December 31, 2016

Total
Liability

Total
Payments

Less
than
1 year

1-3
years

3-5
years

More
than
5 years

(In millions)

Future policy benefits

$5,674

$19,852

$1,425 $2,676 $2,453 $13,298

Policy claims and other benefits payable

Other policyholder funds

Long-term debt principal

Interest obligations

Commissions

Purchase obligations

Operating lease obligations

Current income tax payable

Other liabilities

268

363

375

—

407

268

363

375

186

268

363

—

397

366

—

375

—

Total contractual obligations

$7,155

$21,598

$2,533 $2,789 $2,519 $13,757

Our liability for future policy benefits represents
the present value of estimated future policy
benefits to be paid, less the present value of
estimated future net benefit premiums to be
collected. Net benefit premiums represent the
portion of gross premiums required to provide
for all benefits and associated expenses. These
benefit payments are contingent on
policyholders continuing to renew their policies
and make their premium payments. Our
contractual obligations table discloses the
impact of benefit payments that will be due
assuming the underlying policy renewals and
premium payments continue as expected in our
actuarial models. The future policy benefit
payments represented in the table are presented
on an undiscounted basis, gross of any amounts
recoverable through reinsurance agreements
and gross of any premiums to be collected. We
expect to fully fund the obligations for future
policy benefits from cash flows from general
account invested assets, claims reimbursed by
reinsurers, and from future premiums. These
estimations are based on mortality and lapse
assumptions comparable with our historical
experience. Due to the significance of the
assumptions used, the amounts presented could
materially differ from actual results.

Freedom Lives Here™

Policy claims and other benefits payable
represents claims and benefits currently owed to
policyholders.

Other policyholders’ funds primarily represent
claim payments left on deposit with us.

Long-term debt principal relates to our Senior
Notes.

Interest obligations (reported within other
liabilities in our consolidated balance sheets)
reflect expected interest on our Senior Notes,
the financing charges related to an issued letter
of credit, fees paid for the credit enhancement
feature on the LLC Note, and a finance charge
incurred pursuant to one of our coinsurance
agreements as of December 31, 2016. We did
not include the principal or interest on the
Surplus Note in the table above as the payments
due for these items are contractually offset by
the principal and interest on the LLC Note as
long as we hold the LLC Note. The Company
asserts its positive intent and ability to hold the
LLC Note until maturity.

Commissions represent commissions that have
been earned by our sales force but have not
been paid as of December 31, 2016. We are only
obligated to pay commissions as earned from

ITEM 7. MD&A

sales of our products. The total liability amount
is reported within other liabilities in our
consolidated balance sheets.

properties. Our executive and home operations
for all of our domestic U.S. operations (except
New York) are located in Duluth, Georgia.

Purchase obligations include agreements to
purchase goods or services that are enforceable
and legally binding and that specify all
significant terms. These obligations consist
primarily of accounts payable and certain
accrued liabilities, including committed funds
related to meetings and conventions for our
independent sales force, plus a variety of vendor
commitments funding our ongoing business
operations. The total liability amount is reported
within other liabilities in our consolidated
balance sheets.

Our operating lease obligations primarily relate
to office, warehouse, printing, and distribution

Other liabilities are obligations reported within
the consolidated balance sheets and consist
primarily of amounts due under reinsurance
agreements and general accruals and payables.
The total payments within the table differ from
the amounts presented in our consolidated
balance sheets due to the exclusion of amounts
where a reasonable estimate of the period of
settlement cannot be determined.

For additional information concerning our
commitments and contingencies, see Note 16
(Commitments and Contingent Liabilities) to our
consolidated financial statements included
elsewhere in this report.

Primerica 2016 Annual Report

ITEM 7A. MARKET RISK

ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.

Market risk is the risk of the loss of fair value
resulting from adverse changes in market rates
and prices, such as interest rates and foreign
currency exchange rates. Market risk is directly
influenced by the volatility and liquidity in the
markets in which the related underlying financial
instruments are traded. Sensitivity analysis
measures the impact of hypothetical changes in
interest rates, foreign exchange rates and other
market rates or prices on the profitability of
market-sensitive financial instruments.

The following discussion about the potential
effects of changes in interest rates and Canadian
currency exchange rates is based on shock-tests,
which model the effects of interest rate and
Canadian exchange rate shifts on our financial
condition and results of operations. Although we
believe shock tests provide the most meaningful
analysis permitted by the rules and regulations
of the SEC, they are constrained by several
factors, including the necessity to conduct the
analysis based on a single point in time and by
their inability to include the extraordinarily
complex market reactions that normally would
arise from the market shifts modeled. Although
the following results of shock tests for changes
in interest rates and Canadian currency
exchange rates may have some limited use as
benchmarks, they should not be viewed as
forecasts. These disclosures also are selective in
nature and address, in the case of interest rates,
only the potential direct impact on our financial
instruments and, in the case of Canadian
currency exchange rates, the potential
translation impact on net income from our
Canadian subsidiaries. They do not include a
variety of other potential factors that could
affect our business as a result of these changes
in interest rates and Canadian currency
exchange rates.

Interest Rate Risk. The fair value of the fixed-
maturity securities (excluding the
held-to-maturity security) in our invested asset
portfolio as of December 31, 2016 was
approximately $1.8 billion. The primary market

Freedom Lives Here™

risk for this portion of our invested asset
portfolio is interest rate risk. One means of
assessing the exposure of our fixed-maturity
securities portfolios to interest rate changes is a
duration-based analysis that measures the
potential changes in market value resulting from
a hypothetical change in interest rates of 100
basis points across all maturities. This model is
sometimes referred to as a parallel shift in the
yield curve. Under this model, with all other
factors constant and assuming no offsetting
change in the value of our liabilities, we
estimated that such an increase in interest rates
would cause the market value of our fixed-
maturity securities portfolios to decline by
approximately $64.1 million, or approximately
4%, based on our actual securities positions as
of December 31, 2016.

If interest rates remain at or near historically low
levels, we anticipate the average yield of our
fixed-income investment portfolio, and therefore
the investment income derived from it, would
decrease as maturing fixed-income investments
would be replaced with purchases of lower
yielding investments.

Canadian Currency Risk. We also have
exposure to foreign currency exchange risk to
the extent we conduct business in Canada. A
strong Canadian dollar relative to the U.S. dollar
results in higher levels of reported revenues,
expenses, net income, assets, liabilities, and
accumulated comprehensive income (loss) in our
U.S. dollar financial statements, and a weaker
Canadian dollar would have the opposite effect.
Generally, our Canadian dollar-denominated
assets are held in support of our Canadian
dollar-denominated liabilities. For the year
ended December 31, 2016, 16% of our revenues
from operations, excluding realized investment
gains, and 20% of income from continuing
operations before income taxes were generated
by our Canadian operations.

One means of assessing exposure to changes in
Canadian currency exchange rates is to model
the effects on reported income using a
sensitivity analysis. We analyzed our Canadian
currency exposure for the year ended
December 31, 2016. Net exposure was measured

assuming a 10% decrease in Canadian currency
exchange rates compared to the U.S. dollar. We
estimated that such a decrease would decrease
our income before income taxes for the year
ended December 31, 2016 by approximately
$6.8 million.

Our investment in the net assets of our Canadian
operations is also subject to Canadian currency
risk. If we were to assume a 10% decrease in
Canadian currency exchange rates compared to
the U.S. dollar, the translated value of our net
investment in our Canadian subsidiaries in U.S.
dollars would decrease by approximately
$24.3 million based on net assets as of
December 31, 2016. Historically, we have not
hedged this exposure, although we may elect to
do so in future periods. The impact of translating
the balance of net assets of our Canadian
operations is recorded in our consolidated balance
sheets within the accumulated other
comprehensive income component of
stockholders’ equity.

Credit Risk. We extensively use reinsurance in
the United States to diversify our insurance and
underwriting risk and to manage our loss
exposure to mortality risk. Reinsurance does not
relieve us of our direct liability to our
policyholders. Due to factors such as insolvency,
adverse underwriting results or inadequate
investment returns, our reinsurers may not be
able to pay the amounts they owe us on a timely
basis or at all. Further, reinsurers might refuse or
fail to pay losses that we cede to them or might
delay payment. To limit our exposure with any
one reinsurer, we monitor the concentration of
credit risk we have with our reinsurance
counterparties, as well as their financial
condition. We manage this reinsurer credit risk
through analysis and monitoring of the credit-
worthiness of each of our reinsurance partners
to minimize collection issues. Also, for
reinsurance contracts with unauthorized
reinsurers, we require collateral such as letters of
credit. For information on our reinsurance
exposure and reinsurers, see Note 6
(Reinsurance) to our consolidated financial
statements included elsewhere in this report.

In connection with our Credit Facility Agreement,
the Company assumes credit risk associated with

ITEM 7A. MARKET RISK

Deutsche Bank’s ability to make payment to us
as fulfillment of its obligations under the letter
of credit. Such a draw on the letter of credit
would only be requested in the event that the
assets held in support of the liabilities assumed
by Peach Re were insufficient, which, based on
actuarial analysis, is unlikely.

Concurrent with the execution of the Regulation
XXX redundant reserve financing transaction
between Vidalia Re and Primerica Life, Vidalia Re
entered into a Surplus Note Purchase Agreement
(the “Surplus Note Purchase Agreement”) with
Hannover Life Reassurance Company of America
and certain of its affiliates (collectively, “Hannover
Re”) and a newly formed limited liability company
(the “LLC”) owned by a third-party service
provider. Under the Surplus Note Purchase
Agreement, Vidalia Re issued the Surplus Note to
the LLC in exchange for the LLC Note of equal
principal amount. The Company assumes credit
risk associated with a credit enhancement feature
provided by Hannover Re, which bears the
obligation to absorb the LLC’s losses in the event
of a Surplus Note default in exchange for a fee.

For information on our Credit Facility Agreement
and Surplus Note Purchase Agreement, see Note
16 (Commitments and Contingent Liabilities),
Note 4 (Investments), and Note 10 (Debt) to our
consolidated financial statements included
elsewhere in this report.

We also bear credit risk on our investment
portfolio related to the uncertainty associated
with the continued ability of an obligor to make
timely payments of principal and interest. In an
effort to meet business needs and mitigate
credit and other portfolio risks, we established
investment guidelines that provide restrictions
on our portfolio’s composition, including limits
on asset type, per issuer limits, credit quality
limits, portfolio duration, limits on the amount of
investments in approved countries and
permissible security types. See “Management’s
Discussion and Analysis of Financial Condition
and Results of Operations — Financial
Condition” included elsewhere in this report for
details on our investment portfolio, including
investment strategy, asset mix, and credit
ratings.

Primerica 2016 Annual Report

ITEM 8. FINANCIAL STATEMENTS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Primerica, Inc.:

We have audited the accompanying consolidated balance sheets of Primerica, Inc. and subsidiaries
(the Company) as of December 31, 2016 and 2015, and the related consolidated statements of income,
comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year
period ended December 31, 2016. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Primerica, Inc. and subsidiaries as of December 31, 2016 and 2015,
and the results of their operations and their cash flows for each of the years in the three-year period
ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Primerica, Inc.’s internal control over financial reporting as of December 31, 2016,
based on criteria established in Internal Control — Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated
February 27, 2017 expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.

/s/ KPMG LLP

Atlanta, Georgia
February 27, 2017

Freedom Lives Here™

ITEM 8. FINANCIAL STATEMENTS

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

Assets:

Investments:

$1,690,043 in 2015)

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $1,734,683 in 2016 and

Fixed-maturity securities held-to-maturity, at amortized cost (fair value: $513,015 in 2016 and $371,742

in 2015)

Equity securities available-for-sale, at fair value (cost: $36,818 in 2016 and $39,969 in 2015)
Trading securities, at fair value (cost: $7,382 in 2016 and $5,383 in 2015)
Policy loans

Total investments
Cash and cash equivalents
Accrued investment income
Due from reinsurers
Deferred policy acquisition costs, net
Agent balances, due premiums and other receivables
Intangible assets, net
Current income tax receivable
Deferred income taxes
Other assets
Separate account assets

Total assets

Liabilities and Stockholders’ Equity:

Liabilities:

Future policy benefits
Unearned premiums
Policy claims and other benefits payable
Other policyholders’ funds
Notes payable
Surplus note
Current income tax payable
Deferred income taxes
Other liabilities
Payable under securities lending
Separate account liabilities
Commitments and contingent liabilities (see Commitments and Contingent Liabilities note)

Total liabilities

Stockholders’ equity:

Common stock ($0.01 par value; authorized 500,000 in 2016 and 2015; issued and outstanding 45,721

shares in 2016 and 48,297 shares in 2015)

Paid-in capital
Retained earnings
Accumulated other comprehensive income (loss), net of income tax:

Unrealized foreign currency translation gains (losses)
Net unrealized investment gains (losses):

Net unrealized investment gains not other-than-temporarily impaired
Net unrealized investment losses other-than-temporarily impaired

Total stockholders’ equity

Total liabilities and stockholders’ equity

December 31,
2016

December 31,
2015

(In thousands)

$ 1,792,438

$ 1,731,459

503,230
44,894
7,383
30,916

2,378,861
211,976
16,520
4,193,562
1,713,065
210,448
54,915
—
37,369
334,274
2,287,953

365,220
47,839
5,358
28,627

2,178,503
152,294
17,080
4,110,628
1,500,259
190,379
58,318
4,955
30,112
304,356
2,063,899

$11,438,943

$10,610,783

5,673,890
527
268,136
363,038
372,919
502,491
26,365
198,641
449,963
73,646
2,287,953

5,431,711
628
238,157
365,276
372,552
364,424
6,476
141,649
408,757
71,482
2,063,899

10,217,569

9,465,011

457
52,468
1,138,851

483
180,250
952,804

(13,193)

(19,801)

42,852
(61)

32,107
(71)

1,221,374

1,145,772

$11,438,943

$10,610,783

See accompanying notes to consolidated financial statements.

Primerica 2016 Annual Report

ITEM 8. FINANCIAL STATEMENTS

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Income

Revenues:

Direct premiums
Ceded premiums

Net premiums

Commissions and fees
Investment income net of investment expenses
Interest expense on surplus note

Net investment income

Realized investment gains (losses), including other-than-temporary impairment losses
Other, net

Total revenues

Benefits and expenses:
Benefits and claims
Amortization of deferred policy acquisition costs
Sales commissions
Insurance expenses
Insurance commissions
Interest expense
Other operating expenses

Total benefits and expenses

Income from continuing operations before income taxes

Income taxes

Income from continuing operations
Income from discontinued operations, net of income taxes

Net income

Basic earnings per share:
Continuing operations
Discontinued operations

Basic earnings per share

Diluted earnings per share:
Continuing operations
Discontinued operations

Diluted earnings per share

Weighted-average shares used in computing earnings per share:

Basic

Diluted

Supplemental disclosures:
Total impairment losses
Impairment losses recognized in other comprehensive income before income taxes

Net impairment losses recognized in earnings

Other net realized investment gains

Realized investment gains (losses), including other-than-temporary impairment losses

Dividends declared per share

Year ended December 31,

2016

2015

2014

(In thousands, except per-share amounts)

$ 2,444,268
(1,600,559)

$ 2,345,444
(1,595,220)

$ 2,301,332
(1,616,817)

843,709
541,686
97,905
(18,880)

79,025
4,088
50,576

750,224
537,146
89,557
(13,048)

76,509
(1,738)
42,058

684,515
527,166
89,955
(3,482)

86,473
(261)
39,203

1,519,084

1,404,199

1,337,096

367,655
180,582
272,815
132,348
17,783
28,691
181,615

339,315
157,727
274,893
123,030
16,340
33,507
168,406

311,417
144,378
268,775
113,871
15,353
34,570
173,010

1,181,489

1,113,218

1,061,374

337,595
118,181

219,414
—

290,981
101,110

189,871
—

275,722
95,888

179,834
1,578

$ 219,414

$ 189,871

$ 181,412

4.59
—

4.59

4.59
—

4.59

3.70
—

3.70

3.70
—

3.70

47,411

47,453

50,881

50,913

(3,420) $

(6,893) $

—

(6,893)
5,155

—

(3,420)
7,508

4,088

0.70

3.26
0.03

3.29

3.26
0.03

3.29

54,567

54,598

(4,045)
—

(4,045)
3,784

(1,738) $

(261)

0.64

0.48

See accompanying notes to consolidated financial statements.

Freedom Lives Here™

ITEM 8. FINANCIAL STATEMENTS

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income

Net income

Other comprehensive income (loss) before income taxes:

Unrealized investment gains (losses):

Change in unrealized holding gains (losses) on investment

securities

Reclassification adjustment for realized investment (gains)

losses included in net income

Foreign currency translation adjustments:

Year ended December 31,

2016

2015

2014

(In thousands)
$219,414 $ 189,871 $181,412

20,500

(65,920)

11,228

(3,955)

1,596

794

Change in unrealized foreign currency translation gains (losses)

before income tax expense (benefit)

6,689

(41,929)

(20,527)

Total other comprehensive income (loss) before income taxes

23,234

(106,253)

(8,505)

Income tax expense (benefit) related to items of other

comprehensive income (loss)

5,871

(22,961)

3,974

Other comprehensive income (loss), net of income taxes

17,363

(83,292)

(12,479)

Total comprehensive income

$236,777 $ 106,579 $168,933

See accompanying notes to consolidated financial statements.

Primerica 2016 Annual Report

ITEM 8. FINANCIAL STATEMENTS

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity

Common stock:

Balance, beginning of period

Repurchases of common stock

Net issuance of common stock

Balance, end of period

Paid-in capital:

Balance, beginning of period

Share-based compensation

Net issuance of common stock

Repurchases of common stock

Adjustments to paid-in capital, other

Balance, end of period

Retained earnings:

Balance, beginning of period

Net income

Dividends

Balance, end of period

Accumulated other comprehensive income (loss):

Balance, beginning of period

Year ended December 31,

2016

2015

2014

(In thousands)

483 $

522 $

(33)

457

(45)

483

548

(31)

522

180,250

353,337

472,633

26,219

33,544

37,494

(7)

(6)

(5)

(153,994)

(207,714)

(154,268)

—

1,089

(2,517)

52,468

180,250

353,337

952,804

219,414

795,740

189,871

640,840

181,412

(33,367)

(32,807)

(26,512)

1,138,851

952,804

795,740

12,235

95,527

108,006

Change in foreign currency translation adjustment, net of

income tax expense (benefit)

6,608

(41,482)

(20,293)

Change 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)

Change in net unrealized investment losses other-than-

10,745

(42,201)

6,929

temporarily impaired, net of income tax expense (benefit)

391

885

Balance, end of period

Total stockholders’ equity

29,598

12,235

95,527

$1,221,374 $1,145,772 $1,245,126

See accompanying notes to consolidated financial statements.

Freedom Lives Here™

ITEM 8. FINANCIAL STATEMENTS

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Change in future policy benefits and other policy liabilities

Deferral of policy acquisition costs

Amortization of deferred policy acquisition costs

Deferred tax provision

Change in income taxes

Realized investment (gains) losses, including other-than-temporary impairments

Gain from sale of business, net

Accretion and amortization of investments

Depreciation and amortization

Change in due from reinsurers

Change in agent balances, due premiums and other receivables

Trading securities sold, matured, or called (acquired), net

Share-based compensation

Change in other operating assets and liabilities, net

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Available-for-sale investments sold, matured or called:

Fixed-maturity securities — sold

Fixed-maturity securities — matured or called

Equity securities

Available-for-sale investments acquired:

Fixed-maturity securities

Equity securities

Purchases of property and equipment and other investing activities, net

Proceeds from sale of business

Cash collateral received (returned) on loaned securities, net

Sales (purchases) of short-term investments using securities lending collateral, net

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Dividends paid

Common stock repurchased

Excess tax benefits on share-based compensation

Tax withholdings on share-based compensation

Cash proceeds from stock options exercised

Payments of deferred financing costs

Net cash provided by (used in) financing activities

Effect of foreign exchange rate changes on cash

Change in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosures of cash flow information:

Income taxes paid

Interest paid

Year ended December 31,

2016

2015

2014

(In thousands)

$ 219,414

$ 189,871

$ 181,412

256,520

242,957

257,908

(376,879)

(326,197)

(289,945)

180,582

157,727

144,378

44,316

25,341

(4,088)

—

(1,411)

14,595

38,292

25,757

700

1,738

—

(1,343)

10,998

1,090

261

(1,578)

(4,825)

12,266

(72,880)

(49,966)

(90,024)

(20,069)

(11,379)

(11,047)

(2,051)

13,442

15,335

2,308

14,948

5,232

17,982

(11,565)

(11,535)

292,167

259,089

237,332

91,666

254,585

8,572

130,608

247,771

4,894

109,681

314,589

2,351

(386,394)

(433,457)

(425,904)

(2,683)

(882)

(11,878)

(13,669)

(7,399)

—

(7,484)

3,000

2,164

21,271

(39,641)

(2,164)

(21,271)

39,641

(47,923)

(58,465)

(15,645)

(33,367)

(32,807)

(26,512)

(150,057)

(200,084)

(147,922)

2,260

(3,970)

—

5,162

(7,675)

136

—

5,804

(6,377)

—

(876)

(185,134)

(235,268)

(175,883)

572

(5,059)

(2,789)

59,682

(39,703)

43,015

152,294

191,997

148,982

$ 211,976

$ 152,294

$ 191,997

$ 45,402

$ 62,116

$ 66,077

27,992

32,386

33,058

See accompanying notes to consolidated financial statements.

Primerica 2016 Annual Report

FINANCIAL STATEMENTS — NOTE 1

PRIMERICA, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

(1) Description of Business, Basis of
Presentation, and Summary of
Significant Accounting Policies

Description of Business. Primerica, Inc.
(the “Parent Company”), together with its
subsidiaries (collectively, “we”, “us” or the
“Company”), is a leading distributor of financial
products to middle-income households in the
United States and Canada. We assist our clients
in meeting their needs for term life insurance,
which we underwrite, and mutual funds,
annuities, managed investments and other
financial products, which we distribute primarily
on behalf of third parties. Our primary
subsidiaries include the following entities:
Primerica Financial Services, Inc. (“PFS”), a
general agency and marketing company;
Primerica Life Insurance Company (“Primerica
Life”), our principal life insurance company;
Primerica Financial Services (Canada) Ltd., a
holding company for our Canadian operations,
which includes Primerica Life Insurance
Company of Canada (“Primerica Life Canada”)
and PFSL Investments Canada Ltd. (“PFSL
Investments Canada”); and PFS Investments Inc.
(“PFS Investments”), an investment products
company and broker-dealer. Primerica Life,
domiciled in Massachusetts, owns National
Benefit Life Insurance Company (“NBLIC”), a New
York insurance company. We established Peach
Re, Inc. (“Peach Re”) and Vidalia Re, Inc. (“Vidalia
Re”) as special purpose financial captive
insurance companies and wholly owned
subsidiaries of Primerica Life. Peach Re and
Vidalia Re have each entered into separate
coinsurance agreements with Primerica Life
whereby Primerica Life has ceded certain level-
premium term life insurance policies to Peach Re
and Vidalia Re (respectively, the “Peach Re
Coinsurance Agreement” and the “Vidalia Re
Coinsurance Agreement”).

