Primerica Annual Report 2019

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FY2019 Annual Report · Primerica

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FINANCIAL HIGHLIGHTS
(in millions, except per share amounts)

GAAP

Total Revenues

Net Income

Stockholders’ Equity

Diluted Earnings Per Share1

Book Value Per Share1

Common Shares Repurchased

End of Period Share Count2

Cash Dividends Declared Per Common Share

Market Price Per Share at Year End

Total Stockholder Return

Debt-to-Capital Ratio3

2019

2018

Change5

$2,052.5

$1,899.8

$366.4

$324.1

$1,652.5

$1,461.5

$8.62

$7.33

$40.10

$34.23

$57.7

44.0

2.0

42.7

$1.00

$97.71

-3%

1.9

41.2

$1.36

$130.56

35%

18.5%

20.4%

13%

18%

17%

22%

-4%

-8%

-3%

36%

34%

Term Life Insurance Net Premium

$1,166.5

$1,067.1

End of Period Client Asset Values ($ in billions)

$70.5

Weighted Average Shares Used to Calculate Diluted EPS

42.3

Operating4

2019

2018

Change5

Adjusted Operating Revenues

$2,042.2

$1,903.6

Adjusted Net Operating Income

$358.4

$324.3

Diluted Adjusted Operating Income Per Share1

$8.43

$7.33

Adjusted Net Operating Income Return
on Adjusted Stockholders’ Equity

23.5%

22.8%

11%

15%

1. Percent change in per share calculations is calculated prior to rounding per share amounts
2. Share count reflects outstanding common shares and excludes restricted stock units (RSUs)
3. Debt-to-capital is that of the parent company only. Capital in the debt-to-capital ratio includes stockholders’ equity and

the note payable

4. A reconciliation of GAAP results to operating results can be found on our website at http://investors.primerica.com
5. Certain variances are noted as “nm” to indicate not meaningful

ON THE COVER: Diana Macias, of Miami, FL, uses her role as a Primerica representative to impact families throughout her
community. “We believe in working with clients in order to help them take control of their money and invest for the future,”
says Diana. “With a bit of education and guidance, anyone can completely change their narrative. All they need is someone
who will show them the way.”

Dear Fellow Stockholders,

For more than four decades, Primerica has
remained committed to a single purpose: creating
financially independent families. Through more
than 130,000 independent licensed insurance
representatives, we provide valuable financial
education to our clients about the need to protect
income, reduce debt and invest for the future.
Every day, our representatives help middle-income
families make informed decisions while offering
simple, easy-to-understand solutions to address
their financial challenges.

In 2019, we issued $94 billion of term life
insurance. Because of our efforts, our clients
are better prepared to ease the financial burden
associated with the loss of a loved one. In addition,
we helped clients invest a record $7.5 billion, enabling
them to enjoy a more financially-secure retirement.

The power of our distribution model is rooted

in our people and the personal connections
each representative brings to Primerica. Their
accomplishments made this one of our most
successful years ever. Annual and year-end
highlights include:

• 130,522 licensed insurance representatives and

25,747 securities licensed representatives

• 5,503 Regional Vice Presidents leading teams of

representatives across North America
• $808 billion of term face amount in force
• $71 billion of client assets under management
• Record total revenues of $2.1 billion and diluted

earnings per share of $8.62

• 79% of operating earnings returned to stockholders
• Return on adjusted equity of 23.5%

CAGR
24%

$8.62

CAGR
18%

$366

$3.70

$190

2015

2019

2015

2019

DILUTED EARNINGS PER SHARENET INCOME($ IN MILLIONS)Our People

Our success is driven by the leadership, size
and diversity of the sales force. The unique nature
of our business model allows us to successfully
serve families with annual incomes between
$30,000 and $100,000, a segment of the market
that often falls below the income minimums
required by many traditional financial institutions.
Our business model appeals to individuals
with an entrepreneurial spirit who are looking
for the opportunity to build a financial services
business and create a legacy for their families.
While reasons to build a Primerica business are
as diverse as the sales force, one common thread
runs across the organization: the desire to help
clients reach their financial goals.

Primerica’s expansive network of

representatives plays a key role in educating
clients and helping them understand their
family’s financial needs. Most of our business
is done in the client’s home, often while sitting
at the kitchen table where representatives
provide individualized advice. This one-on-one,
personalized approach is an important factor in
building trust and providing the client with the
motivation necessary to take action to address
their family’s financial situation.

Our Home Office employees also play an
integral role in our success. We are proud of the
collaborative environment we create: one where
our teammates are collectively driven by the goal
of helping our clients achieve financial security.
We take our responsibility to foster a workplace
that provides equal
opportunities seriously and
our efforts were reinforced
by Primerica’s inclusion
in the 2020 Bloomberg
Gender Equality Index.

IN 2019, PRIMERICA HELD ITS BIENNIAL INTERNATIONAL
CONVENTION AT THE GEORGIA WORLD CONGRESS
CENTER AND THE MERCEDES-BENZ STADIUM, LOCATED
IN ATLANTA, GA. FOR FOUR DAYS, TENS OF THOUSANDS
OF REPRESENTATIVES AND THEIR TEAMMATES
GATHERED TO CELEBRATE THEIR ACCOMPLISHMENTS
AND SET THE COURSE FOR THE REST OF ANOTHER
INCREDIBLE YEAR. ATTENDEES WERE GIVEN THE
CHANCE TO NETWORK WITH ONE ANOTHER, ATTEND
WORKSHOPS AND SEMINARS AND LEARN FROM THE
COMPANY’S MOST DYNAMIC LEADERS.

SIZE OF LIFE INSURANCE-LICENSED
SALES FORCE (END OF PERIOD)

2
2
5
0
3
1

2015

2016

2017

2018

2019

106,710116,827126,121130,736Our Products

As the second largest issuer of term life

insurance coverage in North America, we are
uniquely positioned to serve middle-income
families. According to a recent research report by
Swiss Re Institute,* the protection gap (the amount
of life insurance needed, but not in force) in the
United States could be as large as $25 trillion, half
of which is estimated to be in the middle market.

We serve our clients with a suite of
straightforward products that are easy to
understand, yet sophisticated enough to meet our
clients’ protection and investment needs. We firmly
believe term life insurance offers the best income
protection for our market because it provides a
high level of coverage at a low price. Our term
life insurance products offer simple, affordable
protection and give our clients the control and
flexibility to invest in professionally managed

investment products outside of their life insurance
policies. We also offer a variety of investment
products, including mutual funds, annuities and
managed accounts. Demand for investment
products remains at record levels and solutions
such as our Lifetime Investment Platform adds to
our clients’ success.

We continue to explore other products that
meet the needs of our clients and complement
our current solutions. In 2019, we launched a pilot
program in the U.S. to evaluate the demand and
viability of a mortgage business, which would add
a solution for our clients seeking to refinance or
consolidate debt. Based on the results of our pilot,
we are embarking on a multi-year expansion plan.

*Swiss Re Institute: “Life Underinsurance in the U.S.: Bridging
the USD 25 Trillion Mortality Protection Gap,” September 21, 2018

0
4
9
$

5
.
7
$

TERM LIFE INSURANCE FACE AMOUNT ($ IN BILLIONS)INVESTMENT & SAVINGS PRODUCTS SALES AND CLIENT ASSET VALUES($ IN BILLIONS)Annual IssuedIn Force At Year EndAnnual SalesClient Asset ValuesAt Year End2015201620172018201920152016201720182019$79.1$693.2$47.4$808.3$70.5$5.9$89.9$5.6$95.6$6.2$95.2$7.0A COUPLE OF YEARS AGO, JOSH AND LINDSEY KEB, OF
GEORGETOWN, TX, BOTH IN THEIR LATE 20S, KNEW IT WAS
TIME TO GET SERIOUS ABOUT SAVING AND INVESTING
FOR THEIR TWO DAUGHTERS’ COLLEGE EDUCATIONS
AND FOR THEIR OWN RETIREMENT. “WE ALSO HAD
SOME DEBT WE WANTED TO TACKLE,” SAYS JOSH. THE
COUPLE’S PRIMERICA REPRESENTATIVES, MARIO AND
TAZ HINOJOSA, SHOWED JOSH AND LINDSEY, THROUGH A
PERSONALIZED PRIMERICA FINANCIAL NEEDS ANALYSIS
(FNA), THE MOST EFFICIENT WAY TO PAY DOWN THAT
DEBT AND START AN ACHIEVABLE SAVING AND INVESTING
PROGRAM DESIGNED TO REACH THEIR GOALS.

Our Future

In 2019, we continued to execute against our
strategic plan, positioning us to capture today’s
opportunities, while preparing for the future. We
believe that our success will be amplified if we
combine human interaction with cutting-edge
tools, which led us to increase our budget for
technology. This investment will help us make
better use of emerging technologies to enhance
the client experience and enable the sales force
to be more productive. Our ultimate goal is to
maximize convenience, simplicity and value for our
representatives and for our clients.

Our strategic plan also includes initiatives
to add industry-leading innovations to our life
insurance products, expand our investment
business and improve our entrepreneurial
opportunities for the sales force.

MICHAEL AND ALEESHA BLANCHARD, OF STONE
MOUNTAIN, GA, WERE IMPRESSED WHEN THEIR
PRIMERICA REPRESENTATIVES, CHRISSY AND
LORENZO COOPER, SHOWED THEM THE RESULTS OF
THEIR PRIMERICA FINANCIAL NEEDS ANALYSIS (FNA).
“THE FNA REALLY CRYSTALIZED WHAT WE NEEDED
TO DO AND SHOWED A CLEAR PATH FORWARD,”
SAYS ALEESHA. “EVERYTHING PRIMERICA DOES
IS EVERYTHING WE’VE BEEN WANTING TO DO FOR
YEARS.” NOW PRIMERICA REPS THEMSELVES, THE
COUPLE IS OUT TO HELP MORE FAMILIES CHART
THEIR OWN SUCCESSFUL FINANCIAL COURSE.

Creating Value for Our Stakeholders

61%

We are steadfast in our commitment to build a better Primerica: one that can withstand the challenges of the marketplace and bring value to our clients and their families. By adopting sound, sustainable business practices, we are building trust and enhancing our reputation for “doing the right thing.” We understand that the success of our clients is interconnected with the success of the sales force and our employees. We strive every day to ensure that these stakeholders have the products, processes and leadership necessary to succeed.Our financial results reflect our growth. In 2019, term life insurance adjusted direct premiums increased nearly 11%, helping push total revenues above $2 billion for the first time in company history. Net income was $366 million, increasing 13% compared to 2018 and diluted EPS was $8.62, or 18% higher than the prior year.In 2019, Primerica’s total stockholder return was 35% compared to 29% for the S&P 500 Insurance Index. In total, we returned 79% of our adjusted operating earnings to stockholders through a combination of share repurchases and quarterly dividends.We look forward to 2020 with increasing excitement. It marks not only the beginning of a new year, but also a new decade, filled with opportunities to continue serving our clients. It also marks our tenth anniversary as a publicly traded company, which we view as an important milestone noteworthy of celebration.Thank you for your continued commitment to Primerica.Glenn J. WilliamsChief Executive OfficerTOTAL STOCKHOLDER RETURN VS. THE S&P 500 INSURANCE INDEX154%S&P 500 Insurance IndexPrimerica, Inc.201520142016201720182019JORGE AND LAURA QUIJADA, BOTH BUSY TECH
INDUSTRY WORKERS IN ORO VALLEY, AZ, WERE
SAVING AND INVESTING, AND HAD SOME LIFE
INSURANCE COVERAGE – BUT NEEDED SOMEONE
TO HELP THEM DEVELOP A COHERENT INVESTMENT
STRATEGY. PRIMERICA REPRESENTATIVES ERNEST
AND IVONNE ESCARCEGA HELPED THEM DO JUST
THAT. JORGE AND LAURA ARE NOW ALSO PRIMERICA
REPS SO THEY CAN “PAY IT FORWARD.”