Basis of Presentation. We prepare our
financial statements in accordance with U.S.
generally accepted accounting principles (“U.S.

Freedom Lives Here™

GAAP”). These principles are established
primarily by the Financial Accounting Standards
Board (“FASB”). The preparation of financial
statements in conformity with U.S. GAAP
requires us to make estimates and assumptions
that affect financial statement balances,
revenues and expenses and cash flows, as well as
the disclosure of contingent assets and liabilities.
Management considers available facts and
knowledge of existing circumstances when
establishing the estimates included in our
financial statements.

Use of Estimates. The most significant items
that involve a greater degree of accounting
estimates and actuarial determinations subject
to change in the future are the valuation of
investments, deferred policy acquisition costs
(“DAC”), liabilities for future policy benefits and
unpaid policy claims, and income taxes.
Estimates for these and other items are subject
to change and are reassessed by management in
accordance with U.S. GAAP. Actual results could
differ from those estimates.

Consolidation. The accompanying
consolidated financial statements include the
accounts of the Company and those entities
required to be consolidated under applicable
accounting standards. All material intercompany
profits, transactions, and balances among the
consolidated entities have been eliminated.

Reclassifications. Certain reclassifications
have been made to prior-period amounts to
conform to current-period reporting
classifications. These reclassifications had no
impact on net income or total stockholders’
equity.

Subsequent Events. The Company has
evaluated subsequent events for recognition and
disclosure for occurrences and transactions after
the date of the consolidated financial statements
at December 31, 2016.

Foreign Currency Translation. Assets and
liabilities of our Canadian subsidiaries are
translated into U.S. dollars using year-end

exchange rates, and the translation adjustments
are reported in other comprehensive income
(loss). Revenues and expenses of our Canadian
subsidiaries are translated monthly at amounts
that approximate weighted-average exchange
rates.

Investments.
following bases:

Investments are reported on the

• Available-for-sale (“AFS”) fixed-maturity

securities, including bonds and redeemable
preferred stocks not classified as trading
securities, are carried at fair value. When
quoted market values are unavailable, we
obtain estimates from independent pricing
services or estimate fair value based upon a
comparison to quoted issues of the same
issuer or of other issuers with similar
characteristics.

• Held-to-maturity fixed-maturity security is

carried at amortized cost.

•

Equity securities, including common and
nonredeemable preferred stocks, are
classified as AFS and are carried at fair
value. When quoted market values are
unavailable, we obtain estimates from
independent pricing services or estimates
fair value based upon a comparison to
quoted issues of the same issuer or of other
issuers with similar characteristics.

Trading securities, which primarily consist of
bonds, are carried at fair value. Changes in
fair value of trading securities are included
in net investment income in the period in
which the change occurred.

• Policy loans are carried at unpaid principal
balances, which approximate fair value.

Investment transactions are recorded on a trade-
date basis. We use the specific-identification
method to determine the realized gains or losses
from securities transactions and report the
realized gains or losses in the accompanying
consolidated statements of income.

Unrealized gains and losses on AFS securities are
included as a separate component of other
comprehensive income, except for other-than-
temporary impairments (“OTTI”) discussed

FINANCIAL STATEMENTS — NOTE 1

below, in the accompanying consolidated
statements of comprehensive income.

Investments are reviewed on a quarterly basis
for OTTI. Credit risk, interest rate risk, the
amount of time the security has been in an
unrealized loss position, actions taken by ratings
agencies, and other factors are considered in
determining whether an unrealized loss is other-
than-temporary. OTTI in our accompanying
consolidated statements of income reflect the
impairment on AFS securities that we intend to
sell or would more likely than not be required to
sell before the expected recovery of the
amortized cost basis. For AFS fixed maturity
securities that we have no intent to sell and
believe that it is not more likely than not we will
be required to sell prior to recovery, only the
credit loss component of OTTI is recognized in
our accompanying consolidated statements of
income, while the remainder is recognized in
other comprehensive income in the
accompanying consolidated statements of
comprehensive income (loss). The credit loss
component of OTTI recognized in net income is
identified as the amount of principal cash flows
not expected to be received over the remaining
term of the security. Any subsequent changes (if
not an other-than-temporary impairment) in the
fair value of AFS securities are recognized in
other comprehensive income in the
accompanying statements of comprehensive
income.

Interest income on fixed-maturity securities is
recorded when earned by determining the
effective yield, which gives consideration to
amortization of premiums, accretion of
discounts, and any previous OTTI. Dividend
income on equity securities is recorded when
declared. These amounts are included in net
investment income in the accompanying
consolidated statements of income.

Included within fixed-maturity securities are
loan-backed and asset-backed securities.
Amortization of the premium or accretion of the
discount uses the retrospective method. The
effective yield used to determine amortization/
accretion is calculated based on actual and
historical projected future cash flows and
updated quarterly.

Primerica 2016 Annual Report

FINANCIAL STATEMENTS — NOTE 1

Embedded conversion options associated with
fixed-maturity securities are bifurcated from the
fixed-maturity security host contracts and
separately recognized as equity securities. The
change in fair value of these bifurcated
conversion options is recorded in realized gains
(losses), including OTTI in the accompanying
consolidated statements of income.

Cash and Cash Equivalents. Cash and cash
equivalents include cash on hand, money market
instruments, and all other highly liquid
investments purchased with an original or
remaining maturity of three months or less at
the date of acquisition.

Reinsurance. We use reinsurance extensively,
utilizing yearly renewable term (“YRT”) and
coinsurance agreements. Under YRT agreements,
we reinsure only the mortality risk, while under
coinsurance, we reinsure a proportionate part of
all risks arising under the reinsured policy. Under
coinsurance, the reinsurer receives a
proportionate part of the premiums, less
commission allowances, and is liable for a
corresponding part of all benefit payments.

All reinsurance contracts in effect for the three-
year period ended December 31, 2016 transfer a
reasonable possibility of substantial loss to the
reinsurer or are accounted for under the deposit
method of accounting.

Ceded premiums are treated as a reduction to
direct premiums and are recognized when due
to the assuming company. Ceded claims are
treated as a reduction to direct benefits and are
recognized when the claim is incurred on a
direct basis. Ceded policy reserve changes are
also treated as a reduction to benefits and
claims expense and are recognized during the
applicable financial reporting period.

Reinsurance premiums, commissions, expense
reimbursements and benefits and reserves
related to reinsured long-duration contracts are
accounted for over the life of the underlying
contracts using assumptions consistent with
those used to account for the underlying
policies. Amounts recoverable from reinsurers
are estimated in a manner consistent with the
claim liabilities and future policy benefits

100

Freedom Lives Here™

associated with reinsured policies. Ceded policy
reserves and claims liabilities relating to
insurance ceded are shown as due from
reinsurers on the accompanying consolidated
balance sheets.

We analyze and monitor the credit-worthiness of
each of our reinsurance partners to minimize
collection issues. For reinsurance contracts with
unauthorized reinsurers, we require collateral
such as letters of credit.

To the extent we receive ceding allowances to
cover policy and claims administration under
reinsurance contracts, these allowances are treated
as a reduction to insurance commissions and
expenses and are recognized when due from the
assuming company. To the extent we receive
ceding allowances reimbursing commissions that
would otherwise be deferred, the amount of
commissions deferrable will be reduced. The
corresponding DAC balances are reduced on a pro
rata basis by the portion of the business reinsured
with reinsurance agreements that meet risk
transfer provisions. The reduced DAC will result in
a corresponding reduction of amortization
expense.
DAC. We defer incremental direct costs of
successful contract acquisitions that result
directly from and are essential to the contract
transaction(s) and that would not have been
incurred had the contract transaction(s) not
occurred. These deferred policy acquisition costs
mainly include commissions and policy issue
expenses. All other acquisition-related costs,
including unsuccessful acquisition and renewal
efforts, are charged to expense as incurred. Also,
administrative costs, rent, depreciation,
occupancy, equipment, and all other general
overhead costs are considered indirect costs and
are charged to expense as incurred.

DAC for term life insurance policies is amortized
over the initial premium-paying period of the
related policies in proportion to premium
income. DAC for Canadian segregated funds is
amortized over the life of the underlying policies
at a constant rate based on the present value of
the estimated gross profits expected to be
realized over the life of the underlying policies.
DAC is subject to recoverability testing annually
and when impairment indicators exist.

FINANCIAL STATEMENTS — NOTE 1

Intangible assets are

Intangible Assets.
amortized over their estimated useful lives. Any
intangible asset that was deemed to have an
indefinite useful life is not amortized but is
subject to an annual impairment test. An
impairment exists if the carrying value of the

indefinite-lived intangible asset exceeds its fair
value. For the other intangible assets, which are
subject to amortization, an impairment is
recognized if the carrying amount is not
recoverable and exceeds the fair value of the
intangible asset.

The components of intangible assets were as follows:

December 31,

2016

2015

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

(In thousands)

Indefinite-lived intangible

asset

$ 45,275

n/a

$45,275

$ 45,275

n/a

$45,275

Amortizing intangible

asset

84,871

(75,231)

9,640

84,871

(71,828)

13,043

Total intangible assets

$130,146

$(75,231)

$54,915

$130,146

$(71,828)

$58,318

We have an indefinite-lived intangible asset
related to the 1989 purchase of the right to
contract with our sales force. This asset represents
the core distribution model of our business, which
is our primary competitive advantage to
profitably distribute term life insurance and
investment and savings products on a significant
scale, and as such, is considered to have an
indefinite life. This indefinite-lived intangible asset
is supported by a significant portion of the
discounted cash flows of our future business. We
assessed this asset for impairment as of
October 1, 2016 and determined that no
impairment had occurred. There have been no
subsequent events requiring further analysis.

We also have an amortizing intangible asset
related to a 1995 sales agreement termination
payment to Management Financial Services, Inc.
This asset is supported by a non-compete
agreement with the founder of our business
model. We calculate the amortization of this

Data processing equipment and software

Leasehold improvements

Furniture and other equipment

contract buyout on a straight-line basis over 24
years, which represents the life of the
non-compete agreement. Intangible asset
amortization expense was approximately
$3.4 million in 2016, 2015 and 2014.
Amortization expense is expected to be
approximately $3.4 million annually during the
remainder of the amortization period. No events
have occurred during 2016, and no factors exist
as of December 31, 2016 that would indicate
that the net carrying value of our amortizing
intangible asset may not be recoverable or will
not be used throughout its estimated useful life.

Property and Equipment. Property and
equipment, which are included in other assets,
are stated at cost, less accumulated
depreciation. Depreciation is recognized on a
straight-line basis over the asset’s estimated
useful life, which is estimated as follows:

Estimated Useful Life

3 to 7 years

Lesser of 15 years or remaining life of lease

5 to 15 years

Depreciation expense is included in other
operating expenses in the accompanying
consolidated statements of income. Depreciation

expense was $11.2 million, $7.6 million, and
$7.0 million for the years ended December 31,
2016, 2015, and 2014, respectively.

Primerica 2016 Annual Report

101

FINANCIAL STATEMENTS — NOTE 1

Property and equipment balances were as
follows:

December 31,

2016

2015

(In thousands)

Data processing

equipment and software $ 57,178 $ 60,414

Leasehold improvements

13,718

13,947

Other, principally furniture

and equipment

23,571

27,065

94,467

101,426

Accumulated depreciation

(67,001)

(72,017)

Net property and
equipment

$ 27,466 $ 29,409

Separate Accounts. The separate accounts are
primarily comprised of contracts issued by the
Company through its subsidiary, Primerica Life
Canada, pursuant to the Insurance Companies
Act (Canada). The Insurance Companies Act
authorizes Primerica Life Canada to establish the
separate accounts.

The separate accounts are represented by
individual variable annuity contracts. Purchasers
of variable annuity contracts issued by Primerica
Life Canada have a direct claim to the benefits of
the contract that entitles the holder to units in
one or more investment funds (the “Funds”)
maintained by Primerica Life Canada. The Funds
invest in assets that are held for the benefit of
the owners of the contracts. The benefits
provided vary in amount depending on the
market value of the Funds’ assets. The Funds’
assets are administered by Primerica Life Canada
and are held separate and apart from the
general assets of the Company. The liabilities
reflect the variable insurance annuity contract
holders’ interests in variable annuity assets
based upon actual investment performance of
the respective Funds. Separate account
operating results relating to contract holders’
interests are excluded from our consolidated
statements of income.

Primerica Life Canada’s contract offerings
guarantee the maturity value at the date of

102

Freedom Lives Here™

maturity (or upon death, whichever occurs first)
to be equal to 75% of the sum of all
contributions made, net of withdrawals, on a
first-in first-out basis. Otherwise, the maturity
value or death benefit will be the accumulated
value of units allocated to the contract at the
specified valuation date. The amount of this
value is not guaranteed, but will fluctuate with
the fair value of the Funds.

Future policy benefits

Policyholder Liabilities.
are accrued over the current and expected
renewal periods of the contracts. Liabilities for
future policy benefits on traditional life
insurance products have been computed using a
net level method, including assumptions as to
interest rates, mortality, persistency, and other
assumptions based on our experience, modified
as necessary to reflect anticipated trends and to
include provisions for possible adverse
deviation. The underlying mortality tables are
the Society of Actuaries (“SOA”) 65-70,
SOA 75-80, SOA 85-90, and the 91 Bragg,
modified to reflect various underwriting
classifications and assumptions. Interest rate
reserve assumptions at December 31, 2016 and
2015 ranged from approximately 3.5% to 7.0%.
For policies issued in 2010 and after, we have
been using an increasing interest rate
assumption to reflect the historically low interest
rate environment. The liability for policy claims
and other benefits payable on traditional life
insurance products includes estimated unpaid
claims that have been reported to us and claims
incurred but not yet reported.

The future policy benefit reserves we establish
are necessarily based on estimates, assumptions
and our analysis of historical experience. We do
not modify the assumptions used to establish
future policy benefit reserves during the policy
term unless recoverability testing deems them to
be inadequate and there is no remaining DAC
associated with the underlying policies. Our
results depend significantly upon the extent to
which our actual claims experience is consistent
with the assumptions we used in determining
our future policy benefit reserves and pricing our
products. Our future policy benefit reserve
assumptions and estimates require significant

FINANCIAL STATEMENTS — NOTE 1

judgment and, therefore, are inherently
uncertain. We cannot determine with precision
the ultimate amounts that we will pay for actual
claims or the timing of those payments.

tax assets are recognized subject to
management’s judgment that realization is more
likely than not applicable to the periods in which
we expect the temporary difference will reverse.

Other Policyholders’ Funds. Other
policyholders’ funds primarily represent claim
payments left on deposit with us.

Litigation. The Company is involved from time
to time in legal disputes, regulatory inquiries and
arbitration proceedings in the normal course of
business. Contingent litigation- related losses
are recognized when probable and can be
reasonably estimated. Legal costs, such as
attorneys’ fees and other litigation-related
expenses that are incurred in connection with
resolving litigation are expensed as incurred.
These disputes are subject to uncertainties,
including indeterminate amounts sought in
certain of these matters and the inherent
unpredictability of litigation. Due to the difficulty
of estimating costs of litigation, actual costs may
be substantially higher or lower than any
amounts reserved.

Income Taxes. We are subject to the income
tax laws of the United States, its states,
municipalities, and certain unincorporated
territories, and those of Canada. These tax laws
can be complex and subject to different
interpretations by the taxpayer and the relevant
governmental taxing authorities. In establishing
a provision for income tax expense, we must
make judgments and interpretations about the
applicability of these tax laws. We also must
make estimates about the future impact certain
items will have on taxable income in the various
tax jurisdictions, both domestic and foreign.

Income taxes are accounted for under the asset
and liability method. Deferred tax assets and
liabilities are recognized for the future tax
consequences attributable to (i) differences
between the financial statement carrying
amounts of existing assets and liabilities and
their respective tax bases and (ii) operating loss
and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax
rates expected to apply to taxable income in the
years in which those temporary differences are
expected to be recovered or settled. Deferred

Premium Revenues. Traditional life insurance
products consist principally of those products
with fixed and guaranteed premiums and
benefits, and are primarily related to term
products. Premiums are recognized as revenues
when due.

Commissions and Fees. We receive
commission revenues from the sale of various
non-life insurance products. Commissions are
generally received on sales of mutual funds and
annuities. We also receive trail commission
revenues from mutual fund and annuity
products based on the net asset value of shares
sold by us. We, in turn, pay certain commissions
to our sales force. Additionally, we receive
marketing and support fees from product
originators. We also receive management fees
based on the average daily net asset value of
managed investments and contracts related to
separate account assets issued by Primerica Life
Canada. We earn recordkeeping fees for
administrative functions that we perform on
behalf of several of our mutual fund providers
and custodial fees for services performed as a
non-bank custodian of our clients’ retirement
plan accounts. We, in turn, pay a third-party
provider for its servicing of certain of these
accounts. Commissions and fees are recognized
as income during the period in which they are
earned.

Benefits and Expenses. Benefit and expense
items are charged to income in the period in
which they are incurred. Both the change in
policyholder liabilities, which is included in
benefits and claims, and the amortization of
deferred policy acquisition costs will vary with
policyholder persistency.

For employee and

Share-Based Transactions.
director share-based compensation awards, we
determine a grant date fair value based on the
price of our publicly-traded common stock and
recognize the related compensation expense,
adjusted for expected forfeitures, in the
statement of income on a straight-line basis

Primerica 2016 Annual Report

103

FINANCIAL STATEMENTS — NOTE 1

over the requisite service period for the entire
award. For non-employee share-based
compensation, we recognize the impact during
the period of performance, and the fair value of
the award is measured as of the date
performance is complete, which is the vesting
date. To the extent that a share-based award
contains sale restrictions extending beyond the
vesting date, we reduce the recognized fair value
of the award to reflect the corresponding
illiquidity discount. Most non-employee share-
based compensation is an incremental direct
cost of successful acquisitions or renewals of life
insurance policies that result directly from and
are essential to the policy acquisition(s) and
would not have been incurred had the policy
acquisition(s) not occurred. We defer these
expenses and amortize the impact in the same
manner as all other DAC.

Earnings Per Share (“EPS”). The Company
has outstanding common stock and equity
awards that consist of restricted stock units
(“RSUs”), performance-based stock units
(“PSUs”), and stock options. The RSUs maintain
non-forfeitable dividend rights that result in
dividend payment obligations on a one-to-one
ratio with common shares for any future
dividend declarations. Unvested RSUs are
deemed participating securities for purposes of
calculating EPS as they maintain dividend rights.

See Note 13 (Earnings Per Share) for details
related to the calculations of our basic and
diluted EPS using the two-class method.

NewAccountingPrinciples.

In April 2015, the FASB issued Accounting
Standards Update No. 2015-03, Interest —
Imputation of Interest (Subtopic 835-30) —
Simplifying the Presentation of Debt Issuance
Costs (“ASU 2015-03”). Prior to the adoption of
ASU 2015-03, debt issuance costs related to a
recognized debt liability were presented as a
deferred charge, or asset, within the balance
sheet. ASU 2015-03 requires the presentation of
debt issuance costs related to a recognized debt
liability as a direct deduction from the carrying
amount of that debt liability, consistent with
debt discounts. We adopted ASU 2015-03

104

Freedom Lives Here™

during the three months ended March 31, 2016
and the amendments in the update were applied
retrospectively, which resulted in the deduction
of debt issuance costs of approximately
$2.8 million from other assets and a
corresponding reduction in the carrying
amounts of the notes payable and surplus note
of approximately $2.0 million and $0.8 million,
respectively, in our consolidated balance sheets
as of December 31, 2015. This update had no
impact on our results of operations.

In March 2016, the FASB issued Accounting
Standards Update No 2016-09 (“ASU 2016-09”)
Compensation — Stock Compensation (Topic
718) — Improvements to Employee Share-Based
Payment Accounting. ASU 2016-09 intends to
simplify several aspects of the accounting for
share-based payment transactions, including the
income tax consequences, classification of
awards as either equity or liabilities, and
classification on the statement of cash flows. We
anticipate that its most notable impact on the
Company’s financial statements will involve the
change in accounting for the income tax
consequences associated with share-based
payment transactions in the income statement.
The amendments in ASU 2016-09 require that
the tax effect of the difference between the
cumulative compensation cost of a share-based
award recognized for financial reporting
purposes and the deduction of the award for tax
purposes (“excess tax benefits or deficiencies”)
be recognized as income tax expense or benefit
in the income statement. Under current U.S.
GAAP, the Company recognizes excess tax
benefits or deficiencies as an adjustment to
additional paid-in capital in the statement of
stockholders’ equity. The amendments in ASU
2016-09 that require a change in the accounting
for excess tax benefits and deficiencies in the
income statement are effective prospectively,
and the Company will adopt the amendments in
ASU 2016-09 beginning in the first quarter of
2017. We do not expect the adoption of the
amendments in ASU 2016-09 will materially
affect our results of operations.

In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic
606) (“ASU 2014-09”). ASU 2014-09 clarifies the

principles for recognizing revenue by
establishing the core principle that an entity
should recognize revenue to depict the transfer
of goods or services to customers in an amount
that reflects the consideration to which the
entity expects to be entitled in exchange for
those goods or services. ASU 2014-09 also
requires additional disclosure about the nature,
amount, timing and uncertainty of revenue that
is recognized. Insurance contracts are specifically
excluded from the scope of ASU 2014-09 and
therefore revenue from our insurance product
lines will not be affected by the new standard.
The amendments in ASU 2014-09, as updated by
ASU No. 2015-14, are effective retrospectively
for the Company beginning in fiscal year 2018.
Early adoption is not permitted. We have
performed an initial assessment of the revenue
streams in our Investment and Savings Products
and Corporate and Other Distributed Products
segments, and we currently believe that it will
not have a material impact on our consolidated
financial statements. However, we will continue
to further evaluate all aspects of ASU 2014-09
and analyze our non-insurance revenue streams
through the adoption date.

In January 2016, the FASB issued Accounting
Standards Update No. 2016-01, Financial
Instruments — Overall (Subtopic 825-10) —
Recognition and Measurement of Financial Assets
and Financial Liabilities (“ASU 2016-01”). ASU
2016-01 intends to enhance the reporting model
for financial instruments and addresses certain
aspects of recognition, measurement of
investments in equity securities and the
presentation of certain fair value changes for
financial liabilities measured at fair value. ASU
2016-01 also amends certain disclosure
requirements associated with the fair value of
financial instruments. The amendments in ASU
2016-01 are effective for the Company
beginning in fiscal year 2018. The recognition
and measurement provisions of ASU 2016-01
will be applied by means of a cumulative-effect
adjustment to the balance sheet as of the
beginning of the fiscal year of adoption and
early adoption is not permitted. We expect its
primary impact on the Company will be the
recognition of all unrealized gains and losses on

FINANCIAL STATEMENTS — NOTE 1

AFS equity securities in net income. Currently, all
unrealized gains and losses (except for OTTI) on
AFS equity securities are recognized in other
comprehensive income (loss). The impact of
adopting this standard will be driven by the
market value of AFS equity securities as of the
effective date of adoption. See Note 4
(Investments) for details of unrealized gains and
losses on AFS equity securities held by the
Company.

In February 2016, FASB issued Accounting
Standards Update No. 2016-02 (“ASU 2016-02”),
Leases (ASC 842). ASU 2016-02 intends to
enhance transparency and comparability among
organizations by requiring lessees to recognize
lease assets and lease liabilities on the balance
sheet. The amendments in ASU 2016-02 are
effective for the Company beginning in fiscal
year 2019, with early adoption permitted. The
Company intends to adopt the amendments in
ASU 2016-02 beginning in the first quarter of
2019. We expect the primary impact will be the
recognition of our operating lease obligations
and corresponding right to use assets on our
balance sheet, which mainly consist of our
executive and home office operations and other
real estate leases of office space as well as office
equipment. We anticipate that the impact of
adopting this standard will result in an increase
to assets and liabilities that is generally
consistent with our remaining lease obligations
as listed in Note 16 “Commitments and
Contingent Liabilities” plus any new operating
lease commitments agreed to before the
effective date.

In June 2016, the FASB issued Accounting
Standards Update No. 2016-13 (“ASU 2016-13”),
Financial Instruments — Credit Losses (Topic
326) — Measurement of Credit Losses on
Financial Instruments. ASU 2016-13 introduces
new guidance for accounting for credit losses on
financial instruments within its scope by
replacing the current approach that delays
recognition until it is probable a loss has been
incurred with a new approach that estimates an
allowance for anticipated credit losses on the
basis of an entity’s own expectations. The
objective of the new approach for estimating
credit losses is to require consideration of a

Primerica 2016 Annual Report

105

FINANCIAL STATEMENTS — NOTE 2

broader range of forward-looking information,
which is expected to result in earlier recognition
of credit losses on financial instruments. AFS
debt securities are excluded from the scope of
financial instruments that require measurement
of credit losses on the basis of a forward-looking
expected loss estimate under ASU 2016-13. The
incurred probable loss approach for measuring
credit losses on AFS debt securities will remain
under ASU 2016-13 but will be presented as an
allowance rather than as a write-down.
Therefore, an entity will be allowed to reverse
credit losses previously recorded on AFS debt
securities in situations where the estimate of
credit losses on those securities has declined.
The amendments in ASU 2016-13 also preclude
an entity from considering the length of time an
AFS debt security has been in an unrealized loss
position to avoid recording a credit loss and
remove the requirement to consider recoveries
or declines in fair value after the balance sheet
date. The amendments in ASU 2016-13 are
effective for the Company beginning in fiscal
year 2020. The Company is currently in the
process of evaluating its impact on the
Company’s consolidated financial statements.

Future Application of Accounting
Standards. Recent accounting guidance not
discussed is not applicable, is immaterial to our
financial statements, or did not or will not have
an impact on our business.

(2) Discontinued Operations

In January 2014, NBLIC sold the assets and
liabilities of its short-term statutory disability
benefit insurance business (“DBL”) to AmTrust
North America, Inc. and its affiliates (the
“buyer”). As part of the sale agreement, the
buyer assumed all liabilities for DBL insurance
policies. In addition, NBLIC transferred the assets
held in support of DBL’s insurance liabilities and
all other premium-related assets and liabilities to
the buyer as of January 1, 2014. The results of
DBL’s operations from January 1, 2014 forward
were also transferred to the buyer. NBLIC
received cash proceeds from the sale of
$3.0 million and recognized a pre-tax gain on
the sale of approximately $2.4 million, which
comprised income from discontinued operations
before income taxes in our results of operations
for the year ended December 31, 2014.

After the sale, we no longer had significant
continuing involvement in the operations of DBL,
and its direct cash flows have been eliminated
from our ongoing operations. As a result,
beginning in 2014, the results of operations for
DBL have been reported in discontinued
operations for all periods presented in the
consolidated statements of income. We had no
assets or liabilities related to DBL as of
December 31, 2016, 2015 and 2014. The results
of DBL included in discontinued operations were
as follows:

Total revenues from discontinued operations

Income from discontinued operations before income taxes

Provision for income taxes

Year ended December 31,

2016

2015

2014

(In thousands)

$—

$— $ —

—

2,427

849

Income from discontinued operations, net income taxes

$—

$— $1,578

(3) Segment and Geographical
Information

Segments. We have two primary operating
segments — Term Life Insurance and Investment
and Savings Products. The Term Life Insurance

segment includes underwriting profits on our
in-force book of term life insurance policies, net
of reinsurance, which are underwritten by our
life insurance company subsidiaries. The
Investment and Savings Products segment
includes retail and managed mutual funds and

106

Freedom Lives Here™

annuities distributed through licensed broker-
dealer subsidiaries and includes segregated
funds, an individual annuity savings product that
we underwrite in Canada through Primerica Life
Canada. In the United States, we distribute
mutual fund and annuity products of several
third-party companies. We also earn fees for
account servicing on a subset of the mutual
funds we distribute. In Canada, we offer a
Primerica-branded fund-of-funds mutual fund
product, as well as mutual funds of well-known
mutual fund companies. These two operating
segments are managed separately because their
products serve different needs — term life
insurance income protection versus wealth-
building savings products.

We also have a Corporate and Other Distributed
Products segment, which consists primarily of
revenues and expenses related to several

Revenues:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

Total revenues

Net investment income:

Term life insurance segment

Investment and savings products segment

FINANCIAL STATEMENTS — NOTE 3

discontinued lines of insurance other than our
core term life insurance products and the
distribution of various other financial products
generally underwritten or offered by third-party
providers. All of the Company’s net investment
income, except for the portion allocated to the
Term Life Insurance segment that represents the
assumed interest accreted to its U.S. GAAP-
measured future policy benefit reserve liability
less DAC, is attributed to the Corporate and
Other Distributed Products segment. In addition,
interest expense incurred by the Company as
well as realized gains and losses on our invested
asset portfolio are entirely attributed to the
Corporate and Other Distributed Products
segment.

Notable information included in profit or loss by
segment was as follows:

Year ended December 31,

2016

2015

2014

(In thousands)

$ 866,382 $ 763,958 $ 692,385

524,621

128,081

521,336

118,905

511,102

133,609

$1,519,084 $1,404,199 $1,337,096

7,634 $

5,987 $

4,444

—

Corporate and other distributed products segment

71,391

70,522

82,029

Total net investment income

79,025 $

76,509 $

86,473

Amortization of DAC:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

Total amortization of DAC

Non-cash share-based compensation expense:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

$ 172,812 $ 147,980 $ 133,331

6,148

1,622

7,952

1,795

8,734

2,313

$ 180,582 $ 157,727 $ 144,378

2,652 $

5,392 $

2,179

8,611

2,228

7,328

6,315

2,641

9,026

Total non-cash share-based compensation expense

13,442 $

14,948 $

17,982

Primerica 2016 Annual Report

107

FINANCIAL STATEMENTS — NOTE 3

Year ended December 31,

2016

2015

2014

(In thousands)

Income (loss) from continuing operations before income

taxes:
Term life insurance segment

$ 213,361 $ 173,209 $ 152,101

Investment and savings products segment

144,356

146,083

146,017

Corporate and other distributed products segment

(20,122)

(28,311)

(22,396)

Total income from continuing operations before income

taxes

$ 337,595 $ 290,981 $ 275,722

Insurance expenses and other operating
expenses directly attributable to the Term Life
Insurance and the Investment and Savings
Products segments are recorded directly to the
applicable segment. We allocate certain other
revenue and operating expenses that are not
directly attributable to a specific operating
segment based on the relative sizes of our life-
licensed and securities-licensed independent
sales forces. These allocated items include fees
charged for access to our sales force support

Total assets by segment were as follows:

Assets:

Term life insurance segment

applications and costs incurred for field
technology, supervision, training and certain
miscellaneous costs. We also allocate certain
technology and occupancy costs to our
operating segments based on estimated usage.
Any remaining unallocated revenue and expense
items, as well as realized investment gains and
losses, are reported in the Corporate and Other
Distributed Products segment. We measure
income and loss for the segments on an income
before income taxes basis.

December 31,
2016

December 31,
2015

December 31,
2014

(In thousands)

$ 5,945,502 $ 5,638,682 $ 5,471,563

Investment and savings products segment (1)

2,391,512

2,157,548

2,545,372

Corporate and other distributed products segment

3,101,929

2,814,553

2,718,994

Total assets

$11,438,943 $10,610,783 $10,735,929

(1) The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the
Investment and Savings Products segment assets were approximately $103.7 million, $93.8 million, and $105.5 million as of
December 31, 2016, 2015, and 2014, respectively.

Assets specifically related to a segment are held
in that segment. All invested assets held by the
Company, including the deposit asset
recognized in connection with our 10%
coinsurance agreement (the “10% Coinsurance
Agreement”) and the held-to-maturity security
received in connection with the Vidalia Re
Coinsurance Agreement, are reported as assets
of the Corporate and Other Distributed Products

segment. DAC is recognized in a particular
segment based on the product to which it
relates. Separate account assets supporting the
segregated funds product in Canada are held in
the Investment and Savings Products segment.
Any remaining unallocated assets are reported
in the Corporate and Other Distributed Products
segment.

108

Freedom Lives Here™

Geographical Information. Results of continuing operations by country and long-lived assets —
primarily tangible assets reported in other assets in our consolidated balance sheets — were as follows:

FINANCIAL STATEMENTS — NOTE 3

Revenues by country:

United States

Canada

Total revenues

Income from continuing operations before income taxes by

country:
United States

Canada

Year ended December 31,

2016

2015

2014

(In thousands)

$1,281,580 $1,172,508 $1,094,714

237,504

231,691

242,382

$1,519,084 $1,404,199 $1,337,096

$ 269,791 $ 225,920 $ 203,120

67,804

65,061

72,602

Total income from continuing operations before income

taxes

$ 337,595 $ 290,981 $ 275,722

Long-lived assets by country:

United States

Canada

Total long-lived assets

December 31,
2016

December 31,
2015

December 31,
2014

(In thousands)

$26,685

$28,621

$25,897

780

787

566

$27,465

$29,408

$26,463

Primerica 2016 Annual Report

109

FINANCIAL STATEMENTS — NOTE 4

(4) Investments

AFS Securities. The period-end cost or amortized cost, gross unrealized gains and losses, and fair
value of AFS fixed-maturity and equity securities follow:

Securities available-for-sale, carried at fair value:

Fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

December 31, 2016

Cost or
amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair value

(In thousands)

10,148

350

(24) $

10,474

124,274

43,950

5,719

1,903

(687)

(129)

129,306

45,724

1,281,630

49,272

(5,529)

1,325,373

94,708

107,201

72,772

4,963

2,712

(120)

(470)

(303)

99,551

109,443

72,567

Total fixed-maturity securities (1)

1,734,683

65,017

(7,262)

1,792,438

Equity securities

36,818

8,589

(513)

44,894

Total fixed-maturity and equity securities

$1,771,501

$73,606

$(7,775) $1,837,332

(1)

Includes approximately $0.1 million of OTTI losses related to corporates and mortgage- and asset-backed securities
recognized in accumulated other comprehensive income.

Securities available-for-sale, carried at fair value:

Fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

December 31, 2015

Cost or
amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair value

(In thousands)

20,233

448

(22) $

20,659

114,656

38,995

7,082

2,111

(1,522)

120,216

(541)

40,565

1,276,965

49,008

(24,211)

1,301,762

94,532

97,666

46,996

6,814

2,875

129

(121)

(555)

(79)

101,225

99,986

47,046

Total fixed-maturity securities (1)

1,690,043

68,467

(27,051)

1,731,459

Equity securities

39,969

8,252

(382)

47,839

Total fixed-maturity and equity securities

$1,730,012

$76,719

$(27,433) $1,779,298

(1)

Includes approximately $0.1 million of OTTI losses related to corporates and mortgage- and asset-backed securities
recognized in accumulated other comprehensive income.

110

Freedom Lives Here™

FINANCIAL STATEMENTS — NOTE 4

All of our AFS mortgage- and asset-backed
securities represent variable interests in variable
interest entities (“VIEs”). We are not the primary
beneficiary of these VIEs because we do not
have the power to direct the activities that most
significantly impact the entities’ economic

performance. The maximum exposure to loss as
a result of our involvement in these VIEs equals
the carrying value of the securities.

The scheduled maturity distribution of the AFS
fixed-maturity portfolio at December 31, 2016
follows:

Due in one year or less

Due after one year through five years

Due after five years through 10 years

Due after 10 years

Mortgage- and asset-backed securities

Total fixed-maturity securities

Amortized cost

Fair value

(In thousands)

$ 128,339

$ 130,743

704,614

576,963

50,086

737,152

589,600

53,382

1,460,002
274,681

1,510,877
281,561

$1,734,683

$1,792,438

Expected maturities may differ from scheduled contractual maturities because issuers of securities may
have the right to call or prepay obligations with or without call or prepayment penalties.

Unrealized Gains and Losses on Investments. The net effect on stockholders’ equity of unrealized
gains and losses on AFS securities was as follows:

Net unrealized investment gains including OTTI:

Fixed-maturity and equity securities

OTTI

Net unrealized investment gains excluding OTTI

Deferred income taxes

December 31,
2016

December 31,
2015

(In thousands)

$ 65,831

$ 49,286

109

65,926

49,395

(23,074)

(17,288)

Net unrealized investment gains excluding OTTI, net of tax

$ 42,852

$ 32,107

Trading Securities. We maintain a portfolio
mostly of fixed-maturity securities that are
classified as trading securities. The carrying
values of the fixed-maturity securities classified
as trading securities were approximately
$7.4 million and $5.4 million as of December 31,
2016 and 2015, respectively.

Held-to-maturity Security. Concurrent with
the execution of the Vidalia Re Coinsurance
Agreement, Vidalia Re entered into a Surplus
Note Purchase Agreement (the “Surplus Note
Purchase Agreement”) with Hannover Life

Reassurance Company of America and certain of
its affiliates (collectively, “Hannover Re”) and a
newly formed limited liability company (the
“LLC”) owned by a third- party service provider.
Under the Surplus Note Purchase Agreement,
Vidalia Re issued a surplus note (the “Surplus
Note”) to the LLC in exchange for a credit
enhanced note from the LLC with an equal
principal amount (the “LLC Note”). The principal
amount of both the LLC Note and the Surplus
Note will fluctuate over time to coincide with the
amount of reserves contractually supported
under the Vidalia Re Coinsurance Agreement.

Primerica 2016 Annual Report

111

FINANCIAL STATEMENTS — NOTE 4

Both the LLC Note and the Surplus Note mature
on December 31, 2029 and bear interest at an
annual interest rate of 4.50%. The LLC Note is
guaranteed by Hannover Re through a credit
enhancement feature in exchange for a fee,
which is reflected in interest expense on our
consolidated statements of income.

The LLC is a VIE as its owner does not have an
equity investment at risk that is sufficient to
permit the LLC to finance its activities without
Vidalia Re or Hannover Re. The Parent Company,
Primerica Life, and Vidalia Re share the power to
direct the activities of the LLC with Hannover Re,
but do not have the obligation to absorb losses
or the right to receive any residual returns
related to the LLC’s primary risks or sources of
variability. Through the credit enhancement
feature, Hannover Re is the ultimate risk taker in
this transaction and bears the obligation to
absorb the LLC’s losses in the event of a Surplus
Note default in exchange for the fee.
Accordingly, the Company is not the primary
beneficiary of the LLC and does not consolidate
the LLC within its consolidated financial
statements.

The LLC Note is classified as a held-to-maturity
debt security in the Company’s invested asset
portfolio as we have the positive intent and
ability to hold the security until maturity. As of
December 31, 2016, the LLC Note, which was
rated A+ by Fitch Ratings, had an estimated
unrealized holding gain of $9.8 million based on
its amortized cost and estimated fair value,
which is derived using the valuation techniques
described in Note 5 (Fair Value of Financial
Instruments).

See Note 10 (Debt) for more information on the
Surplus Note.

Investments on Deposit with Governmental
Authorities. As required by law, we have
investments on deposit with governmental
authorities and banks for the protection of
policyholders. The fair values of investments on
deposit were $18.2 million and $18.1 million as
of December 31, 2016 and 2015, respectively.

Securities Lending Transactions. We
participate in securities lending transactions with
broker-dealers and other financial institutions to
increase investment income with minimal risk.
We require minimum collateral on securities
loaned equal to 102% of the fair value of the
loaned securities. We accept collateral in the
form of securities, which we are not able to sell
or encumber, and to the extent the collateral
declines in value below 100%, we require
additional collateral from the borrower. Any
securities collateral received is not reflected on
our consolidated balance sheets. We also accept
collateral in the form of cash, all of which we
reinvest. For loans involving unrestricted cash
collateral, the collateral is reported as an asset
with a corresponding liability representing our
obligation to return the collateral. We continue
to carry the loaned securities as invested assets
on our consolidated balance sheets during the
terms of the loans, and we do not report them
as sales. Cash collateral received and reinvested
was approximately $73.6 million and
$71.5 million as of December 31, 2016 and 2015,
respectively.

112

Freedom Lives Here™

Investment Income. The components of net investment income were as follows:

FINANCIAL STATEMENTS — NOTE 4

Fixed-maturity securities (available-for-sale)

Fixed-maturity security (held-to-maturity)

Equity securities

Policy loans and other invested assets

Cash and cash equivalents

Total return on deposit asset underlying 10% coinsurance agreement

Gross investment income

Investment expenses

Investment income net of investment expenses

Interest expense on surplus note

Net investment income

Year ended December 31,

2016

2015

2014

(In thousands)
$ 74,673 $ 77,271 $84,687

18,880

13,048

2,053

1,340

632

5,212

2,059

1,368

228

482

3,482

1,862

1,448

247

3,095

102,790

94,456

94,821

(4,885)

(4,899)

(4,866)

97,905

89,557

89,955

(18,880)

(13,048)

(3,482)

$ 79,025 $ 76,509 $86,473

The components of net realized investment gains (losses), as well as details on gross realized
investment gains (losses) and proceeds from sales or other redemptions, were as follows:

Net realized investment gains (losses):

Gross gains from sales

Gross losses from sales

OTTI losses

Gains (losses) from bifurcated options

Net realized investment gains (losses)

OTTI. We conduct a review each quarter to
identify and evaluate impaired investments that
have indications of possible OTTI. An investment
in a debt or equity security is impaired if its fair
value falls below its cost. Factors considered in
determining whether an unrealized loss is
temporary include the length of time and extent
to which fair value has been below cost, the
financial condition and near-term prospects for
the issue, and our ability and intent to hold the
investment for a period of time sufficient to
allow for any anticipated recovery, which may be
maturity for fixed-maturity securities or within a
reasonable period of time for equity securities.

Year ended December 31,

2016

2015

2014

(In thousands)

$ 8,126 $ 5,762 $ 3,687

(751)

(465)

(436)

(3,420)

(6,893)

(4,045)

133

(142)

533

$ 4,088 $(1,738) $ (261)

Our review for OTTI generally entails:

• Analysis of individual investments that have

fair values less than a pre-defined
percentage of amortized cost, including
consideration of the length of time the
investment has been in an unrealized loss
position;

• Analysis of corporate fixed-maturity

securities by reviewing the issuer’s most
recent performance to date, including
analyst reviews, analyst outlooks and rating
agency information;

Primerica 2016 Annual Report

113

FINANCIAL STATEMENTS — NOTE 4

• Analysis of commercial mortgage-backed
securities based on an assessment of
performance to date, credit enhancement,
risk analytics and outlook, underlying
collateral, loss projections, rating agency
information and available third-party
reviews and analytics;

• Analysis of residential mortgage-backed
securities based on loss projections
provided by models compared to current
credit enhancement levels;

• Analysis of our other fixed-maturity and
equity security investments, as required
based on the type of investment; and

• Analysis of downward credit migrations that

occurred during the quarter.

AFS fixed-maturity and equity securities with a
cost basis in excess of their fair values were
approximately $450.9 million and $626.0 million
as of December 31, 2016 and 2015, respectively.

The following tables summarize, for all AFS securities in an unrealized loss position, the aggregate fair
value and the gross unrealized loss by length of time such securities have continuously been in an
unrealized loss position:

December 31, 2016

Less than 12 months

12 months or longer

Fair value

Unrealized
losses

Number
of

securities Fair value

Unrealized
losses

Number
of
securities

(Dollars in thousands)

Fixed-maturity securities:

U.S. government and agencies

3,668 $

(24)

Foreign government

States and political subdivisions

34,538

8,902

(526)

(129)

$ — $ —

3,048

(161)

—

Corporates

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

232,070

(3,484)

225

45,471

(2,045)

15,232

33,335

48,275

(92)

(423)

(260)

3,606

7,663

1,315

(28)

(47)

(43)

—

Total fixed-maturity securities

376,020

(4,938)

61,103

(2,324)

Equity securities

4,179

(269)

1,852

(244)

Total fixed-maturity and equity

securities

$380,199 $(5,207)

$62,955 $(2,568)

114

Freedom Lives Here™

FINANCIAL STATEMENTS — NOTE 4

December 31, 2015

Less than 12 months

12 months or longer

Fair value

Unrealized
losses

Number
of

securities Fair value

Unrealized
losses

Number
of
securities

(Dollars in thousands)

Fixed-maturity securities:

U.S. government and agencies

$ 13,651 $

(22)

Foreign government

States and political subdivisions

23,572

2,729

(829)

(44)

$ — $ —

—

2,396

878

(693)

(497)

Corporates

413,131

(17,481)

393

34,624

(6,730)

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

9,681

56,216

26,611

(61)

(493)

(77)

4,762

3,199

260

(60)

(62)

(2)

Total fixed-maturity securities

545,591

(19,007)

46,119

(8,044)

Equity securities

3,652

(287)

3,209

(95)

Total fixed-maturity and equity

securities

$549,243 $(19,294)

$49,328 $(8,139)

The amortized cost and fair value of AFS fixed-maturity securities in default were as follows:

Fixed-maturity securities in default

December 31, 2016 December 31, 2015

Amortized
cost

Fair
value

Amortized
cost

Fair
value

(In thousands)
$125

$138

$262

Impairment charges recognized in earnings on AFS securities were as follows:

Impairments on fixed-maturity securities not in default

Impairments on fixed-maturity securities in default

Impairments on equity securities

Total impairment charges

Year ended December 31,

2016

2015

2014

(In thousands)
$3,257 $5,108 $3,656

121

1,756

—

389

$3,420 $6,893 $4,045

The securities noted above were considered to
be other-than-temporarily impaired due to our
intent to sell them; adverse credit events, such as
news of an impending filing for bankruptcy;
analyses of the issuer’s most recent financial
statements or other information in which
liquidity deficiencies, significant losses and large
declines in capitalization were evident; or
analyses of rating agency information for

issuances with severe ratings downgrades that
indicated a significant increase in the possibility
of default. We also recognized impairment
losses related to invested assets held at the
Parent Company that we intended to sell to fund
share repurchases, as well as credit impairments
on certain other investments.