Board of Directors

LEFT TO RIGHT:

John A. Addison, Jr., Gary L. Crittenden, Beatriz R. Perez, Joel M. Babbit, Glenn J. Williams, P. George Benson, Cynthia N. Day, C. Saxby Chambliss,
Barbara A. Yastine, D. Richard Williams, Sanjeev Dheer

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

For the fiscal year ended December 31, 2019
OR

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

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)

Title of each class
Common Stock

Registrant’s telephone number, including area code: (770) 381-1000
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
PRI
Securities registered pursuant to Section 12(g) of the Act: None

Name of each exchange on which registered
New York Stock Exchange

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 every Interactive Data File required to be submitted
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 such files). È Yes ‘ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È
Non-accelerated filer ‘

‘
Accelerated filer
Smaller reporting company ‘
Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ‘
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, 2019, was
$5,014,399,156. The number of shares of the registrant’s Common Stock outstanding at January 31, 2020, with $0.01 par value,
was 41,108,029.

Documents Incorporated By Reference
Certain information contained in the Proxy Statement for the Company’s Annual Meeting of Stockholders to be held on
May 13, 2020 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.

Information About Our Executive Officers and Certain Significant Employees

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

147

149

150

151

152

153

170

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 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 sales representatives is overturned;

the Company’s or the 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 2019 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 the 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 adopted by the Securities and
Exchange Commission and those proposed
or adopted by state legislatures or
regulators or Canadian securities regulators,
are imposed on us or the 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, or
our policies and procedures for compliance
with federal or state regulations governing
standards of care, were deemed inadequate,
it could have a material adverse effect on
our business, financial condition and results
of operations;

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;

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;

•

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;

licensing requirements will impact the size
of the mortgage loan sales force;

• our loan business is subject to various

federal and state laws, changes in which
could affect the cost or our ability to
distribute our products and could materially
adversely affect our business, financial
condition and results of operations;

•

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 what type of impairment
exists when the fair value of our
available-for-sale invested assets is below
amortized cost are both 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 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;

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

•

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;

• 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 2019 Annual Report

iii

PART I

ITEM 1. BUSINESS.

Primerica, Inc. (“Primerica”, “we”, “us” or the
“Parent Company”) is a leading provider of
financial products to middle-income households
in the United States and Canada with 130,522
licensed sales representatives as of December 31,
2019. These independent licensed representatives
(“sales representatives” or “sales force”) 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 over five
million lives and had approximately 2.5 million
client investment accounts as of December 31,
2019. Our business 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 tools to gain financial independence. Our
distribution model is designed to:

• Address our clients’ financial needs.

Licensed

sales representatives primarily use our
proprietary financial needs analysis tool
(“FNA”) and an educational approach to
demonstrate how our product offerings can
provide financial protection for our clients’
families, save for their retirement and other
needs, and manage their debt. Typically, our
clients are the friends, family members and
personal acquaintances of 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 sales representatives to supplement
their income by starting their own

independent businesses without leaving
their current jobs. Our unique compensation
structure, technology, sales support and
back-office processing are designed to
enable sales representatives to successfully
grow their independent businesses.

We believe there is significant opportunity to
meet the increasing array of financial services
needs of our clients. We intend to leverage the
sales force to meet such client needs, which will
drive long-term value for all of our stakeholders.
Our strategy is organized across four primary
areas:

• Maximizing sales force growth, leadership

and productivity;

• Broadening and strengthening our

protection product portfolio;

• Providing offerings that enhance our

Investment and Savings Products (“ISP”)
business; and

• Developing digital capabilities to deepen

our client relationships.

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

Primerica 2019 Annual Report

ITEM 1. BUSINESS

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 to cede between 80% and 90% of
the risks and rewards of our term life insurance
policies that were in force at year-end 2009. We
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 2018 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:

sales in 2018, 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 find it challenging to save for
retirement and other personal 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, sales
representatives are well equipped to help
clients develop long-term savings plans to
address their financial needs.

• Many need to reduce their 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
distribution model to address this
preference in a cost-effective manner
through a network of more than 130,000 life
insurance-licensed sales representatives.

OurDistributionModel

• 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 9.6 million policy

Our distribution model, which is a modified
traditional insurance agency model, is designed
to reach and serve middle-income consumers
efficiently through the sales force. Key

characteristics of our unique distribution model
include:

•

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

Low barriers to entry: 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. Sales representatives are able to
start their independent businesses for low
fees, for which they receive technological
support, pre-licensing training and access to
licensing examination preparation programs.
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 sales representatives begin selling
products on a part-time basis, which enables
them to hold jobs while exploring an
entrepreneurial business opportunity with us.

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
for 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.

ITEM 1. BUSINESS

Innovative compensation structure: We
have developed an innovative system for
compensating the sales force that is
contingent upon product sales. We advance
to sales representatives a significant portion
of their insurance 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 sales representatives
with immediate cash flow to offset their
costs. In addition, monthly production
bonuses are paid to RVPs whose sales
organizations meet certain sales levels. With
compensation tied to sales activity, our
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 RVPs with quarterly stock awards
based largely on sales production (“agent
equity awards”), which aligns their interests
with those of our stockholders.

Large, dynamic sales force: Members of the
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 the
sales force and the active recruiting of new
sales representatives, the 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 sales representatives to
achieve financial success, we seek to create
a culture that inspires and rewards sales
representatives for their personal successes
and those of their sales organizations
through sales force recognition events and
contests. We also use Intranet-streamed

Primerica 2019 Annual Report

ITEM 1. BUSINESS

broadcasts and local, regional and national
meetings to inform and teach sales
representatives, as well as facilitate
camaraderie and the exchange of ideas
across the sales force. These initiatives
encourage and empower sales
representatives to develop their own
successful sales organizations.

•

Building and maintaining

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

StructureandScalabilityoftheSales
Force

New sales representatives are recruited by
existing sales representatives. When these new
recruits become sales representatives, 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. We encourage
sales representatives to bring in new recruits to
build their own sales organizations, enabling the
Company to reach more middle-income families.

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, training and certain recognition events for
the sales representatives in their respective sales
organizations. Field offices provide a location for
sales 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 house more than one field
office. At December 31, 2019, approximately
5,300 field offices in 3,000 locations were
managed by sales representatives that served as
RVPs.

RVPs play a major role in training, motivating
and monitoring their sales force organization.

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 RVPs
to reduce the time spent on administrative
responsibilities associated with their sales
organizations so they can devote more time to
the sales, recruiting and training activities that
drive our growth. We believe that our tools and
technology, coupled with our sales
compensation programs, further incentivize sales
representatives to become RVPs.

Both the structure of the 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
RVPs, we are able to grow the Company without
incurring proportionate overhead expenses.

RecruitmentofSalesRepresentatives

The recruitment of sales representatives is
undertaken by existing sales representatives,
who identify prospects and share with them the
benefits of associating with our organization.
Sales representatives showcase the Company as
dynamic and capable of improving the 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 businesses by becoming sales
representatives. At the conclusion of each
opportunity meeting, prospective recruits are

asked to complete an application and pay a
nominal 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
recruits do not get licensed, often due to the

Number of new recruits

ITEM 1. BUSINESS

time commitment required to obtain licenses
and various regulatory and licensing hurdles.
Many 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 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 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,

2019

2018

2017

282,207 290,886 303,867

Number of newly life insurance-licensed sales representatives

44,739

48,041

48,535

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

130,522 130,736 126,121

Average number of life insurance-licensed sales representatives during
period

130,370 128,977 121,291

We define new recruits as individuals who have
submitted an independent business application
to become sales representatives together with
payment of the nominal fee to commence their
pre-licensing training. Certain recruits may not
meet the compliance standards to become a
sales representative, and others elect to
withdraw prior to becoming actively engaged.

On average, it takes approximately three months
for 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 products. As a result,
individuals recruited to become sales
representatives within a given fiscal period may

not become licensed sales representatives or
meet compliance standards until a subsequent
period.

SalesForceMotivation,Training,
CommunicationandSalesSupport
Tools

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

Through our proven system of

Motivation.
sales force recognition events, contests and
communications, we provide incentives that
drive our results. Motivation is driven in part by

Primerica 2019 Annual Report

ITEM 1. BUSINESS

sales representatives’ desire to achieve higher
levels of financial success by building their own
businesses as sales representatives. The
opportunity to help underserved middle-income
households address financial challenges is also a
source of motivation for many sales
representatives.

We motivate sales representatives to succeed in
their businesses by:

•

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

training sales representatives on financial
fundamentals so they can confidently and
effectively assist our clients;

reducing the administrative burden on the
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
the sales force. In June 2019, we hosted our
biennial international convention and associated
meetings at the Mercedes-Benz Stadium and
Georgia World Congress Center in Atlanta,
Georgia, which was attended by approximately
50,000 people. Most of our new recruits and
sales representatives who have attended our
conventions and associated meetings do so at
their own expense, which we believe further
demonstrates their commitment to our
organization and mission.

Primerica Online (“POL”), delivered

Training, Communication and Sales Support
Tools.
through a secure Intranet website and a cross-
platform mobile application (“Primerica App”), is
our primary tool designed to support sales
representatives and assist them in building their
own businesses. We provide sales
representatives with communication, training,
and sales support tools on POL that allow both

new and experienced sales representatives to
offer financial information and products to our
clients. POL provides sales representatives with
access to various business tracking and
management tools, licensing support tools,
product-specific training, and sales procedures
and tools. Additionally, POL provides access to
internal training programs and videos covering
sales, management skills, business ownership,
and compliance. We also use POL to provide
real-time recognition of sales representatives’
successes and scoreboards for sales force
production, contests, and incentive 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 developing
new resources and 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.

The primary features and tools available on POL
include:

•

POL

Training and Licensing Tools:
provides sales representatives with access to
study tools for life insurance and securities
licensing examinations such as pre-licensing
study materials, on-demand videos,
personalized licensing study plans, exam
simulators, progress tracking, and exam and
license registration. POL also provides
training materials and access to obtain
online certifications to sell certain other
distributed products.

• Communication Tools:

POL provides
access to marketing materials for our
product offerings, Company news and
events, live streaming shows, on-demand
videos, home office bulletins, Primerica
e-mail, contact lists, and a hosted
professional business website for sales
representatives. We broadcast and deliver
video content on POL through our own
digital video channel, PFN TV. We create
original broadcasts and videos that enable
senior management to provide business
updates to the sales force as well as 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 the sales force.
We also broadcast training-oriented
programs to the 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.

•

Sales Support and Client Management Tools
offered through POL:

– Our Financial Needs Analysis: Our FNA
is a proprietary, needs-based analysis
tool. The FNA gives 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 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 also
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 and investment products.
These applications populate client
information from the FNA to eliminate
redundant data collection and provide
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 RVPs and us to realize
the efficiencies of straight-through-
processing of application data and other

ITEM 1. BUSINESS

information collected on sales
representatives’ mobile devices, which
results in expedited processing of
product sales. TurboApps also features
EZ-Key, which is a tool that helps sales
representatives guide clients through
the investment decision process and
ultimately provides investment
alternatives based on the client’s
individual situation. TurboApps is
available on the sales representatives’
portal, POL and our mobile platform, the
Primerica App.