As of December 31, 2016, the unrealized losses
on our AFS invested asset portfolio were largely

Primerica 2016 Annual Report

115

FINANCIAL STATEMENTS — NOTE 4

caused by interest rate sensitivity and changes in
credit spreads. We believe that fluctuations
caused by movement in interest rate and credit
spreads have little bearing on the recoverability
of our investments. We do not consider these
investments to be other-than-temporarily

impaired because we have the ability to hold
these investments until maturity or a market
price recovery, and we have no present intention
to dispose of them.

Net impairment losses recognized in earnings
were as follows:

Total impairment losses related to securities which the Company does not

intend to sell or more-likely-than-not will not be required to sell:
Total OTTI losses recognized

Less portion of OTTI loss recognized in accumulated other comprehensive

income (loss)

Year ended December 31,

2016

2015

2014

(In thousands)

$1,486 $ 706 $1,579

—

Net impairment losses recognized in earnings for securities which the

Company does not intend to sell or more-likely- than-not will not be
required to sell before recovery

1,486

706

1,579

OTTI losses recognized in earnings for securities which the Company intends

to sell or more-likely-than-not will be required to sell before recovery

1,934

6,187

2,466

Net impairment losses recognized in earnings

$3,420 $6,893 $4,045

The roll-forward of the OTTI recognized in net income for all fixed-maturity securities still held follows:

Cumulative OTTI recognized in net income for securities still held, beginning of

period

Additions for OTTI securities where no OTTI were recognized prior to the

beginning of the period

Additions for OTTI securities where OTTI have been recognized prior to the

beginning of the period

Reductions due to sales, maturities, calls, amortization or increases in cash flows
expected to be collected over the remaining life of credit impaired securities

Reductions for exchanges of securities previously impaired

Cumulative OTTI recognized in net income for securities still held, end of

period

Year ended December 31,

2016

2015

(In thousands)

$11,856

$ 9,550

1,694

2,340

1,684

2,797

(7,114)

(2,346)

(1,554)

(1,277)

$ 5,774

$11,856

As of December 31, 2016, no impairment losses
have been recognized on the LLC Note
held-to-maturity security.

Derivatives. Embedded conversion options
associated with fixed-maturity securities are
bifurcated from the fixed-maturity security host

contracts and separately recognized as equity
securities. The change in fair value of these
bifurcated conversion options is reflected in
realized investment gains (losses), including OTTI
losses. As of December 31, 2016 and 2015, the
fair value of these bifurcated options was

116

Freedom Lives Here™

approximately $4.3 million and $5.4 million,
respectively.

We have a deferred loss related to closed
forward contracts, which were settled several
years ago, that were used to mitigate our
exposure to foreign currency exchange rates
that resulted from the net investment in our
Canadian operations. The amount of deferred
loss included in accumulated other
comprehensive income was approximately
$26.4 million as of December 31, 2016 and 2015.
While we have no current intention to do so,
these deferred losses will not be recognized until
such time as we sell or substantially liquidate our
Canadian operations.

(5) Fair Value of Financial Instruments

Fair value is the price that would be received
upon the sale of an asset in an orderly
transaction between market participants at the
measurement date. Fair value measurements are
based upon observable and unobservable
inputs. Observable inputs reflect market data
obtained from independent sources, while
unobservable inputs reflect our view of market
assumptions in the absence of observable
market information. We classify and disclose all
invested assets carried at fair value in one of the
following three categories:

•

Level 1. Quoted prices for identical
instruments in active markets. Level 1
primarily consists of financial instruments
whose value is based on quoted market
prices in active markets, such as exchange-
traded common stocks and actively traded
mutual fund investments;

Level 2. Quoted prices for similar
instruments in active markets; quoted prices
for identical or similar instruments in
markets that are not active; and model-
derived valuations in which all significant
inputs and significant value drivers are
observable in active markets. Level 2

FINANCIAL STATEMENTS — NOTE 5

includes those financial instruments that are
valued using industry-standard pricing
methodologies, models or other valuation
methodologies. Various inputs are
considered in deriving the fair value of the
underlying financial instrument, including
interest rate, credit spread, and foreign
exchange rates. All significant inputs are
observable, or derived from observable
information in the marketplace or are
supported by observable levels at which
transactions are executed in the
marketplace. Financial instruments in this
category primarily include: certain public
and private corporate fixed-maturity and
equity securities; government or agency
securities; certain mortgage- and asset-
backed securities and bifurcated conversion
options; and

Level 3. Valuations derived from valuation
techniques in which one or more significant
inputs or significant value drivers are
unobservable. Level 3 consists of financial
instruments whose fair value is estimated
based on industry-standard pricing
methodologies and models using significant
inputs not based on, nor corroborated by,
readily available market information.
Valuations for this category primarily consist
of non-binding broker quotes. Financial
instruments in this category primarily
include less liquid fixed-maturity corporate
securities, mortgage- and asset-backed
securities.

•

As of each reporting period, all assets and
liabilities recorded at fair value are classified in
their entirety based on the lowest level of input
(Level 3 being the lowest) that is significant to
the fair value measurement. Significant levels of
estimation and judgment are required to
determine the fair value of certain of our
investments. The factors influencing these
estimations and judgments are subject to
change in subsequent reporting periods.

Primerica 2016 Annual Report

117

FINANCIAL STATEMENTS — NOTE 5

The estimated fair value and hierarchy classifications for assets and liabilities that are measured at fair
value on a recurring basis were as follows:

Fair value assets:

Available-for-sale fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

December 31, 2016

Level 1

Level 2

Level 3

Total

(In thousands)

$ — $

10,474 $ — $

10,474

—

129,306

45,724

—

129,306

45,724

3,113

1,322,257

1,325,373

—

98,966

109,443

585

—

65,075

7,492

99,551

109,443

72,567

Total available-for-sale fixed-maturity securities

3,113

1,781,245

8,080

1,792,438

Equity securities

Trading securities

Separate accounts

39,556

—

5,256

7,383

2,287,953

—

44,894

7,383

2,287,953

Total fair value assets

$42,669 $4,081,837 $8,162 $4,132,668

Fair value liabilities:
Separate accounts

$ — $2,287,953 $ — $2,287,953

Total fair value liabilities

$ — $2,287,953 $ — $2,287,953

118

Freedom Lives Here™

Fair value assets:

Available-for-sale fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

Equity securities

Trading securities

Separate accounts

FINANCIAL STATEMENTS — NOTE 5

December 31, 2015

Level 1

Level 2

Level 3

Total

(In thousands)

$ — $

20,659

$ — $

20,659

—

120,216 —

40,565 —

120,216

40,565

2,146

1,299,613

1,301,762

—

100,493

732

101,225

99,986 —

47,046 —

735

5,358 —

99,986

47,046

1,731,459

47,839

5,358

2,063,899 —

2,063,899

41,341

6,450

Total available-for-sale fixed-maturity securities

2,146

1,728,578

Total fair value assets

$43,487 $3,804,285

$783

$3,848,555

Fair value liabilities:
Separate accounts

$ — $2,063,899

Total fair value liabilities

$ — $2,063,899

In assessing fair value of our investments, we use
a third-party pricing service for approximately
95% of our securities that are measured at fair
value on a recurring basis. The remaining
securities are primarily thinly traded securities
such as private placements and are valued using
models based on observable inputs on public
corporate spreads having similar characteristics
(e.g., sector, average life and quality rating) and
liquidity and yield based on quality rating,
average life and treasury yields. All observable
data inputs are corroborated by independent
third-party data. In the absence of sufficient
observable inputs, we utilize non-binding broker
quotes, which are reflected in our Level 3
classification as we are unable to evaluate the
valuation technique(s) or significant inputs used
to develop the quotes. Therefore, we do not
internally develop the quantitative unobservable
inputs used in measuring the fair value of Level 3
investments. However, we do corroborate
pricing information provided by our third-party
pricing servicing by performing a review of

selected securities. Our review activities include
obtaining detailed information about the
assumptions, inputs and methodologies used in
pricing the security; documenting this
information; and corroborating it by comparison
to independently obtained prices and or
independently developed pricing
methodologies.

Furthermore, we perform internal
reasonableness assessments on fair value
determinations within our portfolio throughout
the quarter and at quarter-end, including pricing
variance analyses and comparisons to alternative
pricing sources and benchmark returns. If a fair
value appears unusual relative to these
assessments, we will re-examine the inputs and
may challenge a fair value assessment made by
the pricing service. If there is a known pricing
error, we will request a reassessment by the
pricing service. If the pricing service is unable to
perform the reassessment on a timely basis, we
will determine the appropriate price by

Primerica 2016 Annual Report

119

FINANCIAL STATEMENTS — NOTE 5

requesting a reassessment from an alternative
pricing service or other qualified source as
necessary. We do not adjust quotes or prices
except in a rare circumstance to resolve a known
error.

Because many fixed-maturity securities do not
trade on a daily basis, third-party pricing services
generally determine fair value using industry-
standard methodologies, which vary by asset
class. For corporate, government, and agency
securities, these methodologies include
developing prices by incorporating available
market information such as U.S. Treasury curves,
benchmarking of similar securities including new
issues, sector groupings, quotes from market
participants and matrix pricing. Observable
information is compiled and integrates relevant
credit information, perceived market movements
and sector news. Additionally, security prices are
periodically back-tested to validate and/or refine
models as conditions warrant. Market indicators
and industry and economic events are also
monitored as triggers to obtain additional data.
For certain structured securities (such as
mortgage-and assets-backed securities) with
limited trading activity, third-party pricing
services generally use industry-standard pricing

methodologies that incorporate market
information, such as index prices or discounting
expected future cash flows based on underlying
collateral, and quotes from market participants,
to estimate fair value. If these measures are not
deemed observable for a particular security, the
security will be classified as Level 3 in the fair
value hierarchy.

Where specific market information is unavailable
for certain securities, pricing models produce
estimates of fair value primarily using Level 2
inputs along with certain Level 3 inputs. These
models include matrix pricing. The pricing matrix
uses current treasury rates and credit spreads
received from third-party sources to estimate
fair value. The credit spreads incorporate the
issuer’s industry- or issuer-specific credit
characteristics and the security’s time to
maturity, if warranted. Remaining unpriced
securities are valued using an estimate of fair
value based on indicative market prices that
include significant unobservable inputs not
based on, nor corroborated by, market
information, including the utilization of
non-binding broker quotes.

The roll-forward of the Level 3 assets measured
at fair value on a recurring basis was as follows:

Level 3 assets, beginning of period

Net unrealized gains (losses) included in other comprehensive income

Realized gains (losses) and accretion (amortization) recognized in earnings, including

OTTI

Purchases(1)

Settlements

Transfers into Level 3

Transfers out of Level 3

Level 3 assets, end of period

Year ended
December 31,

2016

2015

(In thousands)
$ 783 $1,165

(23)

(26)

7,556

—

(161)

(168)

—

(192)

$8,162 $ 783

(1) During the year ended December 31, 2016, purchases of Level 3 assets primarily consisted of newly-issued fixed-maturity
securities in the fourth quarter for which observable inputs, most notably quoted prices, used to derive valuations are not
yet readily available.

We obtain independent pricing quotes based on
observable inputs as of the end of the reporting

period for all securities in Level 2. Those inputs
include benchmark yields, reported trades,

120

Freedom Lives Here™

broker/dealer quotes, issuer spreads, two-sided
markets, benchmark securities, market bids/
offers, quoted prices for similar instruments in
markets that are not active, and other relevant
data. We monitor these inputs for market
indicators as well as industry and economic
events. We recognize transfers into new levels
and out of previous levels as of the end of the
reporting period, including interim reporting
periods, as applicable. There were no material
transfers between Level 1 and Level 2 or
between Level 1 and Level 3 during the year
ended December 31, 2016. We transferred a
$1.0 million security from Level 1 to Level 2

FINANCIAL STATEMENTS — NOTE 5

during the year ended December 31, 2015 as it
was not consistently trading in an active market.
There were no material transfers between
Level 1 and Level 3 during the year ended
December 31, 2015.

Invested assets included in the transfer from
Level 3 to Level 2 primarily were fixed-maturity
investments for which we were able to obtain
independent pricing quotes based on
observable inputs.

The carrying values and estimated fair values of
our financial instruments were as follows:

December 31, 2016

December 31, 2015

Carrying
value

Estimated
fair value

Carrying
value

Estimated
fair value

(In thousands)

Assets:

Fixed-maturity securities (available-for-sale)

$1,792,438 $1,792,438 $1,731,459 $1,731,459

Fixed-maturity security (held-to-maturity)

503,230

513,015

365,220

371,742

Equity securities

Trading securities

Policy loans

Deposit asset underlying 10% coinsurance

agreement

Separate accounts

Liabilities:

Notes payable(1)

Surplus note(1)

Separate accounts

(1) Carrying value amounts shown are net of issuance costs.

The fair values of financial instruments
presented above are estimates of the fair values
at a specific point in time using various sources
and methods, including market quotations and a
complex matrix system that takes into account
issuer sector, quality, and spreads in the current
marketplace.

Recurring fair value measurements. Estimated
fair values of investments in AFS fixed-maturity
securities are principally a function of current
spreads and interest rates that are corroborated by
independent third-party data. Therefore, the fair

44,894

7,383

30,916

44,894

7,383

30,916

47,839

5,358

28,627

47,839

5,358

28,627

202,435

181,889

2,287,953

2,063,899

$ 372,919 $ 401,340 $ 372,552 $ 398,649

502,491

512,669

364,424

371,498

2,287,953

2,063,899

values presented are indicative of amounts we
could realize or settle at the respective balance
sheet date. We do not necessarily intend to
dispose of or liquidate such instruments prior to
maturity. Trading securities, which primarily
consist of fixed-maturity securities, are carried at
fair value. Equity securities, including common
and nonredeemable preferred stocks, are carried
at fair value. Segregated funds in separate
accounts are carried at the underlying value of
the variable insurance contracts, which is fair
value.

Primerica 2016 Annual Report

121

FINANCIAL STATEMENTS — NOTE 6

Nonrecurring fair value measurements. The
estimated fair value of the held-to-maturity
fixed-maturity security, which is classified as a
Level 3 fair value measurement, is derived using
the credit spread on similarly rated debt
securities and the hypothetical spread of the
security’s credit enhancement feature. Policy
loans, which are categorized as Level 3 fair value
measurements, are carried at the unpaid
principal balances. The fair value of policy loans
approximate the unpaid principal balances as
the timing of repayment is uncertain and the
loans are collateralized by the amount of the
policy. The deposit asset underlying the 10%
Coinsurance Agreement represents the value of
the assets necessary to back the economic
reserves held in support of the reinsurance
agreement. The carrying value of this deposit
asset approximates fair value, which is
categorized as Level 3 in the fair value hierarchy.
Notes payable represent our publicly-traded
senior notes and are valued as a Level 2 fair
value measurement using the quoted market
price for our notes. The estimated fair value of
the Surplus Note is derived by using an assumed
credit spread we would expect if Vidalia Re was
a credit-rated entity and the hypothetical spread
of the Surplus Note’s subordinated structure.
The Surplus Note is classified as a Level 3 fair
value measurement.

The carrying amounts for cash and cash
equivalents, receivables, accrued investment
income, accounts payable, cash collateral and
payables for security transactions approximate
their fair values due to the short-term nature of
these instruments. Consequently, such
instruments are not included in the above table.

(6) Reinsurance

We use reinsurance extensively, which has a
significant effect on our results of operations.
Reinsurance arrangements do not relieve us of
our primary obligation to the policyholder. Our
reinsurance contracts typically do not have a
fixed term. In general, the reinsurers’ ability to
terminate coverage for existing cessions is
limited to such circumstances as material breach
of contract or nonpayment of premiums by the

122

Freedom Lives Here™

ceding company. Our reinsurance contracts
generally contain provisions intended to provide
the ceding company with the ability to cede
future business on a basis consistent with
historical terms. However, either party may
terminate any of the contracts with respect to
the future business upon appropriate notice to
the other party. Generally, the reinsurance
contracts do not limit the overall amount of the
loss that can be incurred by the reinsurer.

Our policy is to limit the amount of life insurance
retained on the life of any one person to
$1 million. To limit our exposure with any one
reinsurer, we monitor the concentration of credit
risk we have with our reinsurance counterparties,
as well as their financial condition. No credit
losses related to our reinsurance counterparties
have been experienced by the Company during
the three-year period ended December 31, 2016.

Due from reinsurers represents ceded policy
reserve balances and ceded claim liabilities. The
amounts of ceded claim liabilities included in
due from reinsurers that we paid and which are
recoverable from those reinsurers were
$30.0 million and $25.5 million as of
December 31, 2016 and 2015, respectively.
Benefits and claims ceded to reinsurers for 2016,
2015, and 2014 were $1,205.6 million,
$1,178.6 million, and $1,191.9 million,
respectively.

In connection with our corporate reorganization
that included an initial public offering (“IPO”) of
our common stock by Citigroup, Inc.
(“Citigroup”), Primerica Life, Primerica Life
Canada and NBLIC entered into significant
coinsurance transactions (the “IPO coinsurance
agreements”) on March 30, 2010 with three
insurance companies then affiliated with
Citigroup (collectively, the “IPO coinsurers”).
Under the IPO coinsurance agreements, we
ceded between 80% and 90% of the risks and
rewards of our term life insurance policies in
force at year-end 2009. Because these
agreements were part of a business
reorganization among entities under common
control, they did not generate any deferred gain
or loss upon their execution. Concurrent with
signing these agreements, we transferred the

corresponding account balances in respect of
the coinsured policies along with the assets to
support the statutory liabilities assumed by the
IPO coinsurers. Each of the account balances
transferred were at book value with no gain or
loss recorded in net income.

Three of the IPO coinsurance agreements satisfy
U.S. GAAP risk transfer rules. Under these
agreements, we ceded between 80% and 90% of
our term life future policy benefit reserves, and
we transferred a corresponding amount of
assets to the IPO coinsurers. These transactions
did not impact our future policy benefit reserves.
As such, we have recorded an asset for the same
amount of risk transferred in due from
reinsurers. We also reduced DAC by a
corresponding amount, which reduces future
amortization expenses. In addition, we are
transferring between 80% and 90% of all future
premiums and benefits and claims associated
with these policies to the corresponding
reinsurance entities. We receive ongoing ceding
allowances, which are reflected as a reduction to
insurance expenses, to cover policy and claims
administration expenses as well as certain
corporate overhead charges under each of these
reinsurance contracts.

The largest of the IPO coinsurance agreements is
a coinsurance agreement originally between
Primerica Life and Prime Reinsurance Company
(“Prime Re”), an affiliate of Citigroup, where we
ceded to Prime Re 80% of our U.S. (except New
York) term life insurance business in force at
year-end 2009 (the “80% U.S. Coinsurance
Agreement”). Beginning on January 1, 2016,
Pecan Re Inc. (“Pecan Re”), an insurance company
owned by Swiss Re Life & Health America Inc.
(“Swiss Re”), assumed Prime Re’s obligations
under the 80% U.S. Coinsurance Agreement
through a novation agreement (the “Swiss Re
Novation Agreement”). In addition, the
counterparties to the related trust and capital
maintenance agreements that provide Primerica
Life with statutory reinsurance credit for the 80%
U.S. Coinsurance Agreement were replaced by
Pecan Re and Swiss Re, respectively. No material
terms and conditions of the 80% U.S. Coinsurance
Agreement and the related trust and capital
maintenance agreements were modified.

FINANCIAL STATEMENTS — NOTE 6

We have also ceded 80% of our Canadian term
life insurance business in force at year-end 2009
in an IPO coinsurance agreement (the “80%
Canada Coinsurance Agreement”) originally
between Primerica Life Canada and Financial
Reassurance Company 2010, Ltd. (“FRAC”). On
September 23, 2016, Munich American
Reassurance Company acquired FRAC from
Citigroup. As part of this transaction, Munich Re
of Malta, an insurance company owned by
Munich American Reassurance Company,
ultimately assumed FRAC’s obligations under the
80% Canada Coinsurance Agreement through a
novation agreement (the “Munich Re Novation
Agreement”). No material terms and conditions
of the 80% Canada Coinsurance Agreement
were modified.

In a fourth IPO coinsurance agreement, the 10%
Coinsurance Agreement, we have ceded to Prime
Re 10% of our U.S. (except New York) term life
insurance business in force at year-end 2009
subject to an experience refund provision. As the
10% Coinsurance Agreement includes an
experience refund provision, it does not satisfy
U.S. GAAP risk transfer rules. As a result, we have
accounted for this contract using deposit method
accounting and have recognized a deposit asset
in other assets on our consolidated balance
sheets for assets backing the economic reserves.
The deposit asset held in support of this
agreement was $202.4 million and $181.9 million
at December 31, 2016 and 2015, respectively. We
make contributions to the deposit asset during
the life of the agreement to fulfill our
responsibility of funding the economic reserve.
The market return on the deposit asset is
reflected in net investment income during the life
of the agreement. Prime Re is responsible for
ensuring that there are sufficient assets to meet
all statutory requirements. In exchange for our
consent to the Swiss Re Novation Agreement
discussed above, the finance charge on the
statutory reserves in excess of economic reserves
funded by Prime Re in support of the 10%
Coinsurance Agreement was reduced from 3.0%
to 2.0% beginning on July 1, 2015 and then from
2.0% to 0.5% beginning on January 1, 2016. This
finance charge is reflected in interest expense in
our consolidated statements of income.

Primerica 2016 Annual Report

123

FINANCIAL STATEMENTS — NOTE 6

The following table represents the Company’s in-force life insurance at December 31, 2016 and 2015:

Direct life insurance in force

Amounts ceded to other companies

Net life insurance in force

December 31, 2016 December 31, 2015

(Dollars in thousands)

$ 731,822,070

$ 696,939,187

(643,364,460)

(616,255,740)

$ 88,457,610

$ 80,683,447

Percentage of reinsured life insurance in force

88%

Due from reinsurers includes ceded reserve balances and ceded claim liabilities. Reinsurance receivable
and financial strength ratings by reinsurer were as follows:

Pecan Re Inc.(1) (2)

Prime Reinsurance Company(2)

SCOR Global Life Reinsurance Companies(3)

Munich Re of Malta(2) (5)

Financial Reassurance Company 2010, Ltd.(2)

Swiss Re Life & Health America Inc.(4)

American Health and Life Insurance Company

Munich American Reassurance Company

Korean Reinsurance Company

RGA Reinsurance Company

TOA Reinsurance Company

Hannover Life Reassurance Company

All other reinsurers

Due from reinsurers

December 31, 2016

December 31, 2015

Reinsurance
receivable

A.M. Best
rating

Reinsurance
receivable

A.M. Best
rating

$2,754,424

(In thousands)
NR

—

355,759

282,382

—

249,299

176,010

106,471

96,921

84,473

23,977

22,929

40,917

—

A+

—

2,692,721

362,195

—

270,306

254,461

176,790

101,466

91,605

81,217

22,242

20,650

36,975

$4,193,562

$4,110,628

—

A+

—

NR – not rated
(1) Pecan Re Inc. is a wholly owned subsidiary of Swiss Re Life & Health America Inc.
(2)

(3)

Includes balances ceded under coinsurance transactions of term life insurance policies that were in force as of December 31,
2009. Amounts shown are net of their share of the reinsurance receivable from other reinsurers.
Includes amounts ceded to Transamerica Reinsurance Companies and fully retroceded to SCOR Global Life Reinsurance
Companies.
Includes amounts ceded to Lincoln National Life Insurance and fully retroceded to Swiss Re Life & Health America Inc.

(4)
(5) This entity, which is rated AA- by S&P, ultimately assumed FRAC’s obligations under the 80% Canada Coinsurance

Agreement as a result of the Munich Re Novation Agreement.

Certain reinsurers with which we do business
receive group ratings. Individually, those
reinsurers are SCOR Global Life Americas
Reinsurance Company, SCOR Global Life U.S.A.
Reinsurance Company, SCOR Global Life Re

Insurance Company of Delaware, and SCOR
Global Life of Canada.

The IPO coinsurance agreements include
provisions to ensure that Primerica Life,
Primerica Life Canada and NBLIC receive full

124

Freedom Lives Here™

regulatory credit for the reinsurance treaties.
Under these agreements, the ceded business can
be recaptured with no fee in the event the IPO
reinsurers do not comply with the various
safeguard provisions in their respective IPO
coinsurance agreements. Pecan Re also has
entered into a capital maintenance agreement
requiring Swiss Re to provide additional funding,
if needed, at any point during the term of the
agreement up to the maximum as described in
the capital maintenance agreement.

(7) Deferred Policy Acquisition Costs

We defer incremental direct costs of successful
contract acquisitions that result directly from
and are essential to the contract transaction(s)
and that would not have been incurred had the
contract transaction(s) not occurred. The
amortization of DAC requires us to make certain
assumptions regarding persistency, expenses,
interest rates and claims. For DAC associated
with term life insurance policies, these
assumptions may not be modified, or unlocked,
unless recoverability testing deems them to be
inadequate. We update assumptions for new
business to reflect the most recent experience.
For DAC associated with Canadian segregated
funds, the assumptions used in determining
amortization expense are evaluated regularly
and are updated if actual experience or other
evidence suggests revisions to earlier estimates
are appropriate.

The balances and activity in DAC were as follows:

DAC balance, beginning of period

Capitalization

Amortization

Foreign exchange translation and other

FINANCIAL STATEMENTS — NOTE 7

DAC amortization for term life insurance policies
is affected by differences between the original
assumptions used for persistency, expenses,
interest rates and claims and actual results and
are recognized in the period in which the change
occurs. For policies underlying the Canadian
segregated funds, gross profits and the resulting
DAC amortization will vary with actual fund
returns, redemptions and expenses. Due to the
inherent uncertainties in making assumptions
about future events, materially different
experience from expected results could result in
a material increase or decrease of DAC
amortization in a particular period.

In determining DAC amortization expense for
term life insurance policies, we use interest rates
available at the time a policy is issued. For
policies issued in 2010 and after, we have been
using an increasing interest rate assumption
based on the historically low interest rate
environment. Interest rate assumptions at
December 31, 2016 and 2015 ranged from 3.5%
to 7.0%.

DAC is subject to recoverability testing annually
and when impairment indicators exist. The
recoverability of DAC is dependent on the future
profitability of the related policies, which, in turn,
is dependent principally upon mortality,
persistency, investment returns, and the expense
of administering the business, as well as upon
certain economic variables, such as inflation.

Year ended December 31,

2016

2015

2014

(In thousands)
$1,500,259 $1,351,180 $1,208,466

387,396

339,639

303,543

(180,582)

(157,727)

(144,378)

5,992

(32,833)

(16,451)

DAC balance, end of period

$1,713,065 $1,500,259 $1,351,180

Primerica 2016 Annual Report

125

FINANCIAL STATEMENTS — NOTE 8

(8) Separate Accounts

The Funds primarily consist of a series of
branded investment funds known as the Asset
Builder Funds, a registered retirement fund
known as the Strategic Retirement Income Fund
(“SRIF”), and a money market fund known as the
Cash Management Fund. The principal
investment objective of the Asset Builder Funds
is to achieve long-term growth while preserving
capital. The principal objective of the SRIF is to
provide a stream of investment income during
retirement plus the opportunity for modest
capital appreciation. The Asset Builder Funds
and the SRIF use diversified portfolios of
publicly-traded Canadian stocks, investment-
grade corporate bonds, Government of Canada
bonds, and foreign equity investments to
achieve their objectives. The Cash Management
Fund invests in government guaranteed short-
term bonds and short-term commercial and
bank papers, with the principal investment
objective being the provision of interest income
while maintaining liquidity and preserving
capital.

Under these contract offerings, benefit
payments to contract holders or their
designated beneficiaries are only due upon
death of the annuitant or upon reaching a
specific maturity date. Benefit payments are
based on the value of the contract holder’s units
in the portfolio at the payment date, but are
guaranteed to be no less than 75% of the
contract holder’s contribution, adjusted for
withdrawals. Account values are not guaranteed
for withdrawn units if contract holders make
withdrawals prior to the maturity dates. Maturity
dates for contracts investing in the Asset Builder
Funds and Cash Management Fund vary by
contract and range from 10 years from the
contract issuance date to December 31, 2070.

Contracts investing in the SRIF mature when the
policyholder reaches age 100, which is a
minimum of 20 years after issue. The SRIF is
designed to provide periodic retirement income
payments and as such, regular withdrawals,
subject to legislated minimums, are anticipated.
The cumulative effects of the periodic
withdrawals are expected to substantially reduce
both account and minimum guaranteed values
prior to maturity.

Both the asset and the liability for the separate
accounts reflect the net value of the underlying
assets in the portfolio as of the reporting date.
Primerica Life Canada’s exposure to losses under
the guarantee at the time of account maturity is
limited to contract holder accounts that have
declined in value more than 25%, adjusted for
withdrawals, since the contribution date prior to
maturity. Because maturity dates are of a long-
term nature, the likelihood guarantee payments
are required at any given point is very small.
Additionally, the portfolios consist of a very large
number of individual contracts, further
spreading the risk related to the guarantee
being exercised upon death. The length of the
contract terms provides significant opportunity
for the underlying portfolios to recover any
short-term losses prior to maturities or deaths of
the contract holders. Furthermore, the funds’
investment allocations are aligned with the
maturity risks of the related contracts and
include investments in Government Strip Bonds
and floating-rate notes.

We periodically assess the exposure related to
these contracts to determine whether any
additional liability should be recorded. As of
December 31, 2016 and 2015, an additional
liability for these contracts was deemed to be
unnecessary.

126

Freedom Lives Here™

The following table represents the fair value of assets supporting separate accounts by major
investment category:

FINANCIAL STATEMENTS — NOTE 9

Fixed-income securities

Equity securities

Cash and cash equivalents

Due to/from funds

Other

Total separate accounts assets

Year ended December 31,

2016

2015

(In thousands)
$ 999,435 $ 932,934

1,264,270

1,109,610

30,064

(5,941)

125

24,003

(2,817)

169

$2,287,953 $2,063,899

(9) Insurance Reserves

Changes in policy claims and other benefits payable were as follows:

Policy claims and other benefits payable, beginning of period

Year ended December 31,

2016

2015

2014

(In thousands)
$ 238,157 $ 245,829 $ 238,750

Less reinsured policy claims and other benefits payable

263,003

264,049

248,185

Net balance, beginning of period

Incurred related to current year

Incurred related to prior years

Total incurred

Claims paid related to current year, net of reinsured policy claims

received

Reinsured policy claims received related to prior years, net of

claims paid

Total paid

Sale of DBL

Foreign currency translation

Net balance, end of period

(24,846)

(18,220)

(9,435)

143,518

138,139

129,869

(522)

212

674

142,996

138,351

130,543

(203,015)

(167,621)

(155,357)

29,546

23,661

21,881

(173,469)

(143,960)

(133,476)

—

260

—

(1,017)

(5,047)

(805)

(55,059)

(24,846)

(18,220)

Add reinsured policy claims and other benefits payable

323,195

263,003

264,049

Balance, end of period

$ 268,136 $ 238,157 $ 245,829

Primerica 2016 Annual Report

127

FINANCIAL STATEMENTS — NOTE 10

See Note 1 (Description of Business, Basis of
Presentation, and Summary of Significant
Accounting Policies) for details regarding the
accounting for policyholder liabilities.

(10) Debt

Notes Payable. Notes payable consisted of
the following:

4.75% Senior Notes, due July 15, 2022

Unamortized issuance discount on notes payable

Total notes payable

At December 31, 2016, we had $375.0 million in
principal amount of publicly-traded, senior
unsecured notes (the “Senior Notes”). The Senior
Notes were issued in 2012 at a price of 99.843%
of the principal amount with an annual interest
rate of 4.75%, payable semi-annually in arrears
on January 15 and July 15, and are scheduled to
mature on July 15, 2022. We were in compliance
with the covenants of the Senior Notes at
December 31, 2016. No events of default
occurred on the Senior Notes during the year
ended December 31, 2016.

As unsecured senior obligations, the Senior
Notes rank equally in right of payment with all
existing and future unsubordinated
indebtedness and senior to all existing and
future subordinated indebtedness of the Parent
Company. The Senior Notes are structurally
subordinated in right of payment to all existing
and future liabilities of our subsidiaries. In
addition, the Senior Notes contain covenants
that restrict our ability to, among other
things, create or incur any indebtedness that is
secured by a lien on the capital stock of certain
of our subsidiaries, and merge, consolidate or
sell all or substantially all of our properties and
assets.

Surplus Note. As of December 31, 2016, the
principal amount outstanding on the Surplus
Note issued by Vidalia Re was approximately

December 31, 2016 December 31, 2015

(Dollars in thousands)

$375,000

(359)

(415)

$374,641

$374,585

$503.2 million, equal to the principal amount of
the LLC Note invested asset. The Surplus Note
was issued in exchange for the LLC Note, which
supports certain obligations of Vidalia Re for a
portion of the statutory accounting-based
reserves (commonly referred to as Regulation
XXX reserves) related to the Vidalia Re
Coinsurance Agreement. The principal amount
of the Surplus Note and the LLC Note will
fluctuate over time to coincide with the amount
of reserves contractually supported. Both the
LLC Note and the Surplus Note mature on
December 31, 2029 and bear interest at an
annual interest rate of 4.50%. Based on the
estimated reserves for ceded policies issued in
2011, 2012, 2013, and 2014, the maximum
principal amounts of the Surplus Note and the
LLC Note are expected to be approximately
$915.0 million each. This financing arrangement
is non-recourse to the Parent Company and
Primerica Life, meaning that neither of these
companies has guaranteed the Surplus Note or
is otherwise liable for reimbursement for any
payments triggered by the credit enhancement
feature underlying the LLC Note. The Parent
Company has agreed to support Vidalia Re’s
obligation to pay the credit enhancement fee
incurred on the LLC Note.

See Note 4 (Investments) for more information
on the LLC Note.

128

Freedom Lives Here™

(11) Income Taxes

Income tax expense (benefit) from continuing operations consists of the following:

FINANCIAL STATEMENTS — NOTE 11

Year ended December 31, 2016

Federal

Foreign

State and local

Total tax expense

Year ended December 31, 2015

Federal

Foreign

State and local

Total tax expense

Year ended December 31, 2014

Federal

Foreign

State and local

Total tax expense

Current

Deferred

Total

(In thousands)

$47,980 $50,758 $ 98,738

23,102

(4,710)

18,392

2,783

(1,732)

1,051

$73,865 $44,316 $118,181

$46,175 $36,723 $ 82,898

14,600

3,161

17,761

2,043

(1,592)

451

$62,818 $38,292 $101,110

$44,356 $31,590 $ 75,946

24,403

(4,826)

19,577

1,372

(1,007)

365

$70,131 $25,757 $ 95,888

Total income tax expense from continuing operations is different from the amount determined by
multiplying income from continuing operations before income taxes by the statutory federal tax rate of
35%. The reconciliation for such difference follows:

Year ended December 31,

2016

2015

2014

Amount

Percentage

Amount

Percentage

Amount

Percentage

(Dollars in thousands)

Computed tax expense

$118,450

35.0% $101,843

35.0% $96,503

35.0%

Difference between foreign

statutory rate and U.S. statutory
rate

Residual U.S. income taxes on

foreign earnings not
permanently reinvested

Other

(5,665)

(1.7)%

(5,531)

(1.9)%

(6,271)

(2.3)%

3,855

1,541

1.1%

0.6%

3,810

988

1.3%

0.3%

3,067

2,589

1.1%

1.0%

Total tax expense / effective rate

$118,181

35.0% $101,110

34.7% $95,888

34.8%

Primerica 2016 Annual Report

129

FINANCIAL STATEMENTS — NOTE 11

The main components of deferred income tax assets and liabilities were as follows:

Deferred tax assets:

Future policy benefit reserves and unpaid policy claims

$ 223,845 $ 210,164

December 31,

2016

2015

(In thousands)

Intangibles and tax goodwill

Future deductible liabilities

Share-based compensation

Other

Total deferred tax assets

Deferred tax liabilities:

Deferred policy acquisition costs

Investments

Unremitted earnings on foreign subsidiaries

Reinsurance deposit asset

Other

Total deferred tax liabilities

Net deferred tax liabilities

The majority of total deferred tax assets are
attributable to future policy benefit reserves and
unpaid policy claims, which represents the
difference between the financial statement
carrying value and tax basis for liabilities related
to future policy benefits. The tax basis for future
policy benefit reserves and unpaid policy claims
is actuarially determined in accordance with
guidelines set forth in the Internal Revenue
Code. The majority of total deferred tax liabilities
are attributable to DAC, which represents the
difference between the policy acquisition costs
capitalized for U.S. GAAP purposes and those
capitalized for tax purposes, as well as the
difference in the resulting amortization methods.

The Company has state net operating losses
resulting in a deferred tax asset of approximately
$10.6 million, which are available for use through
2034. The Company has no other material net
operating loss or credit carryforwards.

In assessing the realizability of deferred tax
assets, management considers whether it is

130

Freedom Lives Here™

36,261

19,831

15,592

11,528

39,977

17,741

15,698

8,962

$ 307,057 $ 292,542

$(366,144) $(319,250)

(16,769)

(2,700)

(6,893)

(2,297)

(70,852)

(63,661)

(11,864)

(11,978)

(468,329)

(404,079)

$(161,272) $(111,537)

more likely than not that some portion or all of
the deferred tax assets will not be realized.
Management considers the scheduled reversal
of deferred tax liabilities, projected future
taxable income, carryback and carryforward
periods, and tax planning strategies in making
this assessment. Management believes that it is
more likely than not that the results of future
operations will generate sufficient taxable
income to realize the deferred tax assets.
Therefore, there was no deferred tax asset
valuation allowance at December 31, 2016 or
2015.

The Company has direct ownership of a group of
controlled foreign corporations in Canada. We
have asserted a position of permanent
reinvestment for the difference in share basis
and certain operational earnings. Such
operational earnings if not permanently
reinvested would have generated a deferred tax
liability of approximately $11.0 million as of
December 31, 2016. For those operational
earnings for which we have not made a

permanent reinvestment assertion, we have
established a deferred tax liability to account for
the tax liability that will occur upon repatriation
of such earnings. As of December 31, 2016, we
had approximately $28.0 million in Canadian
operational earnings available to be repatriated
to the U.S. for which we have not made a
permanent reinvestment assertion.

The total amount of unrecognized benefits on
uncertain tax positions that, if recognized, would
affect our effective tax rate was approximately
$11.7 million and $9.3 million as of
December 31, 2016 and 2015, respectively. We
recognize interest expense related to

FINANCIAL STATEMENTS — NOTE 11

unrecognized tax benefits in tax expense net of
federal income tax. As of December 31, 2016
and 2015, the total amount of accrued interest
and penalties in the consolidated balance sheets
was approximately $2.1 million and $2.0 million,
respectively. Additionally, we recognized interest
related to unrecognized tax benefits in the
consolidated statements of income of less than
$0.2 million of expense in 2016, 2015, and 2014.

A reconciliation of the change in the
unrecognized income tax benefit for the years
ended December 31, 2016 and 2015 is as
follows:

Unrecognized tax benefits, beginning of period

Change in prior period unrecognized tax benefits

Change in current period unrecognized tax benefits

Reductions as a result of a lapse in statute of limitations

Unrecognized tax benefits, end of period

December 31,

2016

2015

(In thousands)
$13,939 $16,014

(146)

2,840

2,191

(1,976)

(4,120)

$14,811 $13,939

We have no penalties included in calculating our
provision for income taxes. There is no
significant change that is reasonably possible to
occur within twelve months of the reporting
date.

In connection with our corporate reorganization,
we entered into a tax separation agreement with
Citigroup, whereby Citigroup agreed to
indemnify the Company against any
consolidated, combined, affiliated, unitary or
similar federal, state or local income tax liability
related to any taxable period ending on or
before April 2010. As of December 31, 2016, the

Company had a Citigroup tax indemnification
asset of $0.7 million.

The major tax jurisdictions in which we operate
are the United States and Canada. We are
currently open to tax audit by the Internal
Revenue Service for the year ended
December 31, 2010 and for the years ended
December 31, 2013 and thereafter for federal
income tax purposes. We are currently open to
audit in Canada for tax years ended
December 31, 2012 and thereafter for federal
and provincial income tax purposes. For those
periods prior to the IPO, we are fully indemnified
by Citigroup.

Primerica 2016 Annual Report

131

FINANCIAL STATEMENTS — NOTE 12

(12) Stockholders’ Equity

A reconciliation of the number of shares of our common stock follows:

Year ended December 31,

2016

2015

2014

(In thousands)
48,297 52,169 54,834

148

516

574

502

(3,240)

(4,535)

(3,171)

45,721 48,297 52,169

method, we allocate earnings to common shares
and vested RSUs outstanding for the period.
Earnings attributable to unvested participating
securities, along with the corresponding share
counts, are excluded from EPS as reflected in our
consolidated statements of income.

In calculating basic EPS, we deduct any
dividends and undistributed earnings allocated
to unvested RSUs from net income and then
divide the result by the weighted-average
number of common shares and vested RSUs
outstanding for the period.

We determine the potential dilutive effect of PSUs
and stock options outstanding (“contingently-
issuable shares”) on EPS using the treasury-stock
method. Under this method, we determine the
proceeds that would be received from the issuance
of the contingently- issuable shares if the end of
the reporting period were the end of the
contingency period. The proceeds from the
contingently-issuable shares include: the remaining
unrecognized compensation expense of the
awards, the cash received for the exercise price on
stock options, and the resulting effect on the
income tax deduction from the vesting of PSUs
and the exercise of stock options. We then use the
average market price of our common shares
during the period the contingently-issuable shares
were outstanding to determine how many shares
we could repurchase with the proceeds raised
from the issuance of the contingently-issuable
shares. The net incremental share count issued
represents the potential dilutive securities. We then
reallocate earnings to common shares and vested
RSUs by incorporating the increased fully-diluted
share count to determine diluted EPS.

Common stock, beginning of period

Shares issued for stock options exercised

Shares of common stock issued upon lapse of RSUs

Common stock retired

Common stock, end of period

The above reconciliation excludes RSUs and PSUs,
which do not have voting rights. As sales
restrictions on RSUs lapse and PSUs are earned,
we issue common shares with voting rights. As of
December 31, 2016, we had a total of
approximately 1.1 million RSUs and 18 thousand
PSUs outstanding.

On August 13, 2015, our Board of Directors
authorized a share repurchase program for up to
$200.0 million of our outstanding common stock
(the “share repurchase program”) for purchases
through December 31, 2016. Under the share
repurchase program we repurchased 4,169,467
shares of our common stock in the open market
for an aggregate purchase price of
approximately $200.0 million through
December 31, 2016, fully exhausting the
program. On November 17, 2016, the Board of
Directors authorized a new share repurchase
program for up to $200.0 million of our
outstanding common shares for purchases
through June 30, 2018. Repurchases under this
new program began in January 2017.

(13) Earnings Per Share

The Company has outstanding common stock
and equity awards that consist of RSUs, PSUs
and stock options. The RSUs maintain
non-forfeitable dividend rights that result in
dividend payment obligations on a one-to-one
ratio with common shares for any future
dividend declarations.

Unvested RSUs are deemed participating
securities for purposes of calculating EPS as they
maintain dividend rights. We calculate EPS using
the two-class method. Under the two-class

132

Freedom Lives Here™

The calculation of basic and diluted EPS follows:

FINANCIAL STATEMENTS — NOTE 13

Basic EPS:

Numerator (continuing operations):

Income from continuing operations

Year ended December 31,

2016

2015

2014

(In thousands, except
per-share amounts)

$219,414 $189,871 $179,834

Income attributable to unvested participating securities

(1,835)

(1,572)

(2,038)

Income from continuing operations used in calculating basic EPS

$217,579 $188,299 $177,796

Numerator (discontinued operations):

Income from discontinued operations

$ — $ — $

1,578

Income attributable to unvested participating securities

—

(18)

Income from discontinued operations used in calculating basic EPS $ — $ — $

1,560

Denominator:

Weighted-average vested shares

Basic EPS from continuing operations

47,411

50,881

54,567

4.59 $

3.70 $

3.26

Basic EPS from discontinued operations

$ — $ — $

0.03

Diluted EPS:

Numerator (continuing operations):

Income from continuing operations

$219,414 $189,871 $179,834

Income attributable to unvested participating securities

(1,833)

(1,571)

(2,037)

Income from continuing operations used in calculating diluted EPS $217,581 $188,300 $177,797

Numerator (discontinued operations):

Income from discontinued operations

$ — $ — $

1,578

Income attributable to unvested participating securities

—

(18)

Income from discontinued operations used in calculating diluted

EPS

Denominator:

$ — $ — $

1,560

Weighted-average vested shares

47,411

50,881

54,567

Dilutive effect of incremental shares to be issued for equity awards

Weighted-average shares used in calculating diluted EPS

47,453

50,913

54,598

Diluted EPS from continuing operations

4.59 $

3.70 $

3.26

Diluted EPS from discontinued operations

$ — $ — $

0.03

Primerica 2016 Annual Report

133

FINANCIAL STATEMENTS — NOTE 14

(14) Share-Based Transactions

The Company has outstanding equity awards
under its Omnibus Incentive Plan (“OIP”). The
OIP provides for the issuance of equity awards,
including stock options, stock appreciation
rights, restricted stock, deferred stock, RSUs,
PSUs, unrestricted stock, as well as cash-based
awards. In addition to time-based vesting
requirements, awards granted under the OIP
also may be subject to specified performance
criteria. Since 2010, the Company has issued
equity awards to our management (officers and
other key employees), non-employees who serve
on our Board of Directors (“directors”), and sales
force leaders under the OIP. As of December 31,
2016, we had approximately 0.9 million shares
available for future grants under this plan.