– Primerica App:

The mobile Primerica

App platform has experienced broad
adoption and provides the sales force
with access to the critical components
needed to start, build and maintain their
businesses. We continually enhance and
expand the scope and resources
available in this strategic platform.

– 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.

–

Shareholder Account Manager
(“SAM”):
SAM is a web-based tool that
allows securities-licensed representatives
to service client investments in mutual
funds accessed through our transfer
agent recordkeeping platform.

– Client Relationship Manager

(“CRM”): Our CRM tool allows sales
representatives and their RVPs to
organize client information, such as
personal contact information, product
relationships, account details, notes,
appointments and follow-ups, in one

Primerica 2019 Annual Report

ITEM 1. BUSINESS

place to enable fast and convenient
access for managing client relationships.

In addition, our publications department
produces materials to support, motivate and
inform the sales force. We sell recruiting
materials, sales brochures, business cards and
stationery and provide communications services
that include 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.

Performance-BasedCompensation
Structure

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

•

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

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; and

• bonuses and other compensation, including
agent equity awards, generated by their
own sales performance, the aggregate sales
performance of their sales organizations
and other criteria.

Our compensation structure pays commissions
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 the policy fee) for
all policies and riders. To motivate the 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, equals 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 by the Company 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
prior to the full commission being earned.
Additionally, we hold back a portion of the
commissions earned by 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
and they 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 a
policy’s level premium paying period, we pay
commissions on policy exchanges and bonuses
on some policy exchanges and continuations.

We also pay bonuses as a percentage of
premiums to RVPs with respect to sales of term
life policies and riders, up to a maximum
premium. Bonuses are paid to RVPs for
achieving specified production levels.

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. Commissions are
calculated based on the dealer reallowance and
trail compensation actually paid to us. For
managed investment products, fees earned are
based on the assets under management and
represent the fee we receive as compensation
for as long as we retain the account. For our
Canadian segregated fund investment products,
we pay sales representatives a sales commission
based on the amount invested and a monthly
fee based on clients’ asset values.

We also pay the sales force with respect to sales
of prepaid legal services subscriptions and
referrals for customers purchasing other
distributed products. Prepaid legal services
commissions paid to the sales force are earned
in fixed amounts on a monthly basis as long as
the prepaid legal service subscription remains
active. Commissions related to other distributed
products are calculated based on the type of
product sold or referred.

In addition to these methods of compensation,
RVPs can earn quarterly agent equity awards
based largely on sales production.

SalesForceLicensingandSupport

The states, provinces and territories in which
sales representatives operate generally require
sales representatives to obtain and maintain
licenses to sell our insurance and securities
products, requiring sales representatives to pass
applicable examinations. Sales representatives
may also be required to maintain licenses to sell
certain of our other distributed 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

ITEM 1. BUSINESS

she passes the applicable exam and obtains the
applicable life insurance license.

To sell insurance products, 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, sales representatives must also
be appointed by our applicable insurance
subsidiary. Our in-house life insurance licensing
program offers new recruits a significant number
of classroom life insurance pre-licensing courses
to meet applicable state and provincial licensing
requirements and prepares recruits to pass
applicable licensing exams.

To sell mutual funds and variable annuity
products, 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. Sales
representatives must meet all state and federal
regulatory requirements and be designated as
an investment advisor representative in order to
sell our managed investment products. We
contract with third-party training firms to
conduct securities license exam preparation for
sales representatives, and we also offer
supplemental training tools.

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. 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 other distributed products,
appropriate state, provincial and territorial
licensing may be required.

Primerica 2019 Annual Report

ITEM 1. BUSINESS

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 sales
representatives. We work with the RVPs to
develop and maintain appropriate compliance
procedures and systems.

Generally, 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 additional regulatory responsibility
over the activities of their sales organizations.
Additional supervision is provided by designated
principal-licensed home office personnel,
referred to as Regional Securities Principals
(“RSPs”). RSPs are required to supervise and
monitor activity across all product lines and
report any compliance issues they observe to
our Compliance Department. In addition, our
Compliance Department regularly runs
surveillance reports designed to monitor the
activity of the sales force and investigates any
unusual or suspicious activity identified during
these reviews or during periodic inspections of
RVP offices.

All sales representatives are required to
participate in our annual compliance meeting, a
program administered by our senior
management and our legal and compliance staff.
We provide a compliance training overview
across all product lines and require the
completion of compliance checklists by each
licensed sales representative for each product he
or she offers. Additionally, sales representatives
receive periodic compliance communications,
both in writing and through videos, regarding
new compliance developments and business
issues of significance.

Our Field Audit Department regularly conducts
audits of all sales representative offices,
including scheduled and no-notice audits. The
Field Audit Department reviews 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. Audit deficiencies
are addressed through 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, 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
life insurance does not compete with
mutual funds because term life insurance
has no cash value or investment element.

• Ongoing needs based: Products are

generally 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.

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.

The following table provides information on our principal product offerings and the principal sources
thereof by operating segment as of December 31, 2019.

ITEM 1. BUSINESS

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
Prepaid Legal Services

ID Theft Defense
Supplemental Health and
Accidental Death &
Disability Insurance
Auto and Homeowners’
Insurance (1)

Mortgage Loans (2)

Home Automation
Solutions (1)

Corporate and Other

Distributed Products

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 Investments (U.S.)
VOYA Financial, Inc. (U.S.)
Invesco (U.S. and Canada)
Legg Mason Global Asset Management (U.S.)
AGF Investments (Canada)
PFSL Fund Management Ltd. (Canada)
Mackenzie Investments (Canada)
Fidelity Investments (Canada)
PFS Investments (dba Primerica Advisors) (as a
program sponsor) (U.S.)
American General Life Insurance Company and
its affiliates (U.S.)
AXA Distributors, LLC (U.S.)
Brighthouse Financial, Inc. (U.S.)
Lincoln National Life Insurance Company 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)
Brighthouse Financial, Inc. (U.S.)
Universal Life Insurance Company (Puerto
Rico)
Primerica Life Canada (Canada)
LegalShield (U.S. and Canada)

LegalShield (U.S. and Canada)
The Edge Benefits Inc. and its affiliates
(Canada)

Various insurance companies, as offered
through Answer Financial, Inc. (U.S.)
SurexDirect.com Ltd. (Canada)
Quicken Loans Inc. (U.S.)
B2B Bank (Canada)
Vivint, Inc. (U.S.) and Vivint Canada, Inc.
(Canada)

(1)

(2)

Referrals only.
In the U.S., mortgage loans are made by Quicken Loans Inc. In Canada, representatives can refer mortgage loans to B2B
Bank.

Primerica 2019 Annual Report

ITEM 1. BUSINESS

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 2018, the latest period
for which data is available from LIMRA, we
ranked as a leading provider of individual term
life insurance in the United States.

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, may 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 initial
level-premium coverage periods that range from
10 to 35 years and a wide range of coverage
face amounts. Policies remain in force until the
expiration of the coverage period or until the
policyholder ceases to make premium payments
and terminates the policy. Our in-force term life
insurance policies have level premiums for the
stated term period. As such, the policyholder
pays the same amount each year. After the initial
policy term, the policyholder has the option to
continue coverage or by renewing or converting
their contract. Both options result in higher
premiums due to the policyholder’s attained
age.

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 up to $300,000 (local currency).
TermNow allows a sales representative to submit
an application via TurboApps and, with the
client’s permission, allows the Company to
access databases, including Medical Information
Bureau (“MIB”) data in the United States and
Canada and prescription drug, motor vehicle,
and criminal 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 determines
whether or not we can rapidly issue a policy.

The average face amount of our in-force policies issued in 2019 was approximately $248,500. The
following table sets forth selected information regarding our term life insurance product portfolio:

ITEM 1. BUSINESS

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

• observed trends in experience that we
expect to continue, such as general
mortality changes 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 risk factors. Each classification (generally
preferred plus, preferred, non-tobacco and
tobacco) has specific criteria. We may decline an
applicant’s request for coverage if his or her
health or activities create unacceptable risks.

Year ended December 31,

2019

2018

2017

287,809

301,589

312,799

93,994 $

95,209 $

95,635

December 31,

2019

2018

2017

2,641,483

2,606,825

2,560,334

$ 808,262 $ 781,041 $ 763,831

Sales representatives ask applicants a series of
questions regarding the applicant’s medical
history. We may also consider information about
the applicant from third-party sources, such as
the MIB, prescription drug databases, motor
vehicle records and physician statements. If we
believe that further information regarding an
applicant’s medical history is necessary, 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. Paramedical
requirements are also needed on applicants
applying for Custom Advantage, our fully-
underwritten term life product.

To accommodate the significant volume of
insurance business that we process, we and the
sales force use specialized technology. We offer
sales representatives an electronic life insurance
application that supports term life insurance
products. Approximately 95% of the life
insurance applications we received in 2019 were
submitted electronically via TurboApps. Our
electronic life insurance application reduces
errors in submitted applications, collects the
applicant’s electronic signatures and populates
the RVP’s sales log. Once an application is
complete, the pertinent application data is
uploaded to our life insurance administrative
systems, which manage the underwriting

Primerica 2019 Annual Report

ITEM 1. BUSINESS

process by electronically analyzing data,
recommending underwriting decisions,
identifying 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 15,800 life insurance
benefit claims in 2019 on policies underwritten
by us and sold by sales representatives. These
claims fall into three categories: death, waiver of
premium (applicable to disabled policyholders
who purchased this benefit for which we agree
to waive life insurance premiums during a
qualifying disability), or terminal illness. The
claim may be reported by a 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,

2019

2018

2017

(In thousands)
$1,447,375 $1,391,755 $1,388,027

49,712

46,690

45,146

14,584

16,474

16,389

Death

Waiver of

premium

Terminal

illness(1)

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

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 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 claims
adjusters 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 Life and NBLIC regularly consult the
Social Security Administration’s Death Master
File in accordance with applicable state
requirements. These processes help identify
potential deceased insureds 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.

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 basis. We pay
premiums to each reinsurer based on rates in
the applicable agreement.

We generally reinsure between 80% and 90% of
the mortality risk for all term life insurance
policies, excluding coverage under certain riders.
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
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, sales representatives
help our clients understand their current
financial situations and how they can use time-
tested financial principles, such as prioritizing
personal savings, to reach their savings goals.
Our product offerings include 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 licensed
sales representatives, we distribute and sell to
our clients a variety of mutual funds, managed
investments, variable, index-linked, and fixed
annuities, fixed indexed annuities and
segregated funds. As of December 31, 2019,
approximately 25,747 sales representatives were
licensed to distribute mutual funds in the United
States (including Puerto Rico) and Canada. As of
December 31, 2019, approximately 13,788 sales
representatives were licensed and appointed to
distribute annuities in the United States and
approximately 13,065 sales representatives were
licensed to sell segregated funds in Canada.

ITEM 1. BUSINESS

In 2019, in the United States,

Mutual Funds.
licensed sales representatives primarily distribute
mutual funds from the following select asset
management firms: American Century
Investments, American Funds, Franklin
Templeton, Invesco, and Legg Mason. 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.