Employee and Director Share-Based
Compensation. As of December 31, 2016, the
Company had outstanding RSUs, PSUs, and
stock options issued to our management
(officers and other key employees), as well as
RSUs issued to our directors, under the OIP.

Restricted Stock and RSUs.

• Prior to 2014, management of the

Company’s U.S. based subsidiaries received
restricted stock and management of the
Company’s Canadian subsidiaries received
RSUs. These awards have time-based
vesting requirements with equal and annual
graded vesting over approximately three
years subsequent to the grant date.

• Beginning in 2014, management (regardless
of geography) received RSUs that have

time-based vesting requirements with equal
and annual graded vesting over
approximately three years subsequent to
the grant date, but also provide for such
awards to vest upon voluntary termination
of employment by any employee who is
“retirement eligible” as of his or her
termination date. In order to be retirement
eligible, an employee must be at least 55
years old and his or her age plus years of
service with the Company must equal at
least 75. The “retirement eligible” provision
is expected to be included in all future
management grants.

• Beginning in 2014, directors received RSUs
that have time-based vesting requirements
with equal and annual graded vesting over
four quarters subsequent to the grant date.
These awards contain post-vesting sale
restrictions until the director no longer
serves on our Board.

•

In addition, certain directors elected to
defer their cash and/or equity retainers into
deferred RSUs, which vest immediately or, if
applicable, on the dates the RSUs would
have vested.

All of our outstanding management and director
RSU awards are eligible for dividend equivalents
regardless of vesting status.

In connection with our granting of management
and director restricted stock and RSU awards, we
recognized expense and tax benefit offsets as
follows:

Total management and director restricted stock and RSUs

Tax benefit associated with total management and director restricted

Year ended December 31,

2016

2015

2014

(In thousands)
$11,067 $13,839 $15,726

stock and RSU award expense

3,715

4,668

5,322

134

Freedom Lives Here™

The following table summarizes management and director restricted stock and RSU activity during the
years ended December 31, 2016, 2015, and 2014.

FINANCIAL STATEMENTS — NOTE 14

Unvested employee restricted stock and RSUs, December 31, 2013

Granted

Forfeited

Vested

Unvested employee restricted stock and RSUs, December 31, 2014

Granted

Forfeited

Vested

Unvested employee restricted stock and RSUs, December 31, 2015

Granted

Forfeited

Vested

Unvested employee restricted stock and RSUs, December 31, 2016

Weighted-average
measurement-date fair
value per share

(Shares in thousands)

722

279

(13)

(408)

580

246

(8)

(428)

390

225

—

(219)

396

$28.67

41.31

30.49

28.53

34.67

52.75

41.98

35.43

45.07

42.86

—

42.28

$45.37

As of December 31, 2016, total compensation
cost not yet recognized in our financial
statements related to management and director
RSU awards with time-based vesting conditions
yet to be reached was approximately
$4.3 million, and the weighted-average period
over which cost will be recognized was 0.7 years.

PSUs.

•

In 2016 the Company began issuing PSUs to
certain of its executive officers under the
OIP as part of their annual equity
compensation. A total of 18,385 PSUs were
granted on February 24, 2016 with a
measurement-date fair value of $41.88 per
unit.

• PSU awards include a performance target of

a specified average annual Return on
Adjusted Equity (“ROAE”) for the Company
over the three year performance period
from January 1, 2016 through December 31,
2018, as well as a threshold ROAE and an
ROAE at which the maximum number of
shares can be earned. The awards cliff vest
two months after the performance period

ends, on March 1, 2019. Depending on the
ROAE achieved within the specified range,
recipients may receive shares of common
stock equal to between 0% and 150% of the
number of PSUs granted. In addition, PSUs
accrue forfeitable dividend equivalents,
which are also paid out based on the
number of shares earned.

• PSU awards provide for vesting upon the
voluntary termination of employment by
any employee who is “retirement eligible” as
of his or her termination date. The number
of shares that will be earned for a
retirement-eligible employee is equal to the
amount calculated using the Company’s
actual average annual three-year ROAE
ending on the last day of the performance
period, even if that employee retires prior to
the completion of the performance period.

•

For the purposes of recognizing PSU related
expense, we are estimating a level of
performance that would result in a vesting
amount of approximately 100% of the PSUs
granted.

Primerica 2016 Annual Report

135

FINANCIAL STATEMENTS — NOTE 14

In connection with our granting of PSU awards, we recognized expense and tax benefit offsets as
follows:

Year ended December 31,

2016

2015

2014

Total management PSU awards

(In thousands)
n/a

n/a

$614

Tax benefit associated with total management PSU award expense

215

n/a

The following table summarizes PSU activity during the year ended December 31, 2016.

Unvested employee PSUs, December 31, 2015

Granted

Forfeited

Vested

Unvested employee PSUs, December 31, 2016

As of December 31, 2016, total unrecognized
compensation related to PSU awards was
approximately $0.2 million, and the weighted-
average period over which cost will be
recognized was 0.8 years.

Stock Options. Beginning in 2013, the Company
issued stock options to certain of its executive
officers under the OIP as part of their annual
equity compensation. Stock options are
generally granted with an exercise price equal to
the fair market value of our common stock on
the grant date, and they expire 10 years from
the date of grant. These options have time-
based restrictions with equal and annual graded

Expense recognized for stock option awards

Tax benefit recognized for stock option awards

Weighted-average
measurement-date fair
value per share

(Shares in thousands)

—

n/a

$41.88

—

41.88

vesting over a three-year period. Stock options
issued in 2014 and thereafter provide for such
awards to vest upon the voluntary termination
of employment by any employee who is
“retirement eligible” as of his or her termination
date. Upon retirement, employees have the
lesser of three years or the remaining option
term to exercise any vested options. We
currently do not anticipate issuing any new stock
options pursuant to our current employee
compensation program.

Compensation expense and related tax benefits
recognized for stock option awards were as
follows:

Year ended December 31,

2016

2015

2014

(In thousands)
$643

$1,803

$851

298

225

631

The fair value of each option was estimated on
the date of grant using the Black-Scholes model.
We derived expected volatility after considering
the historical volatility of our own stock, which
has been trading since April 1, 2010. The
Company’s per share dividend yield as of the
grant date was used as the input for the

expected dividend payout on the underlying
shares. The risk-free interest rate was based on
the U.S. Treasury yield for a term approximating
the expected life of the options at the time of
grant. The Company used a blended approach
to develop the expected term that considered
both actual exercise activity where available

136

Freedom Lives Here™

along with the simplified method where
historical information was not available. All
inputs into the Black-Scholes model were
estimates made at the time of grant. The actual
realized value of each option grant could
materially differ from these estimates, which

FINANCIAL STATEMENTS — NOTE 14

would have no impact on future reported
compensation expense.

The following assumptions were used to
estimate the fair value of stock options granted:

Expected volatility

Expected per share dividend yield

Risk-free interest rate

Expected term of options

Fair value per option

Year ended December 31,

2016

2015

2014

25.00% 24.00%

33.00%

1.62%

1.23%

1.20%

1.61%

1.17%

1.81%

5 years

6 years

8.21 $ 11.07

$ 12.54

The following table summarizes activity related to stock options outstanding and exercisable during the
years ended December 31, 2016, 2015, and 2014.

Outstanding at December 31, 2013

Granted

Exercised

Outstanding at December 31, 2014

Granted

Exercised

Outstanding at December 31, 2015

Granted

Exercised

Outstanding

Exercisable

Number
of
shares

Weighted
average
exercise
price

Number
of
shares

Weighted
average
exercise
price

134

116

(4)

246

(89)

203

(148)

(Shares in thousands)

$32.63

—

n/a

41.20

32.63

36.67

53.50

34.89

41.28

41.88

38.24

$32.63

36.38

Outstanding at December 31, 2016

145

44.75

53.50

Range of granted option exercise prices outstanding at December 31, 2016:

$41.20 (average term remaining — 7.1 years)

$53.50 (average term remaining — 8.2 years)

$41.88 (average term remaining — 9.2 years)

$41.20

—

n/a

53.50

41.88

$53.50

—

n/a

Primerica 2016 Annual Report

137

FINANCIAL STATEMENTS — NOTE 14

The aggregate intrinsic value represents the difference between the exercise price of our stock options
and the quoted closing price of our common stock as of December 31, 2016. A summary of the
intrinsic values of our stock options is as follows:

Aggregate intrinsic value of exercisable stock options

Aggregate intrinsic value of stock options expected to vest

Aggregate intrinsic value of stock options outstanding

December 31, 2016

(In thousands)

3,443

$3,538

The intrinsic value, tax benefit realized and value of shares withheld related to option exercise activity
are summarized as follows:

Intrinsic value of options exercised

Tax benefit realized from the options exercised

Value of issued shares withheld to satisfy option exercise price

Year ended December 31,

2016

2015
(In thousands)

2014

$2,755 $1,620

$ 53

964

567

5,509

2,966

142

As of December 31, 2016, there was
approximately $0.5 million of total unrecognized
compensation cost related to unvested options,
and the weighted-average period over which
cost will be recognized was approximately 0.7
years.

awards”). Agent equity awards are generally
granted as a part of quarterly contests for
successful life insurance policy acquisitions and
for sales of investment and savings products for
which the grant and the service period occur
within the same calendar quarter.

Non-Employee Share-Based
Compensation. Non-employee share-based
transactions relate to the granting of RSUs to
members of our sales force (“agent equity

The following table summarizes non-employee
RSU activity during the years ended
December 31, 2016, 2015, and 2014.

Unvested non-employee RSUs, December 31, 2013

Granted

Vested

Unvested non-employee RSUs, December 31, 2014

Granted

Vested

Unvested non-employee RSUs, December 31, 2015

Granted

Vested

Unvested non-employee RSUs, December 31, 2016

138

Freedom Lives Here™

Weighted-average
measurement-date fair
value per share

(Shares in thousands)

104

295

(326)

326

(326)

236

(267)

$36.44

45.08

41.23

49.98

42.79

44.39

42.83

48.45

44.82

61.55

Agent equity awards vest and are measured
using the fair market value at the conclusion of
the quarterly contest, which is the time that
performance is complete. However, agent equity
awards are subject to long-term sales
restrictions expiring over three years. Because
the sale restrictions extend up to three years
beyond the vesting period, the fair market value
of the awards incorporates an illiquidity discount
reflecting the risk associated with the post-
vesting restrictions. To quantify this discount for
each award, we use a series of put option
models with one-, two- and three-year tenors to

Expected volatility

Quarterly dividends expected

Risk-free interest rates

FINANCIAL STATEMENTS — NOTE 14

estimate a hypothetical cost of eliminating the
downside risk associated with the sale
restrictions.

The most significant assumptions in the Black-
Scholes models are the volatility assumptions.
We derive volatility assumptions primarily from
the historical volatility of our common stock
using terms comparable to the sale restriction
terms.

The following table presents the assumptions
used in valuing quarterly RSU grants to agents:

Year ended December 31,

2016

2015

2014

24% to 42% 18% to 35% 17% to 31%

$0.17 to $0.18 $

0.16 $

0.12

Less than 2% Less than 2% Less than 2%

To the extent that these awards are an
incremental direct cost of successful acquisitions
of life insurance policies that result directly from
and are essential to the policy acquisition(s) and
would not have been incurred had the policy
acquisition(s) not occurred, we defer and
amortize the fair value of the awards in the same

manner as other deferred policy acquisition
costs. All agent equity awards that are not
directly related to the acquisition of life
insurance policies are recognized as expense
over the requisite vesting period.

Details on the granting and valuation of these
awards follow:

Total quarterly non-employee RSUs granted

Measurement date per-share fair value of

awards

Illiquidity discounts

Year ended December 31,

2016

2015

2014

(Dollars in thousands, except
per-share amounts)
325,744

235,735

294,985

$39.87 to $61.50 $40.98 to $46.71 $42.96 to $49.98

10% to 11%

8% to 9%

Quarterly incentive awards expense recognized

currently

910 $

466 $

Quarterly incentive awards expense deferred

Tax benefit associated with incentive awards

10,517

3,674

13,423

4,454

453

13,598

4,500

As of December 31, 2016, all agent equity
awards were fully vested with the exception of
approximately 42,000 shares that vested on
January 1, 2017. As such, any related

compensation cost not recognized as either
expense or DAC in our financial statements
through December 31, 2016 is immaterial.

Primerica 2016 Annual Report

139

FINANCIAL STATEMENTS — NOTE 15

(15) Statutory Accounting and
Dividend Restrictions

U.S. Insurance Subsidiaries. Our two
underwriting U.S. insurance subsidiaries are
Primerica Life and NBLIC. Primerica Life wholly
owns Peach Re and Vidalia Re, and ceded to
each in separate coinsurance arrangements
certain level-premium term life insurance
policies.

Our U.S. insurance subsidiaries are required to
report their results of operations and financial
position to state authorities on the basis of
statutory accounting practices prescribed or
permitted by such authorities and the National
Association of Insurance Commissioners
(“NAIC”), which is a comprehensive basis of
accounting other than U.S. GAAP. Prescribed
statutory accounting practices include a variety
of publications of the NAIC, as well as state laws,
regulations and general administrative rules.
Permitted statutory accounting practices
encompass all accounting practices not so
prescribed. The Company’s principal life
insurance company, Primerica Life, prepares its
statutory financial statements on the basis of
accounting practices prescribed or permitted by
the NAIC and the Massachusetts Division of
Insurance (“Massachusetts DOI”) and includes
the statutory financial statements of its wholly
owned insurance subsidiaries, NBLIC, Peach Re,
and Vidalia Re. NBLIC’s statutory financial
statements are prepared on the basis of
accounting practices prescribed or permitted by
the NAIC and the New York State Department of
Financial Services, while the statutory financial
statements of Peach Re and Vidalia Re are
prepared on the basis of accounting practices
prescribed or permitted by the NAIC or the
Vermont Department of Financial Regulation
(“Vermont DOI”). Our U.S. insurance subsidiaries’
ability to pay dividends to their parent is subject
to and limited by the various laws and
regulations of their respective states. There are
no regulatory restrictions on the ability of the
Parent Company to pay dividends (other than
limitations under the Delaware General
Corporation Code that provide that dividends on

140

Freedom Lives Here™

common stock shall be declared by the Board of
Directors out of surplus or, if there is no surplus,
out of net profits for the fiscal year in which the
dividend is declared and/or the preceding prior
fiscal year).

Primerica Life’s statutory ordinary dividend
capacity is based on the greater of: (1) the
previous year’s statutory net gain from
operations (excluding pro rata distributions of
any class of the insurer’s own securities) or
(2) 10% of the previous year-end statutory
surplus (net of capital stock), which may only be
paid out of statutory unassigned surplus.
Dividends that, together with the amount of
other distributions or dividends made within the
preceding 12 months, exceed this statutory
limitation are referred to as extraordinary
dividends. Extraordinary dividends require
advance notice to the Massachusetts DOI,
Primerica Life’s primary state insurance
regulator, and are subject to potential
disapproval. For dividends exceeding these
thresholds, Primerica Life must provide notice to
the Massachusetts DOI and receive notice that
the Massachusetts DOI does not object to the
payment of such dividends.

Primerica Life’s statutory capital and surplus and
statutory unassigned surplus at December 31,
2016 and 2015 was as follows:

December 31,
2016

December 31,
2015

(In thousands)

Statutory capital and

surplus

$572,748

$560,936

Statutory unassigned

surplus

41,569

48,715

Primerica Life’s statutory net gain from
operations was approximately $392.4 million,
$436.3 million and $267.4 in 2016, 2015 and
2014, respectively. Primerica Life made no pro
rata distributions of any class of its own
securities during 2016. During 2016, Primerica
Life paid ordinary dividends of $94.7 million to
the Parent Company and had estimated ordinary
dividend capacity of approximately $41.6 million
as of January 1, 2017.

Primerica Life’s investment basis in NBLIC, Peach
Re, and Vidalia Re reflect their statutory capital
and surplus amounts recorded in accordance
with statutory accounting practices prescribed or
permitted by the NAIC and/or each subsidiary’s
state of domicile; New York and Vermont. Peach
Re was formed as a special-purpose financial
captive insurance company and, with the explicit
permission of the Vermont DOI, has included the
value of a letter of credit serving as collateral for
its policy reserves as an admitted asset in its
statutory capital and surplus. This permitted
accounting practice was critical to the
organization and operational plans of Peach Re
and explicitly included in the licensing order
issued by the Vermont DOI. The impact of this
permitted practice as of December 31, 2016 was
approximately $408.7 million on Peach Re’s
statutory capital and surplus. As of December 31,
2016, even if Peach Re had not been permitted
to include the letter of credit as an admitted
asset, Primerica Life would not have been below
the minimum statutory capital and surplus level
that triggers a regulatory action event. Vidalia Re
does not have any permitted accounting
practices that are not encompassed in
prescribed statutory accounting practices.

Canadian Insurance Subsidiary. Primerica
Life Canada is incorporated under the provisions
of the Canada Business Corporations Act and is
a domiciled Canadian Company subject to
regulation under the Insurance Companies Act
(Canada) by the Office of the Superintendent of
Financial Institutions in Canada (“OSFI”) and by
Provincial Superintendents of Financial
Institutions/Insurance in those provinces in
which Primerica Life Canada is licensed. The
statutory financial statements of Primerica Life
Canada reported to OSFI are prepared in
accordance with International Financial
Reporting Standards (“IFRS”).

Primerica Life Canada’s capacity to pay ordinary
dividends to its parent is limited by OSFI
regulations to the extent that its capital exceeds
projected capital requirements. OSFI requires

FINANCIAL STATEMENTS — NOTE 16

companies to set internal target levels of capital
sufficient to provide for all the risks of the
insurer, including risks specified in OSFI’s capital
guidelines. As of December 31, 2016 and 2015,
Primerica Life Canada’s statutory capital and
surplus satisfied regulatory requirements and
was approximately $286.7 million and
$252.6 million, respectively.

In Canada, dividends can be paid subject to the
paying insurance company continuing to have
adequate capital and forms of liquidity as
defined by OSFI following the dividend payment
and upon 15 days minimum notice to OSFI.
Primerica Life Canada’s dividend capacity at
January 1, 2017 is estimated to be approximately
$55.9 million, which is calculated based on its
projection of maintaining internal target capital
requirements under certain adverse capital
scenarios during each year over the next five
years. The actual amount of future dividends
that Primerica Life Canada will declare and pay is
also subject to the Company’s asserted position
of permanent reinvestment of certain
unremitted earnings discussed in Note 11
(Income Taxes).

(16) Commitments and Contingent
Liabilities

Commitments. We lease office equipment and
office and warehouse space under various
noncancellable operating lease agreements that
expire through June 2028. Total minimum rent
expense was $7.0 million, $7.2 million, and
$7.7 million for the years ended December 31,
2016, 2015, and 2014, respectively. We had no
contingent rent expense during 2016, 2015, or
2014. In March 2013, we began a 15-year lease
agreement for our corporate headquarters in
Duluth, Georgia with estimated minimum annual
rental payments ranging from approximately
$4.5 million at inception to approximately
$5.6 million in year 15.

Primerica 2016 Annual Report

141

FINANCIAL STATEMENTS — NOTE 17

As of December 31, 2016, the minimum
aggregate rental commitments for operating
leases were as follows:

2017

2018

2019

2020

2021

Thereafter

Total minimum rental
commitments for
operating leases

December 31, 2016

(In thousands)
$ 6,895

6,266

5,804

5,366

5,306

35,075

$64,712

As of December 31, 2016 and 2015, we had no
material capital leases.

Letter of Credit. Effective March 31, 2012,
Peach Re entered into a Credit Facility
Agreement with Deutsche Bank (the “Credit
Facility Agreement”) to support certain
obligations for a portion of the reserves
(commonly referred to as Regulation XXX
reserves) related to level premium term life
insurance policies ceded to Peach Re from
Primerica Life under the Peach Re Coinsurance
Agreement.

Under the Credit Facility Agreement, Deutsche
Bank issued a letter of credit in the initial
amount of $450.0 million with a term of
approximately 14 years (the “LOC”) for the
benefit of Primerica Life, the direct parent of
Peach Re. Subject to certain conditions, the
amount of the LOC periodically increased up to
a maximum amount of approximately
$507.0 million, which was reached in 2014.
Pursuant to the terms of the Credit Facility
Agreement, in the event amounts are drawn
under the LOC by Primerica Life, Peach Re will be
obligated, subject to certain limited conditions,
to reimburse Deutsche Bank for the amount of
any draws and interest thereon. Peach Re has

142

Freedom Lives Here™

collateralized its obligations to Deutsche Bank
by granting it a security interest in all of its
assets with the exception of amounts held in a
special account established to meet minimum
asset thresholds required by state regulatory
authorities. As of December 31, 2016, the
Company was in compliance with all financial
covenants under the Credit Facility Agreement.

Contingent Liabilities. The Company is
involved from time to time in legal disputes,
regulatory inquiries and arbitration proceedings
in the normal course of business. These disputes
are subject to uncertainties, including the large
and/or indeterminate amounts sought in certain
of these matters and the inherent
unpredictability of litigation. As such, the
Company is unable to estimate the possible loss
or range of loss that may result from these
matters unless otherwise indicated.

The Company is currently undergoing multi-
state treasurer unclaimed property audits by 30
jurisdictions focusing on the life insurance claims
paying practices of its subsidiaries, Primerica Life
and NBLIC. Other jurisdictions may pursue
similar audits and litigation. The potential
outcome of such actions is difficult to predict
but could subject the Company to adverse
consequences, including, but not limited to,
settlement payments, additional payments to
beneficiaries and additional escheatment of
funds deemed abandoned under state laws. At
this time, the Company cannot reasonably
estimate the likelihood or the impact of
additional costs or liabilities that could result
from the resolution of these matters.

(17) Benefit Plans

We sponsor a defined contribution plan for the
benefit of our employees. The expense
associated with this plan was approximately
$7.4 million, $6.7 million, and $6.5 million in
2016, 2015, and 2014, respectively.