During 2019, Legg Mason, Invesco, American
Funds, and Franklin Templeton accounted for
approximately 96% of our mutual fund sales in
the United States. Legg Mason and Invesco each
have large wholesaling teams that support the
sales force in distributing their mutual fund
products. Our selling agreements with these
firms all have indefinite terms and provide for
termination at will.

A wholly owned indirect subsidiary of the Parent
Company and affiliate of PFS Investments,
Primerica Shareholder Services, Inc. (“PSS”),
provides transfer agent recordkeeping services
to investors who purchase shares of mutual
funds offered by certain of our fund families
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 to perform the necessary transfer
agent recordkeeping services for these accounts
on its proprietary SuRPASS system. PFS
Investments serves as the Internal Revenue
Service (“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 certain of our
fund families. For these services, PFS Investments
receives an annual custodian fee.

Primerica 2019 Annual Report

ITEM 1. BUSINESS

In Canada, sales representatives offer Primerica-
branded Concert™ Series funds, which accounted
for approximately 34% of our Canadian mutual
fund product sales in 2019. Our Concert™ Series
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 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, Fidelity
Investments, and Invesco. Sales of these
non-proprietary funds accounted for
approximately 59% of mutual fund product sales
in Canada in 2019. 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, 2019, average client assets held in
individual retirement accounts in the United
States and Canada accounted for an estimated
74% and 70% 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 (dba
PFS Advisors) is a registered investment advisor
in the United States, and it offers a managed
investments program, Primerica Advisors
Lifetime Investment Platform (the “Lifetime
Investment Platform”), which we launched in
2017. The Lifetime Investment Platform is a
robust advisory offering designed for clients
who have at least $25,000 of investable assets. It
provides our customers access to mutual fund
and exchange-traded fund investment models
designed and managed by several unaffiliated
investment advisers. PFS Investments, as sponsor
and portfolio manager of the program, evaluates
models for inclusion in the program and
conducts ongoing due diligence of the models
and unaffiliated investment advisers made
available through the program. TD Ameritrade
Institutional, an unaffiliated broker-dealer,
provides custody, trade execution, clearing,
settlement and other services for customer
assets invested through the Lifetime Investment
Platform.

Variable Annuities. U.S. securities licensed
sales representatives also distribute variable
annuities issued by American General Life
Insurance Company and its affiliates (“AIG”), AXA
Equitable Life Insurance Company (“AXA Life”),
Lincoln National Life Insurance Company and its
affiliates (“Lincoln National”), and Brighthouse
Life Insurance Company (“Brighthouse Life”).
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). We also offer
index-linked annuities issued by AXA Life,
Brighthouse Life, and Lincoln National. Index-
linked annuities are insurance contracts that
provide investors with potential growth, subject
to a cap, and partial downside protection against
losses. Gains and losses are measured over a
fixed period, typically three to six years, based
on the performance of a securities index.
Although linked to an index, an investment in
these contracts does not involve ownership of

any underlying portfolio securities by the client.
Each of these companies bears the insurance risk
on its variable annuities and index-linked
variable annuities that we distribute.

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 life and securities representatives
more ways to assist our clients with their
retirement planning needs.

Fixed Annuities. We sell fixed annuities
underwritten by Brighthouse 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.

In Canada, we offer

Segregated Funds.
segregated fund products, branded as our
Common Sense FundsTM, that have some of the
characteristics of our variable annuity products
distributed in the United States. Our Common
Sense FundsTM 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 separate
accounts for the benefit of the segregated fund
contract owners and are not commingled with
the general assets of the Company.

There are three fund products within our
segregated funds offerings: the Asset Builder

ITEM 1. BUSINESS

Funds, the Strategic Retirement Income Fund
(“SRIF”), and a money market fund known as the
Cash Management Fund. 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 securities with the equity component
consisting of a pool of primarily large cap
Canadian and U.S. 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 product guarantees clients 75% of their net
contributions (net of withdrawals) at the earlier
of the date of their death or age 100. The
portfolio consists of both equities and fixed-
income securities, with the equities consisting of
a pool of primarily large cap Canadian and U.S.
equities that are capped at 25% of the portfolio.
The balance is a fixed-income portfolio
consisting of investment-grade government and
corporate bonds. The high quality of the
investments and the percentage cap on equities
results in a relatively low potential loss exposure.
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.

Primerica 2019 Annual Report

ITEM 1. BUSINESS

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.

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.

In the United States, we earn

Investment and Savings Products
Revenue.
revenue from our ISP 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 re-allowance or commission on
new purchases as well as trail commissions on
the assets held in our clients’ accounts. We also
receive marketing and distribution fees from
most of our mutual fund and annuity providers.
These payments are typically a percentage of
sales or a percentage of the clients’ total asset
values, or a combination of both. For
investments into the Lifetime Investment
Platform, we receive an asset-based fee as
compensation for the investment advisory and
other administrative services we provide.

As the IRS-approved non-bank custodian for
certain 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 transfer agent
recordkeeping fees for the services it provides to
the fund families noted above in “Mutual Funds”
section. 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 which 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 re-allowance) on
mutual fund sales and fees paid based upon
clients’ asset values (mutual fund trail
commissions and investment advisory fees from
segregated funds and Concert™ Series funds).
On segregated funds, we may earn deferred
sales charges for early withdrawals at an annual
declining rate within seven years of an investor’s
original contribution. We also offer our clients a
product option in which there is no deferred
sales charge.

OtherDistributedProducts

We distribute other products, including prepaid
legal services, auto and homeowners’ insurance
referrals, mortgage loans through mortgage-
licensed loan originators, and home automation
solutions. In Canada, we also offer mortgage
loan referrals and insurance offerings for small
businesses. While some of these products are
Primerica-branded, all of them are underwritten
or otherwise provided by a third party.

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 sales and
renewals of these subscriptions.

We have an arrangement with Answer
Financial, Inc. (“Answer Financial”), an
independent insurance agency, whereby 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’ placement of insurance
and policy renewals and pay sales representatives
a flat referral fee for each completed application
and policy renewal.

We have an arrangement with Quicken Loans
Inc. (“Quicken Loans”), a mortgage lender,
whereby Primerica Mortgage, LLC a state-
licensed mortgage broker, offers mortgage loans
through its mortgage loan originator licensed
representatives. We launched the program as a
pilot in 2019 in Colorado and Florida, offering
refinance mortgages, and plan to expand the
program in 2020. We receive compensation from
Quicken Loans for each closed loan based on a
fixed percentage of the loan amount for
mortgage brokering services provided and pay
compensation to the representatives for services
rendered.

We have an arrangement with Vivint, Inc.
(“Vivint”), a company that offers homeowners in
the U.S. and many provinces in Canada a
comprehensive suite of products and services to
protect and remotely control, monitor and
manage their homes using any Internet-
connected smart device. We receive
commissions based on referrals that result in a
subscription to Vivint’s home services and pay
sales representatives a referral fee for each such
subscription.

In Canadian provinces Alberta, Ontario and
British Columbia (homeowners’ insurance only)
we have an arrangement with SurexDirect.com
Ltd. (“Surex Direct”), an independent
insurance agency, whereby sales representatives
refer clients to Surex Direct to receive multiple,
competitive auto and homeowners’ insurance
quotes. Surex Direct’s comparative quote
process allows clients to easily identify the
underwriter that is most competitively priced for
their type of risk. We receive referrals based on
completed auto and homeowners’ placement of
insurance and policy renewals and pay sales
representatives a flat referral fee for each
completed application and policy renewal.

In Canada, we have a referral program for
mortgage loan products offered by a third-party
lender, B2B Bank. Due to regulatory
requirements, sales representatives in Canada

ITEM 1. BUSINESS

only refer clients to the lender and are not
involved in the loan application and closing
process. We receive referral fees based on the
funded loan amount and, in turn, pay a
commission to sales representatives.

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 sales and renewals of these policies.

Regulation

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

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 Tennessee-
domiciled insurer, is regulated by the Tennessee
Department of Commerce and 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-
domiciled life insurance underwriting company
and a wholly owned subsidiary of Primerica Life,
is regulated by the New York State Department
of Financial Services (“NYDFS”) and is licensed to
transact business in all 50 U.S. states, the District
of Columbia and the U.S. Virgin Islands.

Primerica 2019 Annual Report

ITEM 1. BUSINESS

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
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 and NBLIC, as well as
Peach Re, Inc. (“Peach Re”) and Vidalia Re, Inc.
(“Vidalia Re”), special purpose financial captive
insurance companies and wholly owned
subsidiaries of Primerica Life, performed by the
respective domiciliary state insurance
department at the time of the exams, were
completed during 2016 with no material 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.

Primerica Life Canada 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.

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

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

ITEM 1. BUSINESS

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.

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 and each subsidiaries domiciliary state
in the United States and using IFRS in Canada.

The following table sets forth the amount of
cash and distributions paid or payable by our
insurance subsidiaries:

Year ended December 31,

2019

2018

2017

(In thousands)
$270,000 $200,000 $138,000

22,544

22,755

22,924

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 to applicable
insurance regulatory authorities.

Primerica Life Canada is also 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

Primerica 2019 Annual Report

ITEM 1. BUSINESS

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
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 risk-based capital model
act (the “RBC Model Act”) that has been adopted
by the state insurance regulatory authorities. The
RBC Model Act provides that life insurance
companies must submit an annual RBC report to
state regulators regarding 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 that vary based upon the
degree of risk to various asset, premium and
policy benefit reserve 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.
These capital requirements are measured using
the Life Insurance Capital Adequacy Tests
(“LICAT”) established by OSFI to determine if any
regulatory action is required to be taken.

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
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, incremental direct costs of
successful policy acquisitions 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,

ITEM 1. BUSINESS

assessments may be partially offset by credits
against future state premium taxes.

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 sales
representatives to obtain their life insurance
licenses. In addition, certain jurisdictions have
passed laws or proposed regulations that
require insurers and insurance agents in the sale
of life insurance, including term life insurance
and annuities, to disclose conflicts of interest to
consumers or meet standards of care requiring
that their advice be in the customer’s best
interest. The impact on our business and the
level of resources necessary to conform to such
new regulations will vary depending on the
extent of changes required and the jurisdictions
that adopt such regulations.

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 Department of
Labor (“DOL”) with respect to certain retirement
plans, and by state securities agencies. PFS
Investments operates as an introducing broker-
dealer, which does not hold client accounts, and
is also registered in all 50 U.S. states and certain
territories. 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 registered representatives.

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 (the “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.

In the United States, clients acquire securities
products from PFS Investments in either a
brokerage or advisory relationship. In a
brokerage relationship, a PFS Investments

Primerica 2019 Annual Report

ITEM 1. BUSINESS

registered representative is currently required
pursuant to FINRA rules to make a suitable
recommendation for the client and, as of
June 30, 2020, will be subject to a “best interest”
standard under SEC regulations, but the
registered representative provides no ongoing
monitoring of the client’s investments. PFS
Investments markets mutual funds and variable
annuities on a brokerage basis. In an advisory
relationship, namely our managed investment
offerings, PFS Investments and its investment
advisory representative have a fiduciary
obligation to the client and conduct ongoing
monitoring of the client’s investments.

PFS Investments is also approved as a non-bank
custodian under IRS regulations and, in that
capacity, may act as a custodian or trustee for
certain retirement accounts. In addition, PFS
Investments is an SEC-registered investment
advisor and, under the name Primerica Advisors,
offers managed investment programs. In most
states, sales representatives are required to obtain
an additional license to offer these programs.

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.

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 of the
Canadian mutual fund industry. It is also
registered with provincial and territorial
securities commissions throughout Canada
(collectively referred to as the “Canadian
Securities Administrators” or “CSA”). 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 subject to
the rules and regulations established by the
Canadian Securities Administrators for the sale
of securities, which include standards of conduct
for the firm and its sales representatives.

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.

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.

Regulation of Mortgage Loan Products.
the United States, state mortgage banking,
brokering and lending laws regulate our
mortgage loan products business. In the United
States, Primerica Mortgage, LLC is regulated by
state banking commissioners and other
equivalent regulators as well as by the Consumer
Financial Protection Bureau. Our mortgage loan
products business must comply with the laws,
rules and regulations, as well as judicial and
administrative decisions, in all of the jurisdictions
in which we are licensed to offer mortgage and
unsecured loans, as well as an extensive body of
federal laws and regulations. These state and
federal laws and regulations address the type of
loan products that can be offered to consumers
through predatory lending and high cost loan
laws and the type of licenses that must be
obtained by individuals and entities seeking to
solicit mortgage loan applications from
consumers. As a mortgage broker licensee,
Primerica Mortgage, LLC is subject to periodic
examinations by regulators.

To offer mortgage loan products, sales
representatives must be individually licensed as
mortgage loan originators by the states in which
they do business (and in some states as both
mortgage brokers and mortgage loan
originators). See “Risk Factors – Other Risks
Related to Our Business – Licensing
requirements will impact the size of the
mortgage loan sales force.”

In addition, our loan product distribution
business is subject to various other federal laws,
including the Truth In Lending Act and its
implementing regulation, Regulation Z, the
Equal Credit Opportunity Act and its
implementing regulation, Regulation B, the Fair
Housing Act and the Home Ownership Equity
Protection Act. We are also subject to the Real
Estate Settlement Procedures Act (“RESPA”) and

ITEM 1. BUSINESS

its implementing regulation, Regulation X, which
requires timely disclosures related to the nature
and costs of real estate settlement amounts and
limits those costs and compensation to amounts
reasonably related to the services performed.
We are also subject to the Dodd-Frank Act and
any implementing regulations.

In Canada, our loan activities are more limited
and the sales representatives only provide
mortgage loan referrals to B2B Bank. The sales
representatives are not required to obtain
mortgage loan licensure from any regulatory
entity to make these referrals.

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.

Primerica 2019 Annual Report

ITEM 1. BUSINESS

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 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.

Competition

We operate in a highly competitive environment
with respect to the sale of financial products and
the retention of the more productive members
of the sales force. 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, 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, while our managed
investment programs compete with other
fee-based advisory services offered by financial
services firms. 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.

PrivacyandInformationSecurity

Our business is dependent on maintaining a
secure, confidential environment for our clients,
employees and other partners’ information.
Information security and privacy is critically
important as we rely more heavily on mobile
technologies to conduct business and bring
solutions to our clients who entrust their data to
us.

We have built sophisticated information
technology platforms to support our clients and
operations and the sales force. Our data center
houses an enterprise-class IBM mainframe as
well as modern distributed and cloud
technology infrastructure. Our business
applications, many of which are proprietary, are
supported by application developers and data
center staff at our main campus.

Primerica’s information security teams provide
services, including project consulting, threat
management, application and infrastructure
assessments, secure configuration management,
and information security administration.
Additionally, we support advanced business
continuity and disaster recovery capabilities. The
Company institutes a three-lines-of-defense
model for information security risk assurance, in
which management owns the risk, our enterprise
risk management team assesses the risk and
oversees compliance with internal guidelines
and policies, and our internal audit team
provides independent assurance of the
effectiveness of the first two lines of defense.
Primerica’s management continually assesses
information security risk, working with industry

experts for maturity and technical assessments.
Primerica’s enterprise risk management and
internal audit functions conduct regular
assessments and audits, and report the results to
the Board of Directors at least quarterly.

The Company has two core policies that govern
our home office initiatives in this critical area:
(1) Information Security Policy; and (2) Data Loss
Prevention Policy. These policies are reviewed
annually and updated as needed. They address
both the processes and technical requirements
needed to protect the environments in which
data is processed, as well as how it is
maintained, governed, and protected. We also
impose mandatory privacy and information
security controls and various data security
protection requirements on the sales force.
These required controls are based on varying
governing laws and regulations.

Primerica’s senior executive leadership is actively
involved in managing privacy and information
security risk, including participation in a risk
steering group that holds quarterly meetings,
coordinates corporate security initiatives to
enable Primerica to optimize spending, manage
infrastructure, and minimize privacy and security
risk. This group also provides high-level
guidance on technology- and security-related
issues of importance to the Company, and is
composed of several of Primerica’s top
executives.

We have an Incident Response Plan that is
reviewed and updated regularly. Our Incident
Response Team consists of employees from our
information security, legal, compliance, public
relations, and operational 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.
The roles and responsibilities of Primerica
personnel and third-party vendors in responding
to information security incidents are well-
documented and include 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

ITEM 1. BUSINESS

simulations of information security
incidents. Primerica also has purchased cyber
insurance coverage.

The reporting of all cyber-related risks and
assessments is ongoing to senior management
and to our Board of Directors, and our Board of
Directors has oversight responsibility for our
cyber security program pursuant to the plan. The
Board receives a quarterly report from
management on cyber security.

We train our entire full- and part-time employee
workforce and third parties with access to
Company systems in information security, how
to recognize and understand privacy-related
risks, and ways to mitigate data and privacy
issues, with certain positions requiring
additional, specialized training. We also perform
regular tests to determine whether our
employees can recognize phishing emails.
Similarly, maintaining data security and privacy is
an integral part of our annual compliance
training for our independent sales
representatives.

Employees

As of December 31, 2019, we had 1,947 full-time
employees in the United States and 254 full-time
employees in Canada. In addition, as of
December 31, 2019, we had 534 on-call
employees in the United States and 68 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.

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

Primerica 2019 Annual Report

ITEM 1. BUSINESS

incorporated by reference into this report. The
Company’s reports are also available on the
SEC’s website. The SEC maintains an Internet site
that contains reports, proxy and information
statements, and other information regarding
issuers that file electronically with the SEC at
www.sec.gov.

ITEM 1A. RISK FACTORS.

RisksRelatedtoOurDistribution
Structure

Our failure to continue to attract new
recruits, retain sales representatives or
license or maintain the licensing of 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 the part-time sales representatives, which
requires us to attract, retain and motivate a large
number of sales representatives. Recruiting is
performed by 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
competitiveness of such programs compared with
other companies, including other part-time
business opportunities and the 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 opportunity and the
products we distribute 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 sales representatives to obtain their
life insurance and/or securities licenses. FINRA
restructured its representative-level securities
qualification examination program in October
2018 to include a new Securities Industry
Essentials exam. We have made enhancements
to our securities licensing preparation process,
but the restructured program could ultimately
result in a decrease in the number of U.S.
representatives obtaining their securities licenses
in the United States. Further, in September 2018,
FINRA requested comments from member firms
on potential changes under consideration to the
continuing education (“CE”) requirements. The
proposals under consideration include changing

the CE regulatory requirement from a three-year
period to an annual requirement for securities-
licensed representatives. Such a change could
place an increased burden on representatives to
complete their CE regulatory requirement more
frequently, which could negatively impact the
size of the active securities sales force in the
event that representatives do not complete the
CE requirement on a timely basis.

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 the new sales 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

ITEM 1A. RISK FACTORS

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 sales representatives
that may increase the expense of, or adversely
impact our recruitment of new sales
representatives.

There are various laws and regulations, including
laws of general application such as the Federal
Trade Commission Act (the “FTC Act”), that
prohibit fraudulent or deceptive practices
including but not limited to pyramid schemes.
Historically, the FTC has defined a pyramid
scheme as an arrangement in which new
participants are required to pay a fee for the
right to sell a product and the right to receive,
for recruiting other persons to participate,
rewards that are primarily unrelated to the sale
of products to ultimate users. 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. Although we
believe that our business practices comply with
applicable 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 in actuality or in
application, which could require us to restructure
our operations or result in regulatory fines,
penalties, or other costs, or reputational harm or
could otherwise adversely affect our business,
financial condition and results of operations.

There are also federal, state and provincial laws
of general application, including 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 become sales
representatives. These materials, as well as our
other recruiting efforts and those of the sales
representatives, particularly with respect to
earnings and lifestyle statements, are subject to

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

scrutiny by the FTC and other federal, state and
provincial regulatory authorities. If statements
made by us or by the sales representatives are
deemed to be unfair, deceptive, or misleading, it
could result in violations of the FTC Act or other
federal, state and provincial laws or regulations
could result in regulatory fines, penalties or
other costs, or reputational harm, or could
otherwise adversely affect our business, financial
condition and results of operations.

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 sales representatives is
overturned.

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
sales representatives should be treated like
employees. Although we believe that we have
properly classified sales 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
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 increasing
federal, state and provincial legislative,
regulatory and judicial interest over the last
several years. In some jurisdictions, legislative
proposals have been introduced and judicial

decisions have been made that call for or result
in greater scrutiny of independent contractor
classifications. For example, in 2019 California
enacted legislation revising its worker
classification test. Although the California
legislation excepted specified occupations and
activities such as insurance and securities
distribution, there can be no assurance that
other legislative or regulatory proposals in
California or other states would include similar
exceptions. Legislation relating to independent
contractor classifications has been proposed by
other states and by members of the U.S.
Congress. We cannot predict the outcome of
any such legislative, regulatory, or judicial
activity.

If there is an adverse determination with respect
to the classification of some or all of the
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 the 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 sales representatives must
follow. At any given time, we may have pending
state, federal or provincial examinations or
inquiries of our investment and savings
products, insurance and other 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 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 on the part of
the Company or the sales representatives.

From time to time, we are subject to private
litigation as a result of alleged misconduct by
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 the
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, which vary significantly
from jurisdiction to jurisdiction. Many sales
representatives, employees, and third-party
service providers have access to, and routinely
process, personal information of clients on paper
and on personal and company-owned hardware,

ITEM 1A. RISK FACTORS

the cloud and mobile devices 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 the sales
representatives. If a sales representative,
employee, or third-party service provider
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 sales representatives, employees, or
service providers 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
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

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

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, based on our
current expectations for mortality, persistency
and other assumptions, 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.

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
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.

On July 18, 2018, the NYDFS issued final
amendments to its suitability regulation for
annuities (the “Amended Suitability Rule”), which
imposes certain duties and obligations on
insurers and insurance producers in the sale of
life insurance, including term life insurance, and
annuities. Under the Amended Suitability Rule,
the NYDFS requires firms and insurance
representatives to ensure that transactions are
suitable and consistent with the customer’s “best
interest”. Because the Amended Suitability Rule
imposes a higher standard of care and enhanced
disclosure and other obligations on life and
annuities transactions, it may increase our
regulatory or litigation risk. The Amended
Suitability Rule does not necessitate significant
changes to our term life insurance or annuities
business in New York. The Amended Suitability
Rule became effective for annuity products on
August 1, 2019 and will become effective for life
insurance products on February 1, 2020.

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

ITEM 1A. RISK FACTORS

requirements or may result in higher costs,
which could materially adversely affect our
business, financial condition and results of
operations. If the Office of the Superintendent of
Financial Institutions (“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. 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. 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
with certainty the effect any proposed or future
legislation or regulatory initiatives may have on
the conduct of our business.