FINANCIAL STATEMENTS — NOTE 18

(18) Other Comprehensive Income

The components of other comprehensive income (“OCI”), including the income tax expense or benefit
allocated to each component, were as follows:

Year Ended December 31,

2016

2015

2014

(In thousands)

Foreign currency translation adjustments:

Change in unrealized foreign currency translation gains

(losses) before income taxes

$ 6,689

$(41,929)

$(20,527)

Income tax expense (benefit) on unrealized foreign currency

translation gains (losses)

(447)

(234)

Change in unrealized foreign currency translation gains

(losses), net of income taxes

$ 6,608

$(41,482)

$(20,293)

Unrealized gain (losses) on available-for-sale securities:
Change in unrealized holding gains (losses) arising during

period before income taxes

$20,500

$(65,920)

$ 11,228

Income tax expense (benefit) on unrealized holding gains

(losses) arising during period

7,174

(23,074)

3,930

Change in unrealized holding gains (losses) on

available-for-sale securities arising during period, net of
income taxes

Reclassification from accumulated OCI to net income for
(gains) losses realized on available-for-sale securities

Income tax (expense) benefit on (gains) losses reclassified

13,326

(42,846)

7,298

(3,955)

1,596

794

from accumulated OCI to net income

(1,384)

560

278

Reclassification from accumulated OCI to net income for
(gains) losses realized on available-for-sale securities,
net of income taxes

Change in unrealized gains (losses) on

available-for-sale securities, net of income taxes and
reclassification adjustment

(2,571)

1,036

516

$10,755

$(41,810)

$ 7,814

Primerica 2016 Annual Report

143

FINANCIAL STATEMENTS — NOTE 19

(19) Unaudited Quarterly Financial Data

In management’s opinion, the following quarterly consolidated financial information fairly presents the
results of operations for such periods and is prepared on a basis consistent with our annual audited
consolidated financial statements. Financial information for the quarters presented was prepared on a
consolidated basis.

Direct premiums

Ceded premiums

Net premiums

Commissions and fees

Net investment income

Realized investment gains (losses),

including OTTI

Other, net

Total revenues

Total benefits and expenses

Income before income taxes

Income taxes

Quarter ended
March 31, 2016

Quarter ended
June 30, 2016

Quarter ended
September 30, 2016

Quarter ended
December 31, 2016

(In thousands, except per-share amounts)

$ 597,130

$ 612,189

$ 616,587

(395,333)

(406,683)

(399,676)

$ 618,362

(398,867)

201,797

128,821

21,238

(783)

11,527

362,600

292,388

70,212

25,036

205,506

136,902

20,389

3,440

12,757

378,994

287,114

91,880

32,554

216,911

134,282

19,399

(35)

13,069

383,626

295,189

88,437

30,400

219,495

141,681

17,999

1,465

13,224

393,864

306,800

87,064

30,191

Net income

$ 45,176

$ 59,326

$ 58,037

$ 56,873

Earnings per share:

Basic earnings per share

Diluted earnings per share

0.92

1.23

1.22

1.21

144

Freedom Lives Here™

FINANCIAL STATEMENTS — QUARTERLY DATA

Direct premiums

Ceded premiums

Net premiums

Commissions and fees

Net investment income

Realized investment gains (losses),

including OTTI

Other, net

Total revenues

Total benefits and expenses

Income before income taxes

Income taxes

Quarter ended
March 31, 2015

Quarter ended
June 30, 2015

Quarter ended
September 30, 2015

Quarter ended
December 31, 2015

(In thousands, except per-share amounts)

$ 577,458

$ 588,248

$ 587,882

(397,540)

(406,854)

(393,987)

$ 591,856

(396,838)

179,918

132,835

21,173

1,284

9,445

344,655

277,846

66,809

23,408

181,394

139,150

19,075

597

10,171

350,387

273,562

76,825

27,652

193,895

132,368

18,715

(259)

10,990

355,709

280,756

74,953

25,603

195,018

132,794

17,546

(3,360)

11,453

353,451

281,057

72,394

24,445

Net income

$ 43,401

$ 49,173

$ 49,350

$ 47,949

Earnings per share:

Basic earnings per share

Diluted earnings per share

0.82

0.94

0.98

0.97

Quarterly amounts may not agree in total to the corresponding annual amounts due to rounding.

Primerica 2016 Annual Report

145

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS

ITEM 9. CHANGES IN AND
DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

There have been no changes in, or
disagreements with, accountants on accounting
and financial disclosure matters during the years
ended December 31, 2016 and 2015.

ITEM 9A. CONTROLS AND
PROCEDURES.

DisclosureControlsandProcedures

The Company’s management, with the
participation of the Company’s Chief Executive
Officer and Chief Financial Officer, has evaluated
the effectiveness of the Company’s disclosure
controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) as of the end of the period
covered by this report (the “Evaluation Date”).
Based on such evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have
concluded that, as of the Evaluation Date, the
Company’s disclosure controls and procedures
are effective.

ChangesinInternalControlOver
FinancialReporting

There have not been any changes in the
Company’s internal control over financial
reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act)
during the fourth quarter of 2016 that have
materially affected, or are reasonably likely to
materially affect, the Company’s internal control
over financial reporting.

Management’sAnnualReportOn
InternalControlOverFinancial
Reporting

Our management is responsible for establishing
and maintaining adequate internal control over
financial reporting for our company. With the
participation of the Chief Executive Officer and
the Chief Financial Officer, our management
conducted an evaluation of the effectiveness of
our internal control over financial reporting
based on the framework and criteria established
in Internal Control — Integrated Framework
(2013), issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
Based on this evaluation, our management has
concluded that our internal control over financial
reporting was effective as of December 31, 2016.

Our independent auditor, KPMG LLP, an
independent registered public accounting firm,
has issued an attestation report on the
effectiveness of our internal control over
financial reporting. This attestation report
appears below.

146

Freedom Lives Here™

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Primerica, Inc.:

We have audited Primerica, Inc.’s (the Company) internal control over financial reporting as of
December 31, 2016, based on criteria established in Internal Control — Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Company’s management is responsible for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting,
included in the accompanying Management’s Annual Report on Internal Control over Financial
Reporting. Our responsibility is to express 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 Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained
in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. 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 reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

In our opinion, Primerica, Inc. maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2016, based on criteria established in Internal Control —
Integrated Framework (2013) issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Primerica, Inc. and subsidiaries as of
December 31, 2016 and 2015, and the related consolidated statements of income, comprehensive
income, stockholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2016, and our report dated February 27, 2017 expressed an unqualified opinion on those
consolidated financial statements.

/s/ KPMG LLP

Atlanta, Georgia
February 27, 2017

Primerica 2016 Annual Report

147

ITEM 9B. OTHER INFORMATION

ITEM 9B. OTHER INFORMATION.

Not applicable.

148

Freedom Lives Here™

PART III

Pursuant to General Instruction G to Form 10-K
and as described below, portions of Items 10
through 14 of this report are incorporated by
reference from the Company’s definitive Proxy
Statement relating to the Company’s 2017
Annual Meeting of Stockholders (the “Proxy
Statement”), which will be filed with the SEC
within 120 days of December 31, 2016, pursuant
to Regulation 14A under the Exchange Act. The
Report of the Audit Committee of our Board of
Directors and the Report of the Compensation
Committee of our Board of Directors to be
included in the Proxy Statement shall be
deemed to be furnished in this report and shall
not be incorporated by reference into any filing
under the Securities Act of 1933, as amended, as
a result of such furnishing.

Our website address is www.primerica.com. You
may obtain free electronic copies of our annual
reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, and all
amendments to those reports from the investors
section of our website. These reports are
available on our website as soon as reasonably
practicable after we electronically file them with
the SEC. These reports should also be available
through the SEC’s website at www.sec.gov.

We have adopted corporate governance
guidelines. The guidelines and the charters of
our board committees are available in the
corporate governance subsection of the investor
relations section of our website,
www.primerica.com, and are also available in
print upon written request to the Corporate
Secretary, Primerica, Inc., 1 Primerica Parkway,
Duluth, GA 30099.

ITEM 10. DIRECTORS, EXECUTIVE
OFFICERS AND CORPORATE
GOVERNANCE.

For a list of executive officers, see Part I Item X.
Executive Officers and Certain Significant
Employees of the Registrant herein.

We have adopted a written code of conduct that
applies to all directors, officers and employees,

including a separate code that applies to only
our principal executive officers and senior
financial officers in accordance with Section 406
of the Sarbanes-Oxley Act of 2002 and the rules
of the SEC promulgated thereunder. Our Code
of Conduct is available in the corporate
governance subsection of the investor relations
section of our website, www.primerica.com, and
is available in print upon written request to the
Corporate Secretary, Primerica, Inc., 1 Primerica
Parkway, Duluth, GA 30099. In the event that we
make changes in, or provide waivers from, the
provisions of the Code of Conduct that the SEC
requires us to disclose, we will disclose these
events in the corporate governance section of
our website.

Except for the information above and the
information set forth in Part I, Item X. Executive
Officers and Certain Significant Employees of the
Registrant, the information required by this item
will be contained under the following headings
in the Proxy Statement and is incorporated
herein by reference:

• Matters to be Voted on — Proposal 1:

Election of Eleven Directors;

• Governance — Director Independence;

• Governance — Code of Conduct;

• Board of Directors — Board Members;

• Board of Directors — Board Committees;

• Board of Directors — Other Director

Matters;

•

Stock Ownership — Section 16(a) Beneficial
Ownership Reporting Compliance;

Executive Compensation — Employment
Agreements with our Executive Team
Members;

• Audit Committee Matters — Audit

Committee Report; and

• Related Party Transactions — Transactions

with Citigroup.

Primerica 2016 Annual Report

149

ITEM 11. EXECUTIVE COMPENSATION

ITEM 11. EXECUTIVE
COMPENSATION.

The information required by this item will be
contained under the following headings in the
Proxy Statement and is incorporated herein by
reference:

• Board of Directors — Board Committees —

Compensation Committee;

• Board of Directors — Director

Compensation; and

•

Executive Compensation.

ITEM 12. SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED
STOCKHOLDER MATTERS.

Except for the information set forth in Part II,
Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer
Purchases of Equity Securities, the information
required by this item will be contained under the
following headings in the Proxy Statement and is
incorporated herein by reference:

•

Stock Ownership — Ownership of our
Common Stock.

ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.

The information required by this item will be
contained under the following headings in the
Proxy Statement and is incorporated herein by
reference:

•

Introductory paragraph to Governance;

• Governance — Director Independence;

• Board of Directors — Board Committees;

and

• Related Party Transactions.

ITEM 14. PRINCIPAL ACCOUNTING
FEES AND SERVICES.

The information required by this item will be
contained under the following headings in the
Proxy Statement and is incorporated herein by
reference:

• Matters to be Voted on — Proposal 5:

Ratification of the Appointment of KPMG
LLP as Our Independent Registered Public
Accounting Firm;

• Board of Directors — Board Committees —

Audit Committee; and

• Audit Matters — Fees and Services of

KPMG.

150

Freedom Lives Here™

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

Consolidated Balance Sheets as of December 31, 2016 and 2015

Consolidated Statements of Income for each of the years in the three-year period ended

December 31, 2016

Consolidated Statements of Comprehensive Income for each of the years in the three-year

period ended December 31, 2016

Consolidated Statements of Stockholders’ Equity for each of the years in the three-year period

ended December 31, 2016

Consolidated Statements of Cash Flows for each of the years in the three-year period ended

December 31, 2016

Notes to Consolidated Financial Statements

Unaudited Quarterly Financial Data

2. FINANCIAL STATEMENT SCHEDULES

Included in Part IV of this report:

Report of Independent Registered Public Accounting Firm on Financial Statement Schedules

Schedule I — Consolidated Summary of Investments — Other than Investments in Related

Parties as of December 31, 2016

Schedule II — Condensed Financial Information of Registrant as of December 31, 2016 and
2015, and for each of the years in the three-year period ended December 31,
2016

Schedule III — Supplementary Insurance Information as of December 31, 2016 and 2015, and

for each of the years in the three-year period ended December 31, 2016

Schedule IV — Reinsurance for each of the years in the three-year period ended December 31,

2016

3. EXHIBIT INDEX

144

158

159

160

166

168

An “Exhibit Index” has been filed as part of this Report beginning on the following page and is
incorporated 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 the
terms of these agreements and are not intended to provide any other factual or disclosure information
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 parties to the applicable

Primerica 2016 Annual Report

151

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

agreement. These representations and warranties have been made solely for the benefit 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 of
allocating 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 the

negotiation of the application agreement, which disclosures are not necessarily reflected in the
agreement;

• may apply standards of materiality in a way that is different from what may be viewed as material

to our investors; and

• were made only as of the date of the applicable agreement or such other date or dates as may be

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 of the
date they were made or at any other time, and should not be relied upon by investors.

Exhibit
Number

3.1

3.2

4.1

4.2

Description

Reference

Amended and Restated Certificate of
Incorporation of the Registrant.

Amended and Restated Bylaws of the
Registrant.

Indenture, dated July 16, 2012, among the
Registrant and Wells Fargo Bank, National
Association, as trustee.

Incorporated by reference to Exhibit 3.1 to
Primerica’s Current Report on Form 8-K
dated May 22, 2013 (Commission File
No. 001-34680).

Incorporated by reference to Exhibit 3.2 to
Primerica’s Current Report on Form 8-K
dated April 1, 2015 (Commission File
No. 001-34680).

Incorporated by reference to Exhibit 4.1 to
Primerica’s Current Report on Form 8-K
dated July 11, 2012 (Commission File
No. 001-34680).

First Supplemental Indenture, dated July 16,
2012, among the Registrant and Wells
Fargo Bank, National Association, as
trustee.

Incorporated by reference to Exhibit 4.2 to
Primerica’s Current Report on Form 8-K
dated July 11, 2012 (Commission File
No. 001-34680).

4.3

Form of 4.750% Senior Notes due 2022.

10.1

10.2

Tax Separation Agreement dated as of
March 30, 2010 by and between the
Registrant and Citigroup Inc.

Amended and Restated 80% Coinsurance
Agreement dated March 31, 2016 by and
between Primerica Life Insurance Company
and Pecan Re Inc.

152

Freedom Lives Here™

Incorporated by reference to Exhibit 4.3
(included in Exhibit 4.2 filed herewith) to
Primerica’s Current Report on Form 8-K
dated July 11, 2012 (Commission File
No. 001-34680).

Incorporated by reference to Exhibit 10.3 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Exhibit
Number

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Description

Reference

10% Coinsurance Agreement dated
March 31, 2010 by and between Primerica
Life Insurance Company and Prime
Reinsurance Company, Inc.

Incorporated by reference to Exhibit 10.6 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Amendment No. 1 dated as of October 5,
2015 to the 10% Coinsurance Agreement
dated March 31, 2010 by and between
Primerica Life Insurance Company and
Prime Reinsurance Company, Inc.

Amendment No. 2 dated as of January 25,
2016 to the 10% Coinsurance Agreement
dated March 31, 2010 by and between
Primerica Life Insurance Company and
Prime Reinsurance Company, Inc.

Amendment No. 3 dated as of March 31,
2016 to the 10% Coinsurance Agreement
dated March 31, 2010 by and between
Primerica Life Insurance Company and
Prime Reinsurance Company, Inc.

Amended and Restated 80% Coinsurance
Trust Agreement dated March 31, 2016
among Primerica Life Insurance Company,
Pecan Re Inc. and The Bank of New York
Mellon.

Amendment No. 1 dated as of March 30,
2016 to the 80% Coinsurance Trust
Agreement dated March 29, 2010 among
Prime Reinsurance Company, Inc. Primerica
Life Insurance Company, and The Bank of
New York Mellon.

Amendment No. 2 dated as of March 31,
2016 to the 80% Coinsurance Trust
Agreement dated March 29, 2010 among
Prime Reinsurance Company, Inc. Pecan Re
Inc., Primerica Life Insurance Company, and
The Bank of New York Mellon.

10% Coinsurance Economic Trust
Agreement dated March 29, 2010 among
Primerica Life Insurance Company, Prime
Reinsurance Company, Inc. and The Bank of
New York Mellon.

Amendment No. 1 dated as of March 31,
2016 to the 10% Coinsurance Economic
Trust Agreement dated March 29, 2010
among Prime Reinsurance Company, Inc.
Primerica Life Insurance Company, and The
Bank of New York Mellon.

Incorporated by reference to Exhibit 10.29
to Primerica’s Quarterly Report on Form
10-Q for the quarter ended September 30,
2015 (Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.1 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.2 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Incorporated by reference to Exhibit 10.3 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.4 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.8 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.5 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Primerica 2016 Annual Report

153

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit
Number

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

Description

Reference

10% Coinsurance Excess Trust Agreement
dated March 29, 2010 among Primerica Life
Insurance Company, Prime Reinsurance
Company, Inc. and The Bank of New York
Mellon.

Amendment No. 1 dated as of March 31,
2016 to the 10% Coinsurance Excess Trust
Agreement dated March 29, 2010 among
Prime Reinsurance Company, Inc. Primerica
Life Insurance Company, and The Bank of
New York Mellon.

Incorporated by reference to Exhibit 10.9 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.6 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Amended and Restated Capital
Maintenance Agreement dated as of
March 31, 2016 by and between Citigroup
Inc. and Prime Reinsurance Company, Inc.

Incorporated by reference to Exhibit 10.7 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Assignment, Transfer and Novation
Agreement dated as of March 31, 2016
among Prime Reinsurance Company, Inc.
Pecan Re Inc. and Primerica Life Insurance
Company.

90% Coinsurance Agreement dated
March 31, 2010 by and between National
Benefit Life Insurance Company and
American Health and Life Insurance
Company.

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.

Coinsurance Agreement dated March 31,
2010 by and between Primerica Life
Insurance Company of Canada and
Financial Reassurance Company 2010, Ltd.
(currently known as Munich Re Life
Insurance Company of Vermont).

Coinsurance Amending Agreement dated
as of December 31, 2011 among Primerica
Life Insurance Company and Financial
Reassurance Company 2010, Ltd.

Coinsurance Amending Agreement dated
as of October 20, 2016 among Primerica
Life Insurance Company, Munich Re Life
Insurance Company of Vermont (formerly
known as Financial Reassurance Company
2010, Ltd.) and Munich-American Holding
Corporation.

Incorporated by reference to Exhibit 10.9 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2016
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.11
to Primerica’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.12
to Primerica’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.13
to Primerica’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

154

Freedom Lives Here™

Exhibit
Number

10.21

10.22

10.23

10.26*

10.27*

10.28*

10.29*

10.30*

10.31*

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Description

Reference

Monitoring and Reporting Agreement
dated as of March 31, 2016 by and among
Primerica Life Insurance Company and
Pecan Re Inc.

Monitoring and Reporting Agreement
dated as of March 31, 2010 by and among
National Benefit Life Insurance Company
and American Health and Life Insurance
Company.

Monitoring and Reporting Agreement
dated as of March 31, 2010 by and among
Primerica Life Insurance Company of
Canada and Financial Reassurance
Company 2010 Ltd. (currently known as
Munich Re Life Insurance Company of
Vermont).

10.24*

Primerica, Inc. Stock Purchase Plan for
Agents and Employees.

10.25*

Primerica, Inc. Amended and Restated 2010
Omnibus Incentive Plan.

Form of Primerica, Inc. Performance Stock
Unit Award Agreement under the Primerica,
Inc. 2010 Omnibus Incentive Plan (2016
awards).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Incorporated by reference to Exhibit 10.42
to Primerica’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.43
to Primerica’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.45
to Primerica’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2010
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.22
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2011
(Commission File No. 001-34680).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Form of U.S. Employee Restricted Stock Unit
Restated Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2014 awards).

Incorporated by reference to Exhibit 10.1 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2014
(Commission File No. 001-34680).

Form of U.S. Employee Restricted Stock Unit
Restated Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2015 awards).

Incorporated by reference to Exhibit 10.19
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2015
(Commission File No. 001-34680).

Form of U.S. Employee Restricted Stock Unit
Award Agreement under the Primerica, Inc.
2010 Omnibus Incentive Plan (2016
awards).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Form of Restated Nonqualified Stock
Option Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2013 awards).

Incorporated by reference to Exhibit 10.2 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2014
(Commission File No. 001-34680).

Form of Restated Nonqualified Stock
Option Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2014 awards).

Incorporated by reference to Exhibit 10.2 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2014
(Commission File No. 001-34680).

Primerica 2016 Annual Report

155

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit
Number

10.32*

10.33*

10.34

10.35

10.36*

10.37*

10.38*

10.39*

10.40*

10.41*

10.42*

Description

Reference

Form of Restated Nonqualified Stock
Option Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2015 awards).

Incorporated by reference to Exhibit 10.22
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2015
(Commission File No. 001-34680).

Form of Restated Nonqualified Stock
Option Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2016 awards).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Form of Director Restricted Stock Unit
Award Agreement under the Primerica, Inc.
2010 Omnibus Incentive Plan (2013
awards).

Incorporated by reference to Exhibit 10.19
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2013
(Commission File No. 001-34680).

Form of Director Restricted Stock Unit
Award Agreement under the Primerica, Inc.
2010 Omnibus Incentive Plan (2014, 2015
and 2016 awards).

Incorporated by reference to Exhibit 10.24
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2015
(Commission File No. 001-34680).

Form of Indemnification Agreement for
Directors and Officers.

Incorporated by reference to Exhibit 10.48
to Primerica’s Registration Statement on
Form S-1 (File No. 333-162918).

Amended and Restated Employment
Agreement, dated as of January 2, 2015,
between the Registrant and Mr. Glenn J.
Williams.

Incorporated by reference to Exhibit 99.4 to
Primerica’s Current Report on Form 8-K
dated January 2, 2015 (Commission File
No. 001-34680).

Amended and Restated Employment
Agreement, dated as of January 2, 2015,
between the Registrant and Mr. Peter W.
Schneider.

Incorporated by reference to Exhibit 99.5 to
Primerica’s Current Report on Form 8-K
dated January 2, 2015 (Commission File
No. 001-34680).

Amendment dated as of November 17,
2015 to the Amended and Restated
Employment Agreement, dated as of
January 2, 2015, between the Registrant
and Mr. Peter W. Schneider.

Incorporated by reference to Exhibit 10.30
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2015
(Commission File No. 001-34680).

Amended and Restated Employment
Agreement, dated as of January 2, 2015,
between the Registrant and Ms. Alison S.
Rand.

Incorporated by reference to Exhibit 99.6 to
Primerica’s Current Report on Form 8-K
dated January 2, 2015 (Commission File
No. 001-34680).

Amendment dated as of November 17,
2015 to the Amended and Restated
Employment Agreement, dated as of
January 2, 2015, between the Registrant
and Ms. Alison S. Rand.

Incorporated by reference to Exhibit 10.32
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2015
(Commission File No. 001-34680).

Amended and Restated Employment
Agreement, dated as of January 2, 2015,
between the Registrant and Mr. Gregory C.
Pitts.