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

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
the Life Insurance Capital Adequacy Test
Guideline (“LICAT”), and is required to provide its
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 LICAT 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 LICAT 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
amounts and RBC and LICAT 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.
Further, errors in programming, data entry, or

our calculations could impact the accuracy of
our estimates. Ratings agencies also may
downgrade the ratings of securities held in our
insurance subsidiaries’ portfolios, which could
result in a reduction of our insurance
subsidiaries’ statutory capital and surplus and
RBC. 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 LICAT levels to
support their business operations.

The failure of any of our insurance subsidiaries
to meet its applicable RBC and LICAT
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 LICAT 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.
Primerica Life currently also has an insurer
financial strength rating from each of
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
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.
These ratings are indicators of a debt issuer’s

ITEM 1A. RISK FACTORS

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
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. On March 6, 2019 Scottish
Re (U.S.), Inc. (“Scottish Re”) was ordered into
receivership for purposes of rehabilitation. While
it is uncertain at this time how much of their
claim obligations Scottish Re will ultimately be
able to pay, we have recognized an allowance

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

for all reinsurance recoverable balances from
Scottish Re, which resulted in the recognition of
an immaterial loss in our 2019 results of
operations.

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.

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, which
amount will not be less than the amount of the
reserves for the coinsured liabilities. In Canada,
the IPO reinsurer must hold pledged assets in an
amount sufficient for us to take credit for
reinsurance in a Canadian financial institution,
not affiliated with the IPO reinsurer, with our
Canadian insurance company having an
enforceable security interest that has priority
over any other security interest for the pledged
assets. 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 is 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

We have entered into transactions by which we
finance redundant statutory reserves of certain
issue years of our term life insurance 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 or
product offerings with us, or a change in law or
regulation that compels us to alter or
discontinue such arrangements, could materially
adversely affect our business, financial condition
and results of operations. 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 addition, we earn a growing
portion of our earnings through our asset-based
advisory platform. A mix shift of new
investments to our advisory platform could
materially impact cash flows to our business,
financial condition and results of operations.

In recent years there has been an increase in the
popularity of alternative investments such as
exchange traded funds (ETFs), which we do not
currently offer on our brokerage platform, but
which are available indirectly to our clients on
our advisory platform. These investment options
typically have low fee structures and provide
some of the attributes of mutual funds, such as
risk diversification. If these products continue to
gain traction among our client base as viable
alternatives to mutual fund investments, or if
other product innovations not offered by us gain
traction, 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
mutual fund companies 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,
or a change in law or regulation that compels us
to alter or discontinue such arrangements,
would materially adversely affect our business,
financial condition and results of operations.

The Company’s or the 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, and the
sales representatives, are subject to federal and
state regulation of its securities business. These
regulations cover sales practices, trade
suitability, supervision of registered

ITEM 1A. RISK FACTORS

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
regulatory actions and/or 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 the sales
representatives are subject to the securities laws
of the provinces and territories of Canada in
which we sell our mutual fund products 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.

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

If heightened standards of conduct or
more stringent licensing requirements,
such as those adopted by the SEC and
those proposed or adopted by state
legislatures or regulators or Canadian
securities regulators, are imposed on us or
the 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.

The U.S. sales representatives are subject to
federal and state regulation as well as state
licensing requirements. PFS Investments, Inc.,
which is regulated as a broker-dealer, and U.S.
sales representatives are currently subject to
general anti-fraud limitations under the
Exchange Act and SEC rules and regulations, as
well as other conduct standards prescribed by
the 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. On June 5, 2019, the SEC adopted
rules and interpretations addressing the
standards of conduct applicable to broker-
dealers and investment advisers and their
associated persons (collectively, the “SEC
Rulemaking”). Specifically, the SEC Rulemaking
(i) creates a new “best interest” standard of
conduct for broker-dealers (“Reg BI”), (ii)
imposes new disclosure requirements through
summary forms intended to clarify relationships
among brokers, advisers, and their retail
customers (“Form CRS”), (iii) provides
interpretative guidance regarding the standard
of conduct that applies to investment advisers
under the Investment Advisers Act of 1940
(“Advisers Act”), and (iv) provides interpretative
guidance on the scope of the broker-dealer
“solely incidental” exclusion from the definition
of “investment adviser” in the Advisers Act. The
SEC Rulemaking became effective on July 12,
2019, with a compliance date of June 30, 2020

for Reg BI and Form CRS. We anticipate making
certain changes to our sales processes, policies,
and procedures in order to comply with the SEC
Rulemaking. While we acknowledge that its
higher standards of care and enhanced
obligations increase regulatory and litigation
risk, we do not anticipate that the SEC
Rulemaking will cause significant disruption to
our business.

In addition to federal regulators, certain states
have proposed or passed laws or proposed or
issued regulations requiring investment advisers,
broker-dealers, and/or insurance agents to meet
fiduciary standards or standards of care that
their advice be in the customer’s best interest,
and to mitigate and disclose conflicts of interest
to consumers of investment and insurance
products. The severity of the impact that such
state laws or regulations could have on our
business vary from state to state depending on
the content of the legislation or regulation and
how it would be applied by state regulators and
interpreted by the courts, but any such laws or
regulations could disrupt our brokerage
business in the relevant state. We cannot
quantify the financial impact, if any, of any
changes to our business that may be necessary
in order to comply with such laws or regulations
at this time.

On February 20, 2020, the organization of
provincial and territorial securities regulators
(collectively referred to as the “Canadian
Securities Administrators” or “CSA”) published
final rule amendments, applicable in all
provinces except Ontario, to prohibit upfront
sales commissions by fund companies for the
sale of mutual funds offered under a prospectus
in Canada (“DSC Ban”). The final amendments
have an effective date of June 1, 2022. The CSA
indicated that the participating provinces’
prohibition of upfront sales commissions by
fund companies will require firms to discontinue
the use of the mutual fund deferred sales charge
compensation model, which is the primary
model for the mutual funds we distribute in
Canada. These rules will result in changes in
compensation arrangements with both the fund
companies that offer the mutual fund products
we distribute and sales representatives in the

participating provinces. The deferred sales
charge compensation model is permitted to be
used until the effective date. While Ontario has
disagreed with the prohibition of upfront sales
commissions by fund companies and is not at
this time participating in adoption of the DSC
Ban, the Ontario Securities Commission has
proposed several restrictions on the use of the
deferred compensation model, including a
$50,000 maximum account size and a limitation
on the maximum term of the deferred sales
charge schedule to three years compared to
current industry practice where the maximum
term can be up to seven years. These
restrictions, if any, will also be effective June 1,
2022. We have not finished the process of
determining the types of changes we will make
in response to the DSC Ban and the restrictions
in Ontario, therefore, we are unable to quantify
the potential impact on our financial condition
or results of operations.

In Canada, on October 3, 2019, the CSA
published final rule amendments intended to
better align the interest of securities dealers and
representatives with the interests of their clients,
improve outcomes for clients, and make clearer
to clients the nature and terms of their
relationship with registered firms and their
representatives. Collectively these amendments
are referred to as the Client Focused Reforms
(“CFRs”). The CFRs, among other things, require
registered firms to identify and mitigate conflicts
of interest between registered firms and their
representatives, on one hand, and clients, on the
other, such that recommendations may be made
in clients’ best interest. The CFRs are subject to
ministerial approval and have staggered
implementation dates. The implementation date
to address conflicts and to improve disclosure is
December 31, 2020 and the implementation
date to enhance overall suitability rules, know
your client rules, and know your product
requirements is December 31, 2021. CFRs will
require changes to our sales process and back-
office systems and processes and may
necessitate changes in compensation
arrangements with the fund companies that
offer the mutual fund products we distribute in
Canada. Although not expected at this time, the

ITEM 1A. RISK FACTORS

impact of such changes could have a material
adverse effect on our investment and savings
products business in Canada.

Heightened standards of conduct or restrictions
on compensation as a result of any of the above
items or other similar proposed rules or
regulations could also increase the compliance
and regulatory burdens on the sales
representatives and could lead to increased
litigation and regulatory risks, changes to our
business model, a decrease in the number of
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, or
our policies and procedures for
compliance with federal or state
regulations governing standards of care,
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
for suitability and for compliance with other
federal or state regulations governing standards
of care. While we believe that the policies and
procedures we implement to help sales
representatives assist clients in making
appropriate and suitable investment choices,
and that will satisfy other federal and state
standards of care, are reasonably designed to
achieve compliance with applicable securities
laws and regulations, it is possible that the SEC,
FINRA, the DOL, the IRS, state securities and
insurance 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.

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

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

The support tools we make available to the sales
force are designed to educate potential and
existing clients, help identify their financial
needs, generally introduce the potential benefits
of our product offerings, and identify suitable
investment products. The tools themselves or
the assumptions and methods of analyses
embedded in them could be challenged and
subject us to regulatory action by the SEC, the
DOL, FINRA or other regulators, 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

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
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 customers, sales
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 the sales force), the Primerica App,
our insurance administration system, Virtual
Base Shop (our secure intranet-based paperless
field office management system), TurboApps
(our point-of-sale tool that streamlines our
application processes), our FNA tool, our
licensing decision and support system, and our
compensation system. Our business also relies
on the use by employees, representatives and
other third parties of electronic mobile devices,
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 sales
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 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, respond to, and recover from
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
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.

ITEM 1A. RISK FACTORS

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 regulators and
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.

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
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. The NYDFS
Cybersecurity Requirements for Financial
Services Companies require covered financial
services institutions to implement a
cybersecurity program designed to protect
information systems. The NAIC has adopted the

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

Insurance Data Security Model Law (“Model
Law”), which, among other things, would require
insurers and insurance producers to develop and
maintain a written information security program,
conduct risk assessments, and assess the data
security practices of third-party service
providers. The Model Law, which has some
similarities as well as differences from the
NYDFS’s cybersecurity regulation, has been
adopted by several states. In June 2018,
California adopted the California Consumer
Protection Act of 2018 (“CCPA”) designed to give
consumers more control over their personal
data. The CCPA, which imposes strict liability for
security incidents under certain circumstances,
will become effective in January 2020. All 50 U.S.
states and Canada have breach notification
requirements.

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, including a
security incident. In the event of either a
campus-wide destruction or the inability to
access our data center or 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 backup/recovery site located around

20 miles from our main 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 the 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.

Licensing requirements will impact the size
of the mortgage loan sales force.

To offer mortgage loan products, sales
representatives must be individually licensed as
mortgage loan originators by the states in which
they do business and, in some states, they must
also be individually licensed as mortgage
brokers. These licensing requirements include
enrollment in the Nationwide Multistate
Licensing System, application to state regulators
for individual licenses, a minimum of 20 hours of
pre-licensing education, an annual minimum of
eight hours of continuing education, and the
successful completion of both national and state
tests or a national test with uniform state
content. Compliance with these licensing
regimes (including background and credit
checks) have proven to be a barrier for many
sales representatives. In addition, the tests have
historically been challenging for the sales
representatives to pass. Primerica Mortgage, LLC
must also be licensed at the company level as a
Mortgage Broker (or equivalent) and, in almost
all states, representatives’ offices must be
licensed as branch offices. To offer mortgage
loans in a state, individual representatives,
offices and Primerica Mortgage, LLC must be
licensed as required by state law. These licenses
must be renewed on an annual basis. Failure of
sales representatives to obtain the required
licenses and comply with ongoing licensing
requirements would adversely affect the size of
the mortgage loan sales force, which could
materially adversely affect our mortgage loan
business.

Our loan business is subject to various
federal and state laws, changes in which
could affect the cost or our ability to
distribute our products and could
materially adversely affect our business,
financial condition and results of
operations.

Our U.S. mortgage loan business is subject to
various federal laws, including the Truth In
Lending Act and its implementing regulation,
Regulation Z, the Equal Credit Opportunity Act
and its implementing regulation, Regulation B,
the Fair Housing Act and the Home Ownership
Equity Protection Act. We are also subject to the
Real Estate Settlement Procedures Act (RESPA)
and its implementing regulation, Regulation X,
which requires timely disclosures related to the
nature and costs of real estate settlement
amounts and limits those costs and
compensation to amounts reasonably related to
the services performed.

We are also subject to the Dodd-Frank Act and
are regulated by the Bureau of Consumer
Financial Protection, which has the authority to
examine, supervise and enforce federal
consumer financial laws, including those
impacting Primerica Mortgage, LLC’s business.
Additionally, the Dodd-Frank Act imposes
restrictions on the manner and amount of
mortgage originator compensation and
establishes a federal ability to repay standard for
all mortgage loans. Other restrictions contained
in the Dodd-Frank Act could have the effect of
limiting the availability of certain loan products
in the market and adversely impact the range of
products offered and the volume of loan
business.

Additionally, we must comply with various state
and local laws and policies concerning our
lenders, the provision of consumer disclosures,
net branching, predatory lending and high cost
loans and recordkeeping. Differing
interpretations of, changes in, or violations of,
any of these laws or regulations could subject us
to damages, fines or sanctions and could affect
the cost or our ability to distribute our products,
which could materially adversely affect our

ITEM 1A. RISK FACTORS

business, financial condition and results of
operations.

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 fair value of our fixed rate
income portfolio decreases. Additionally, if the
fair 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 coinsurer 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.

In 2022, financial markets will transition away
from the London Interbank Offered Rate

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

(“LIBOR”) as a reference interest rate for
securities and contract terms. The
discontinuation of LIBOR or a switch to an
alternative reference rate could adversely impact
the value and liquidity of certain investments
that use LIBOR as a reference rate and could
cause increased cost or uncertainties regarding
changes required to be made to contracts that
reference LIBOR. As of December 31, 2019,
investments that are tied to LIBOR represent less
than 5% of our invested asset portfolio. We also
have limited number of other contracts that
reference LIBOR, including our Credit Facility
Agreement and captive reinsurance agreements,
but we do not anticipate the transition to an
alternative reference rate will have meaningful
impact on such agreements.

Valuation of our investments and the
determination of what type of impairment
exists when the fair value of our
available-for-sale invested assets is below
amortized cost are both based on
estimates that may prove to be incorrect.

Our portfolio of invested assets primarily
consists of fixed-maturity securities that are
classified as available-for-sale. When the fair
value of any of our available-for-sale invested
assets declines below amortized cost, an
impairment exists and we recognize a loss in
either our statement of income or in other
comprehensive income based on the type of the
impairment. 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
available-for-sale security is below its carrying
value, we must determine what type of
impairment exists, which is based on subjective
factors and involves a variety of assumptions
and estimates.

There are certain risks and uncertainties
associated with determining the type of
impairment that exists when the fair value of
available-for-sale securities declines below

amortized cost. 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 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 of what type of impairment exists
for available-for-sale securities, 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 is a continuously evolving set of financial
accounting and reporting standards that govern
the preparation of our financial statements.
Changes to U.S. GAAP can be difficult to
implement and can materially impact how we
record and report our financial condition and
results of operations. An upcoming change in
U.S. GAAP that will impact how we record and
report our financial condition and results of
operations is Accounting Standards Update No.
2018-12, Financial Services – Insurance (Topic
944) – Targeted Improvements to the Accounting
for Long-Duration Contracts (“ASU 2018-12”).
The amendments in this update will change the
accounting guidance we follow for long-
duration insurance contracts. The most notable
amendment included in ASU 2018-12 will
require us to update assumptions used in
measuring future policy benefits, including
mortality, persistency, and disability rates, at
least annually instead of locking those
assumptions at contract inception and reflecting

differences in assumptions and actual
performance as the experience occurs. ASU
2018-12 also includes changes to how we
amortize DAC and determine and update the
discount rate assumptions used in measuring
future policy benefits reserves while increasing
the level of financial statement disclosures
required. The amendments in ASU 2018-12 are
scheduled to be effective for the Company
beginning in 2022 as of the earliest period
presented in the consolidated financial
statements. We anticipate that the adoption of
ASU 2018-12 will have a pervasive impact on our
consolidated financial statements and related
disclosures and will require changes to certain of
our processes, systems, and controls. This new
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
subsidiaries are prepared in accordance with
SAPs prescribed or permitted by state insurance
departments and the NAIC. SAPs, including
actuarial methodologies for estimating reserves,
are subject to continuous evaluation by the
NAIC and state insurance departments. Similarly,
our Canadian life insurance subsidiary is
required to prepare statutory financial
statements in accordance with IFRS, as
prescribed by the OSFI in Canada. In 2017, the
International Accounting Standards Board (the
“IASB”) issued an IFRS standard that will
significantly overhaul our Canadian life insurance
subsidiary’s accounting for insurance contracts
(“IFRS 17”) for statutory reporting purposes. The
IASB has engaged in the process of issuing
targeted amendments to IFRS 17 in response to
concerns and implementation challenges raised
by stakeholders and the proposed effective date
of 2022 could be impacted by such

ITEM 1A. RISK FACTORS

amendments. 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
these and other 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 could
materially adversely affect our business,
financial condition and results of
operations.

Our business, financial condition and results of
operations may be materially adversely affected
by economic downturns in the United States and
Canada, as well as issues in the global economy
that may have repercussions on our local
markets. Economic downturns, which are often
characterized by higher unemployment, lower
household 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
sales representatives. This could cause a
decrease in the asset value of client accounts,
reduce our trailing commission revenues and
result in a decline in the fair value of 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.

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

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), the
Electronic Funds Transfer Act, and the Interlink
Network Inc. Operating Regulations. 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.

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 third-party independent 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
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 undergoing multi-state treasurer
unclaimed property audits by 30 jurisdictions
currently 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.

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.

ITEM 1A. RISK FACTORS

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 the level of
enforcement actions and investigations by
federal, state and provincial regulators may
increase correspondingly. Legislative, regulatory
and enforcement activity at the federal level may
contribute to heightened activity at the state
and provincial level. If we or the 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
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

Primerica 2019 Annual Report

ITEM 1A. RISK FACTORS

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,
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, direct sales companies, and
technology 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 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. In addition, regulatory changes and
competitive factors are leading to innovations in
product offerings and compensation structures.
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 the 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.

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

ITEM 1A. RISK FACTORS

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.
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;

Primerica 2019 Annual Report

We also maintain a regional head office location
for our Canadian operations in Mississauga,
Ontario. Our Canadian head office location
consists of general office space under a lease
expiring in October 2030.

We lease general office space for our NBLIC
subsidiary in Long Island City, New York under a
sublease expiring in March 2020. Subsequent to
the sublease’s expiry, NBLIC’s offices will be
relocated to a different facility in Long Island
City, New York under a lease expiring in 2030.

Each of these leased properties is used by all of
our operating segments. We believe that our
existing facilities in the U.S. and Canada are
adequate for our current requirements and for
our operations for the foreseeable future.

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 1A. RISK FACTORS

•

variations in our quarterly operating results;

changes, or the expectation of changes in
federal and state law, policy and regulation,
or changes in the ways that laws and
regulations are interpreted and applied;

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

actions by the New York Stock Exchange
(“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 or geopolitical conditions;

and

• other risks and uncertainties described in

these risk factors.

ITEM 1B. UNRESOLVED STAFF
COMMENTS.

Not applicable.

ITEM 2.

PROPERTIES.

Our executive offices and business operations
are housed primarily at our home office facility
located in Duluth, Georgia. Our home office
facility consists of general office space where our
primary business operations are maintained
including our information technology
infrastructure and our media production studios.
We lease the building, which is approximately
345,000 square feet, under a lease expiring in
June 2028.

ITEM X. INFORMATION ABOUT OUR EXECUTIVE
OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES

INFORMATION ABOUT OUR

ITEM X.
EXECUTIVE OFFICERS AND CERTAIN
SIGNIFICANT EMPLOYEES

Our executive officers are elected by our Board of Directors.

The name, age at February 27, 2020, and position of each of our executive officers and certain
significant employees are presented below. These officers comprise our senior management team.

Name

Age

Position

Glenn J. Williams

60 Chief Executive Officer

Peter W. Schneider

Alison S. Rand

Gregory C. Pitts

William A. Kelly

President

Executive Vice President and Chief Financial Officer

Executive Vice President and Chief Operating Officer

64 Chief Executive Officer, PFS Investments and Co-Head of Business

Technology

John A. Adams

61 Chief Executive Officer, Primerica Life Insurance Company of Canada

Michael C. Adams

Jeffrey S. Fendler

Kathryn E. Kieser

Michael W. Miller

Robert H. Peterman, Jr.

Brett A. Rogers

Julie A. Seman

Executive Vice President and Chief Business Technology Officer

Executive Vice President and Chief Compliance and Risk Officer

Executive Vice President and Chief Reputation Officer

Executive Vice President, Head of Corporate Development and Strategic
Planning and President of Primerica Mortgage, LLC

Executive Vice President and Chief Marketing Officer

Executive Vice President and General Counsel

Executive Vice President, Field Distribution, Primerica Life, Client

Solutions and Strategic Markets

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 of Field and Product Marketing for
international operations from 2000 to 2005, as
President and Chief Executive Officer of
Primerica Canada from 1996 to 2000, and in
roles of increasing responsibility as part of
Primerica’s international expansion team in
Canada from 1985 to 2000. He began his career
with Primerica in 1981 as a member of the
Company’s sales force and joined the home
office team in 1983. Mr. Williams earned his B.S.
in education from Baptist University of America
in 1981. He currently serves on the board of
trustees for the Georgia Baptist Foundation.

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
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 Securities Industry and
Financial Markets Association (SIFMA) and the
Camp John W. Hanes (YMCA).

Alison S. Rand has served as Executive Vice
President and Chief Financial Officer since 2000
and in various capacities at the Company since
1995. Prior to 1995, Ms. Rand worked in the

Primerica 2019 Annual Report

ITEM X. INFORMATION ABOUT OUR EXECUTIVE
OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES

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 Chair of the board of
directors of Cool Girls, Inc., Vice Chair of the
Audit Committee of the University of Florida
National Foundation board of directors and a
member of the Executive Committee of the
board of directors of Junior Achievement of
Georgia. She also serves on the Terry College of
Business Executive Education CFO Roundtable
Advisory Board.

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 the information
technology division and in various capacities at
the 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 board of
directors of the Boy Scouts of America Atlanta
Area Council.

William A. Kelly has served as Chief Executive
Officer of PFS Investments since May 2018, as
President and Chief Executive Officer from 2005
to May 2018 and in various capacities at the
Company since 1985. He has also served as the
Co-Head of Business Technology since
December 2017. Mr. Kelly graduated from the
University of Georgia in 1979 with a B.B.A. in
accounting.

Set forth below is biographical information
concerning certain significant employees.