Incorporated by reference to Exhibit 99.7 to
Primerica’s Current Report on Form 8-K
dated January 2, 2015 (Commission File
No. 001-34680).

156

Freedom Lives Here™

Exhibit
Number

10.43*

10.44

12.1

21.1

23.1

31.1

31.2

32.1

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Description

Reference

Amendment dated as of November 17,
2015 to the Amended and Restated
Employment Agreement, dated as of
January 2, 2015, between the Registrant
and Mr. Gregory C. Pitts.

Incorporated by reference to Exhibit 10.34
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2015
(Commission File No. 001-34680).

Nonemployee Directors’ Deferred
Compensation Plan, effective as of
January 1, 2011, adopted on November 10,
2010.

Incorporated by reference to Exhibit 10.31
to Annual Report on Form 10-K for the year
ended December 31, 2010 (Commission File
No. 001-34680).

Statement re Computation of Ratios.

Subsidiaries of the Registrant.

Consent of KPMG LLP.

Rule 13a-14(a)/15d-14(a) Certification,
executed by Glenn J. Williams, Chief
Executive Officer.

Rule 13a-14(a)/15d-14(a) Certification,
executed by Alison S. Rand, Executive Vice
President and Chief Financial Officer.

Certifications required by Rule 13a-14(b) or
Rule 15d-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States
Code (18 U.S.C. 1350), executed by Glenn J.
Williams, Chief Executive Officer, and Alison
S. Rand, Executive Vice President and Chief
Financial Officer.

Filed with the Securities and Exchange
Commission as part of this Annual Report.

101.INS

XBRL Instance Document(1)

101.SCH

XBRL Taxonomy Extension Schema

Filed with the Securities and Exchange
Commission as part of this Annual Report.

101.CAL

101.DEF

XBRL Taxonomy Extension Calculation
Linkbase

Filed with the Securities and Exchange
Commission as part of this Annual Report.

XBRL Taxonomy Extension Definition
Linkbase

Filed with the Securities and Exchange
Commission as part of this Annual Report.

101.LAB

XBRL Taxonomy Extension Label Linkbase

Filed with the Securities and Exchange
Commission as part of this Annual Report.

101.PRE

XBRL Taxonomy Extension Presentation
Linkbase

Filed with the Securities and Exchange
Commission as part of this Annual Report.

*
(1)

Identifies a management contract or compensatory plan or arrangement.
Includes the following materials contained in this Annual Report on Form 10-K for the year ended December 31, 2016,
formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of
Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows,
and (vi) Notes to Consolidated Financial Statements.

Primerica 2016 Annual Report

157

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON
FINANCIAL STATEMENT SCHEDULES

The Board of Directors and Stockholders of Primerica, Inc.:

Under date of February 27, 2017, we reported on the consolidated balance sheets of Primerica, Inc. and
subsidiaries (the Company) as of December 31, 2016 and 2015, and the related consolidated
statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the
years in the three-year period ended December 31, 2016. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related financial statement
schedules included herein. These financial statement schedules are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statement schedules based
on our audits.

In our opinion, such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all material respects, the
information set forth therein.

/s/ KPMG LLP

Atlanta, Georgia
February 27, 2017

158

Freedom Lives Here™

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule I
Consolidated Summary of Investments — Other Than Investments in
Related Parties

PRIMERICA, INC.

Type of Investment

Fixed maturities:

Bonds(1):

December 31, 2016

Amortized cost or
cost

Fair value

(In thousands)

Amount at which
shown in the
balance sheet

United States Government and government

agencies and authorities

States, municipalities and political subdivisions

Foreign governments

Public utilities

Convertibles and bonds with warrants attached

All other corporate bonds(2)

Certificates of deposit

Redeemable preferred stocks

$ 100,123

$ 105,087

43,951

126,274

—

2,597

45,724

131,306

—

2,863

45,724

131,306

—

2,863

1,968,909

2,024,042

2,014,257

—

3,442

—

3,814

—

3,814

Total fixed maturities

2,245,296

2,312,836

2,303,051

Equity securities:

Common stocks:
Public utilities

Banks, trusts and insurance companies

Industrial, miscellaneous and all other

Nonredeemable preferred stocks

Total equity securities

Mortgage loans on real estate

Real estate

Policy loans

Other long-term investments

Short-term investments

4,909

6,808

7,834

17,267

36,818

—

8,312

9,027

9,837

17,718

44,894

—

8,312

9,027

9,837

17,718

44,894

—

30,916

—

Total investments

$2,313,030

$2,388,646

$2,378,861

(1) Mortgage-and asset-backed securities are included in the investment types listed based on the entity-type that issued these

(2)

securities.
The amount shown on the balance sheet does not match the amortized cost or cost or fair value for “All other corporate
bonds” due to our held-to-maturity security, which is carried at cost on the balance sheet and all other fixed maturities are
carried at fair value.

See the accompanying report of independent registered public accounting firm.

Primerica 2016 Annual Report

159

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule II
Condensed Financial Information of Registrant

PRIMERICA, INC. (Parent Only)
Condensed Balance Sheets

Assets

Investments:

Fixed-maturity securities available-for-sale, at fair value (amortized cost:

($52,537 in 2016 and $71,419 in 2015)

Trading securities, at fair value (cost: $51 in 2016 and $0 in 2015)

Total investments
Cash and cash equivalents
Due from affiliates*
Other receivables
Income taxes
Investment in subsidiaries*

Total assets

Liabilities and Stockholders’ Equity

Liabilities:

Notes payable
Current income tax payable
Deferred income taxes
Due to affiliates*
Interest payable
Other liabilities
Commitments and contingent liabilities (see Note E)

Total liabilities

Stockholders’ equity:

Common stock ($0.01 par value; authorized 500,000 in 2016 and 2015;
issued and outstanding 45,721 shares in 2016 and 48,297 shares in
2015)

Paid-in capital
Retained earnings
Accumulated other comprehensive income, net of income tax

Total stockholders’ equity

Total liabilities and stockholders’ equity

Eliminated in consolidation.

December 31,

2016

2015

(In thousands)

53,953 $
51

71,437
—

54,004
13,992
—
393
10,640
1,534,774

71,437
15,029
133
659
8,904
1,442,608

1,613,803

1,538,770

372,919
2,552
5,399
1,108
8,214
2,237

372,552
2,311
3,695
3,912
8,214
2,314

392,429

392,998

457
52,468
1,138,851
29,598

483
180,250
952,804
12,235

1,221,374

1,145,772

$1,613,803 $1,538,770

See the accompanying notes to condensed financial statements.
See the accompanying report of independent registered public accounting firm.

160

Freedom Lives Here™

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule II
Condensed Financial Information of Registrant

PRIMERICA, INC. (Parent Only)
Condensed Statements of Income

Revenues:

Dividends from subsidiaries*

Net investment income

Realized investment gains (losses), including other-than-

temporary impairment losses

Total revenues

Expenses:

Interest expense

Other operating expenses

Total expenses

Income before income taxes

Income taxes

Income (loss) before equity in undistributed earnings of

subsidiaries

Equity in undistributed earnings of subsidiaries*

Net income

Eliminated in consolidation.

Year ended December 31,

2016

2015

2014

(In thousands)

$189,582 $149,187 $ 319,740

1,695

2,224

1,010

1,088

(1,762)

(1,574)

192,365

149,649

319,176

18,180

12,433

18,177

10,603

18,174

8,667

30,613

28,780

26,841

161,752

120,869

292,335

(7,019)

(7,124)

(7,540)

168,771

127,993

299,875

50,643

61,878

(118,463)

$219,414 $189,871 $ 181,412

See the accompanying notes to condensed financial statements.
See the accompanying report of independent registered public accounting firm.

Primerica 2016 Annual Report

161

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule II
Condensed Financial Information of Registrant

PRIMERICA, INC. (Parent Only)
Condensed Statements of Comprehensive Income

Net income

Other comprehensive income (loss) before income taxes:

Unrealized investment gains (losses):

Equity in unrealized holding gains (losses) on investment

Year ended December 31,

2016

2015

2014

(In thousands)
$219,414 $189,871 $181,412

securities held by subsidiaries

9,846

(41,171)

7,296

Change in unrealized holding gains/(losses) on investment

securities

2,487

(2,745)

(778)

Reclassification adjustment for realized investment (gains) losses

included in net income

(1,088)

1,762

1,574

Foreign currency translation adjustments:

Equity in unrealized foreign currency translation gains of

subsidiaries

6,689

(41,929)

(20,527)

Total other comprehensive income (loss) before income taxes

17,934

(84,083)

(12,435)

Income tax expense (benefit) related to items of other

comprehensive income (loss)

571

(791)

Other comprehensive income (loss), net of income taxes

17,363

(83,292)

(12,479)

Total comprehensive income

$236,777 $106,579 $168,933

See the accompanying notes to condensed financial statements.
See the accompanying report of independent registered public accounting firm.

162

Freedom Lives Here™

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule II
Condensed Financial Information of Registrant

PRIMERICA, INC. (Parent Only)
Condensed Statements of Cash Flows

Cash flows from operating activities:

Net income

Year ended December 31,

2016

2015

2014

(In thousands)

$ 219,414

$ 189,871

$ 181,412

Adjustments to reconcile net income to cash provided by (used in) operating activities:

Equity in undistributed earnings of subsidiaries* (1)

(89,820)

(74,814)

(70,472)

Deferred tax provision

Change in income taxes

Realized investment (gains) losses, including other-than-temporary impairments

Accretion and amortization of investments

Depreciation and amortization

Share-based compensation

Change in due to/from affiliates*

Trading securities sold, matured, or called (acquired), net

Change in other operating assets and liabilities, net

Net cash provided by (used in) operating activities

Cash flows from investing activities:

Available-for-sale investments sold, matured or called:

Fixed maturity securities — sold

Fixed-maturity securities — matured or called

Available-for-sale investments acquired:

Fixed-maturity securities(1)

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Dividends paid

Common stock repurchased

Excess tax benefit on share-based compensation

Tax withholdings on share-based compensation

Cash proceeds from stock options exercised

Net cash provided by (used) in financing activities

Change in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosures of cash flow information:
Interest paid

167

(528)

(1,088)

(118)

—

1,227

(2,671)

(51)

555

(1,434)

(138)

1,762

808

1,031

2,689

—

3,135

(1,778)

979

1,574

203

998

—

(550)

127,087

122,916

113,387

29,759

79,914

71,019

100,900

45,312

53,512

(50,408)

(72,131)

(10,290)

59,265

99,788

88,534

(33,367)

(32,807)

(26,512)

(150,057)

(200,084)

(147,922)

163

(3,970)

(7,615)

(6,377)

—

136

—

(187,389)

(240,309)

(180,648)

(1,037)

(17,605)

15,029

32,634

21,273

11,361

$ 13,992

$ 15,029

$ 32,634

$ 17,813

Eliminated in consolidation.

*
(1) Does not include $39.2 million, $12.9 million, and $188.9 million of fixed-maturity securities transferred from subsidiaries in

the form of noncash dividends for the years ended December 31, 2016, 2015, and 2014, respectively.

See the accompanying notes to condensed financial statements.
See the accompanying report of independent registered public accounting firm.

Primerica 2016 Annual Report

163

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule II
Condensed Financial Information of Registrant

PRIMERICA, INC. (Parent Only)
Notes to Condensed Financial Statements

(A) Description of Business

Primerica, Inc. (“we”, “us” or the “Company”) is a
holding company with our primary asset being
the capital stock of our wholly owned operating
subsidiaries, and our primary liability being
$375.0 million in principal amount of senior
unsecured notes issued in a public offering in
2012 (the “Senior Notes”). Our subsidiaries assist
clients in meeting their needs for term life
insurance, which our insurance subsidiaries
underwrite, and mutual funds, annuities,
managed investments and other financial
products, which our subsidiaries distribute
primarily on behalf of third parties. Our primary
subsidiaries include the following entities:
Primerica Financial Services, Inc., a general
agency and marketing company; Primerica Life
Insurance Company (“Primerica Life”), our
principal life insurance company; Primerica
Financial Services (Canada) Ltd., a holding
company for our Canadian operations, which
includes Primerica Life Insurance Company of
Canada and PFSL Investments Canada Ltd.; and
PFS Investments Inc., an investment products
company and broker-dealer. Primerica Life,
domiciled in Massachusetts, owns National
Benefit Life Insurance Company, a New York
insurance company. In addition, we established
Peach Re, Inc. (“Peach Re”) and Vidalia Re, Inc.
(“Vidalia Re”) as special purpose financial captive
insurance companies domiciled in Vermont and
wholly owned subsidiaries of Primerica Life.

(B) Basis of Presentation

These condensed financial statements reflect the
results of operations, financial position and cash
flows for the Company. We prepare our financial
statements in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”).
These principles are established primarily by the
Financial Accounting Standards Board (“FASB”).
The preparation of financial statements in

164

Freedom Lives Here™

conformity with U.S. GAAP requires us to make
estimates and assumptions that affect financial
statement balances, revenues and expenses and
cash flows, as well as the disclosure of
contingent assets and liabilities. Management
considers available facts and knowledge of
existing circumstances when establishing the
estimates included in our financial statements.

The most significant item that involves a greater
degree of accounting estimates subject to
change in the future is the determination of our
investments in subsidiaries. Estimates for this
and other items are subject to change and are
reassessed by management in accordance with
U.S. GAAP. Actual results could differ from those
estimates.

The accompanying condensed financial
statements should be read in conjunction with
the consolidated financial statements and notes
thereto of Primerica, Inc. and subsidiaries
included in Part II, Item 8 of this report.

In July 2012, we issued the Senior Notes in a
public offering at a price of 99.843% of the
principal amount with an annual interest rate of
4.75%, payable semi-annually in arrears on
January 15 and July 15. The Senior Notes mature
on July 15, 2022.

things, create or incur any indebtedness that is
secured by a lien on the capital stock of certain
of our subsidiaries, and merge, consolidate or
sell all or substantially all of our properties and
assets.

We were in compliance with the covenants of
the Senior Notes at December 31, 2016. No
events of default(s) occurred on the Senior
Notes during the year ended December 31,
2016.

(D) Dividends

For the years ended December 31, 2016, 2015,
and 2014, the Company received dividends from
our non-life insurance subsidiaries of
approximately $72.5 million, $86.5 million, and
$71.3 million, respectively. For the years ended
December 31, 2016, 2015, and 2014, the
Company received dividends from our life
insurance subsidiaries of approximately
$117.0 million, $62.6 million, and $248.4 million,
respectively.

(E) Commitments and Contingent
Liabilities

Peach Re and Vidalia Re have each entered into
separate coinsurance agreements with Primerica
Life whereby Primerica Life has ceded certain
level-premium term life insurance policies to
Peach Re and Vidalia Re. In conjunction with

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

these coinsurance agreements, we have capital
maintenance agreements with both Peach Re
and Vidalia Re. Each capital maintenance
agreement requires us at times to make capital
contributions to Peach Re and Vidalia Re to
insure that their regulatory accounts, as defined
in the coinsurance agreements with Primerica
Life will not be less than $20.0 million for each
financial captive insurance company. For Peach
Re, the regulatory account will only be used to
satisfy obligations under its coinsurance
agreement after all other available assets have
been used, including a letter of credit issued by
Deutsche Bank for the benefit of Primerica Life.
For Vidalia Re, the regulatory account will only
be used to satisfy obligations under its
coinsurance agreement after all other available
assets have been used including its
held-to-maturity security ultimately guaranteed
by Hannover Life Reassurance Company of
America.

The Company is involved from time to time in
legal disputes, regulatory inquiries and
arbitration proceedings in the normal course of
business. These disputes are subject to
uncertainties, including large and/or
indeterminate amounts sought in certain of
these matters and the inherent unpredictability
of litigation. As such, the Company is unable to
estimate the possible loss or range of loss that
may result from these matters.

Primerica 2016 Annual Report

165

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule III
Supplementary Insurance Information

PRIMERICA, INC.

December 31, 2016
Term Life Insurance

Deferred policy
acquisition costs

Future
policy
benefits

Unearned
premiums

Other policy
benefits and
claims payable

Separate
account
liabilities

(In thousands)

$1,628,957

$5,464,851

$ —

$258,774

—

Investment and Savings Products

56,933

—

2,287,829

Corporate and Other Distributed

Products

Total

December 31, 2015
Term Life Insurance

27,175

209,039

527

9,362

124

$1,713,065

$5,673,890

$527

$268,136

$2,287,953

$1,420,727

$5,221,188

$ —

$227,384

—

Investment and Savings Products

51,501

—

2,063,731

Corporate and Other Distributed

Products

Total

28,031

210,523

628

10,773

168

$1,500,259

$5,431,711

$628

$238,157

$2,063,899

166

Freedom Lives Here™

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Premium
revenue

Net
investment
income

Benefits
and claims

Amortization of
deferred policy
acquisition
costs

Other
operating
expenses

Premiums
written

(In thousands)

Year ended December 31, 2016
Term Life Insurance

$822,207 $ 7,634 $350,640

$172,812

$129,569

$ —

Investment and Savings Products

—

6,148

374,117 —

Corporate and Other Distributed

Products

Total

Year ended December 31, 2015
Term Life Insurance

21,502

71,391

17,015

1,622

129,566

844

$843,709 $79,025 $367,655

$180,582

$633,252

$844

$728,181 $ 5,985 $322,232

$147,980

$120,538

$ —

Investment and Savings Products

—

7,951

367,301 —

Corporate and Other Distributed

Products

Total

Year ended December 31, 2014
Term Life Insurance

22,043

70,524

17,083

1,796

128,340

908

$750,224 $76,509 $339,315

$157,727

$616,179

$908

$660,684 $ 4,444 $295,332

$133,331

$111,619

$ —

Investment and Savings Products

—

8,734

356,351 —

Corporate and Other Distributed

Products

Total

23,831

82,029

16,085

2,313

137,607

934

$684,515 $86,473 $311,417

$144,378

$605,577

$934

See the accompanying report of independent registered public accounting firm.

Primerica 2016 Annual Report

167

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule IV
Reinsurance

PRIMERICA, INC.

Year ended December 31, 2016

Gross amount

Ceded to other
companies

Assumed
from other
companies

Net amount

Percentage
of amount
assumed
to net

(Dollars in thousands)

Life insurance in force

$731,822,070 $643,364,460

$—

$88,457,610

— %

Premiums:
Life insurance

2,442,968 $

1,600,125

Accident and health insurance

1,300

434

Total premiums

2,444,268 $

1,600,559

$—

—

$—

842,843

866

843,709

— %

Year ended December 31, 2015

Gross amount

Ceded to other
companies

Assumed
from other
companies

Net amount

Percentage
of amount
assumed
to net

(Dollars in thousands)

Life insurance in force

$696,939,187 $616,255,740

$—

$80,683,447

— %

Premiums:
Life insurance

2,343,877 $

1,594,606

Accident and health insurance

1,567

614

Total premiums

2,345,444 $

1,595,220

$—

—

$—

749,271

953

750,224

— %

Year ended December 31, 2014

Gross amount

Ceded to other
companies

Assumed
from other
companies

Net amount

Percentage
of amount
assumed
to net

(Dollars in thousands)

Life insurance in force

$686,267,407 $607,218,906

$—

$79,048,501

— %

Premiums:
Life insurance

2,299,355 $

1,615,847

Accident and health insurance

1,977

970

Total premiums

2,301,332 $

1,616,817

$—

—

$—

683,508

1,007

684,515

— %

See the accompanying report of independent registered public accounting firm.

168

Freedom Lives Here™

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Primerica, Inc.

By:

/s/ Alison S. Rand
Alison S. Rand
Executive Vice President and
Chief Financial Officer

February 27, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ D. Richard Williams
D. Richard Williams

/s/ John A. Addison, Jr.
John A. Addison, Jr.

/s/ Glenn J. Williams
Glenn J. Williams

/s/ Alison S. Rand
Alison S. Rand

/s/ Joel M. Babbit
Joel M. Babbit

/s/ P. George Benson
P. George Benson

/s/ Gary L. Crittenden
Gary L. Crittenden

/s/ Cynthia N. Day
Cynthia N. Day

/s/ Mark Mason
Mark Mason

/s/ Robert F. McCullough
Robert F. McCullough

/s/ Beatriz R. Perez
Beatriz R. Perez

/s/ Barbara A. Yastine
Barbara A. Yastine

Chairman of the Board

February 27, 2017

Chairman of Primerica
Distribution and Director

February 27, 2017

Chief Executive Officer
(Principal Executive Officer)

February 27, 2017

Executive Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)

Director

February 27, 2017

Primerica 2016 Annual Report

169

S T O C K H O L D E R I N F O R M A T I O N

Annual Meeting
The annual meeting of
stockholders of Primerica, Inc.
will be held on Wednesday,
May 17, 2017 at 10:00 a.m.

Primerica TV Theater
1 Primerica Parkway
Duluth, GA 30099

Corporate Office
Primerica, Inc.
1 Primerica Parkway
Duluth, GA 30099
(770) 381-1000
www.primerica.com

Investor Contact
Investor Relations
Primerica, Inc.
1 Primerica Parkway
Duluth, GA 30099
(866) 694-0420
investorrelations@primerica.com

Media Contact
Corporate Communications
Primerica, Inc.
1 Primerica Parkway
Duluth, GA 30099
(866) 694-0420
mediarelations@primerica.com

Form 10-K
Copies of the Company’s Annual
Report on Form 10-K for the fiscal
year ended December 31, 2016,
including financial statements,
are available on the Company’s
Investor Relations website at
http://investors.primerica.com
or by written request to:

Board of Directors

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

Joel M. Babbit
CEO, Narrative Content Group, LLC

Investor Relations
Primerica, Inc.
1 Primerica Parkway
Duluth, GA 30099

Common Stock
Trading Symbol: PRI
New York Stock Exchange

Transfers Agent and Registrar
Computershare, Inc.
250 Royall Street
Canton, MA 02021

Written Requests:
Computershare, Inc.
P.O. Box 30170
College Station, Texas 77842-3170

Toll Free Number: 1-866-517-2488
(US, Canada, Puerto Rico)
Phone Number: 1-781-575-4223
(non-US)

Shareholder website:
www.computershare.com/investor

P. George Benson
Former President,
The College of Charleston

Gary L. Crittenden
Private Investor

Cynthia N. Day
President and CEO, Citizens
Bancshares Corporation

Mark Mason
CFO, Institutional Clients Group,
Citigroup Inc.

Robert F. McCullough
Private Investor

Beatriz R. Perez
Chief Sustainability Officer
and SVP of Partnerships,
Innovation, Licensing and Retail,
The Coca Cola Company

D. Richard Williams
Chairman of the Board and
Former Co-CEO, Primerica, Inc.

Glenn J. Williams
CEO, Primerica, Inc.

Barbara A. Yastine
Private Investor and
Independent Director