John A. Adams has served as the Chief Executive
Officer of Primerica Life Insurance Company of
Canada (“Primerica Life Canada”) since 2003. He
previously served Primerica Life Canada as Chief
Financial Officer and before that as Vice
President of Finance. Before joining Primerica,
Mr. Adams served as the Director of Finance of a
major Canadian university and Treasurer of an
insurance group of companies. He began his
career in 1980 with KPMG LLP. He graduated
from Trinity College at the University of Toronto
in 1980 with a Bachelor of Commerce, and is a
Chartered Accountant and Chartered

Professional Accountant. Mr. Adams has
provided industry leadership as a board member
of the Investment Funds Institute of Canada (the
mutual fund industry association) since 2005,
having served as its Board Chairman from 2015
to 2017. He has also served as a board member
of the Federation of Mutual Fund Dealers.

Michael C. Adams has served as Co-Head of
Business Technology since December 2017, as
Chief Business Technology Officer since April
2010, as Executive Vice President responsible for
business technology since 1998 and in various
capacities at the Company since 1980.
Mr. Adams earned his B.A. in business and
economics from Hendrix College in 1978.

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

Kathryn E. Kieser has served as Executive Vice
President and Chief Reputation Officer of
Primerica, Inc. and President and Chair of the
Primerica Foundation since January 2019.
Previously, she served as Executive Vice
President of Investor Relations from April 2010
to December 2018. Ms. Kieser joined Primerica in
October 1995 and has held many positions over
her career including Vice President of Sales and
Product Marketing, Senior Vice President of
Auto and Homeowners Insurance, and Chief
Marketing Officer for Primerica Life Insurance
Company. Ms. Kieser earned her B.S. degree in
Business Administration from Auburn University
and a Master of Science degree from Georgia
State University. She serves on the boards of
directors for the Gwinnett Chamber of
Commerce and the Community Foundation for
Northeast Georgia.

Michael W. Miller has served as Executive Vice
President and Head of Corporate Development
and Strategic Planning since September 2015.
He leads the Company’s strategic undertakings,
including strategic partnerships, organic growth
initiatives, M&A and long-term business
planning. He has also been President of

Primerica Mortgage, LLC since January 2018. He
was previously a senior investment banker at
Lazard from 2006 to September 2015, where he
specialized in providing strategic advice to a
broad array of financial institutions and their
regulators. While at Lazard, Mr. Miller advised on
over $85 billion of successful transactions and
restructuring assignments. Mr. Miller also
worked in the insurance industry in various
capacities. He holds a B.S. from Brigham Young
University in Business Administration and
Finance and earned the Charted Property &
Casualty Underwriter designation.

Robert H. Peterman, Jr. has served as Executive
Vice President and Chief Marketing Officer since
June 2018. He previously served as President of
Primerica Distribution from December 2013 to
June 2018, where he was responsible for
recruiting, licensing, licensing education, field
compensation, field equity, and decision
support. In 2005, he became Executive Vice
President and was given responsibility for the
Company’s Grow the Sales Force initiative. He
also served as Chief Executive Officer of
Primerica’s New York life insurance company
from January 2017 to June 2018. Mr. Peterman
joined the Company in October 1984 and has
served in many varying roles throughout the
business.

Brett “Ben” A. Rogers has served as our Executive
Vice President and General Counsel since May

ITEM X. INFORMATION ABOUT OUR EXECUTIVE
OFFICERS AND CERTAIN SIGNIFICANT EMPLOYEES

2019. Previously, he was a Partner at Rogers &
Hardin LLP in Atlanta, where he represented
Primerica as outside counsel for more than
twenty years. At Rogers & Hardin, his practice
focused on complex business matters, including
securities litigation, arbitration, and general
commercial litigation. Mr. Rogers received a B.A.
from Dickinson College and his J.D. with honors
from Florida State University.

Julie A. Seman has served since May 2018 as
Executive Vice President and Chief Marketing
Officer of Field Distribution, Primerica Life, Client
Solutions, and Strategic Markets. From August
2014 she has been responsible for sales force
growth and increased product distribution
through the training and development of
financial services representatives in the United
States, Canada, Puerto Rico and Guam. In
addition, Ms. Seman augments Primerica’s
strategic markets which include African
American, Hispanic, Partnership and Women
with a focus on personal financial education and
entrepreneurship. Prior thereto, she was Senior
Vice President of Client Solutions from April
2010 to August 2014 where she supervised all
front-end products, including Auto & Home
Marketing and Legal Protection and oversaw
field communication tools. Ms. Seman joined the
Company in September 1998 and has served in
many roles with increasing responsibility.
Ms. Seman received her Bachelors of Business
Management from Southern Illinois University.

Primerica 2019 Annual Report

PART II

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

MarketInformation

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.”

Holders

As of January 31, 2020, we had 137 holders of
record of our common stock.

Dividends

In the first quarter of 2020, we declared a
quarterly dividend to stockholders of $0.40 per
share. We currently expect to continue to pay
comparable 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.

IssuerPurchasesofEquitySecurities

Depending on market conditions, shares of our
common stock may be repurchased from time to
time at prevailing market prices through open
market or privately negotiated transactions.

The Parent Company has no obligation to
repurchase any shares. Subject to applicable
corporate and securities laws, repurchases may
be 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, 2019,
we repurchased shares of our common stock as
follows:

Period

October 1-31, 2019

November 1-30, 2019

December 1-31, 2019

Total

Total number of
shares purchased (1)

Average price paid
per share (1)

Total number of shares
purchased as part of
publicly announced
plans or programs (2)

Approximate dollar
value of shares that
may yet be
purchased under the
plans or programs (3)

191,915

155,917

2,418

350,250

$123.48

129.95

135.45

$126.44

191,915

155,917

—

347,832

$70,261,375

49,999,961

$49,999,961

(1) Consists of (a) repurchases and withholdings of 2,418 shares at an average price of $135.45 arising from share-based

compensation withholdings, and (b) open market share repurchases under the share repurchase program approved by our
Board of Directors.

(2) On February 7, 2019, our Board of Directors authorized a share repurchase program, which was announced the same day,

for up to $275.0 million of our outstanding common stock (including $65.0 million remaining from the prior repurchase
program) for purchases through June 30, 2020.

(3) On February 10, 2020, our Board of Directors authorized a share repurchase program, which was announced on February 11,

2020, for up to $300.0 million of our outstanding common stock (including $50.0 million remaining from the prior
repurchase program) for purchases through June 30, 2021. As a result, no further repurchases will occur under the prior
repurchase program.

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

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

ITEM 5. COMMON STOCK AND STOCKHOLDER MATTERS

in each investment option as of December 31,
2014 and the reinvestment of all dividends. 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 Stockholder Return

e
u
a
V
x
e
d
n
I

$300

$250

$200

$150

$100

$50

4
1
0
2
/
1
3
/

2
1

5
1
0
2
/
1
3
/

2
1

6
1
0
2
/
0
3
/

2
1

7
1
0
2
/
0
3
/

2
1

8
1
0
2
/
1
3
/

2
1

9
1
0
2
/
1
3
/

2
1

Primerica, Inc.

S&P 500 Insurance

S&P MidCap 400

Index

12/31/2014

12/31/2015

12/31/2016

12/31/2017

12/31/2018

12/31/2019

Period Ended

Primerica, Inc.

S&P 500 Insurance

S&P MidCap 400

$100.00

$ 88.20

$130.82

$193.92

$188.33

$254.45

100.00

102.33

97.82

120.32

118.11

139.80

137.29

124.13

122.08

160.60

154.06

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

1934.

Primerica 2019 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.

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

Year ended December 31,

2019

2018

2017

2016

2015

(In thousands, except per-share amounts)

$ 2,753,866
(1,569,729)

$ 2,667,104
(1,581,164)

$ 2,562,109
(1,600,771)

$ 2,444,268
(1,600,559)

$ 2,345,444
(1,595,220)

1,184,137
713,804
94,073

1,085,940
677,607
81,430

961,338
591,317
79,017

843,709
541,686
79,025

750,224
537,146
76,509

4,965
55,525

(2,121)
56,987

1,339
56,091

4,088
50,576

(1,738)
42,058

2,052,504

1,899,843

1,689,102

1,519,084

1,404,199

493,820

457,583

416,019

367,655

339,315

254,552
357,198
178,817
25,051
28,811
237,144

239,730
335,384
168,156
24,490
28,809
229,607

209,399
297,988
147,280
21,108
28,488
189,300

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

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

Total benefits and expenses

1,575,393

1,483,759

1,309,582

1,181,489

1,113,218

Income before income taxes

Income taxes

Net Income

477,111
110,720

366,391

416,084
91,990

324,094

379,520
29,265

350,255

337,595
118,181

219,414

290,981
101,110

189,871

Basic earnings per share:
Continuing operations

Basic earnings per share

Diluted earnings per share:
Continuing operations

Diluted earnings per share

Dividends declared per share

8.65

8.62

1.36

7.35

7.33

1.00

7.63

7.61

0.78

4.59

0.70

3.70

0.64

Balance sheet data

Investments (excluding the
held-to-maturity security)

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

ITEM 6. SELECTED FINANCIAL DATA

December 31,

2019

2018

2017

2016

2015

(In thousands)

262,138
4,141,569
2,133,920

256,876
4,169,823
2,325,750

$ 2,473,840 $ 2,160,596 $ 2,007,993 $ 1,875,631 $ 1,813,283
152,294
279,962
4,110,628
4,205,173
1,500,259
1,951,892
13,688,531 12,595,048 12,460,703 11,438,943 10,610,783
5,431,711
5,954,524
372,552
373,288
9,465,011
1,145,772

5,673,890
372,919
12,036,040 11,133,535 11,041,602 10,217,569
1,221,374

211,976
4,193,562
1,713,065

6,168,157
373,661

6,446,569
374,037

1,461,513

1,652,491

1,419,101

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, 2019. 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 section generally discusses 2019 and 2018
items and comparisons between 2019 and 2018
financial results. Discussions of 2017 items and
comparisons between 2018 and 2017 financial
results can be found in “Management’s
Discussion and Analysis of Financial Condition
and Results of Operations” in Part II, Item 7 of
the Company’s Annual Report on Form 10-K for

the fiscal year ended December 31, 2018 (the
“2018 MD&A”).

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
also impact prospective recruits’ perceptions of
the business opportunity that becoming a 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

Primerica 2019 Annual Report

ITEM 7. MD&A

impact consumer demand for the savings and
investment products we distribute. Our
customers’ perception of the strength of the
capital markets may 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. As a result, changes in
the Canadian dollar exchange rate may
significantly affect the result of our business 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 the Independent Sales Force. Our
ability to increase the size of the independent
sales force (“sales representatives” or “sales
force”) is largely based on the success of the
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 the licensed sales force because new
recruits may obtain the requisite licenses at rates
above or below historical levels.

New recruits declined in 2019 to 282,207 from
290,886 in 2018 and from 303,867 in 2017 as we
experienced slower momentum in recruiting
after a sustained period of growth prior to 2018.
The slower momentum in recruiting led to a
decline in the number of new life-licensed sales
representatives to 44,739 in 2019 from 48,041 in
2018 and 48,535 in 2017. The rate at which
recruits became licensed to sell life insurance
increased 4% in the second half of 2019 over the
prior year period and as a result the life-licensed
sales force remained relatively flat with 130,522
sales representatives at December 31, 2019
compared to 130,736 at December 31, 2018.

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

2019

2018
130,370 128,977 121,291
287,809 301,589 312,799

2017

0.18

0.19

0.21

The volume of new term life insurance policies
issued generally moves in conjunction with the
size of the life-licensed sales force, subject to
fluctuations in productivity as defined above.
Productivity of 0.18 new policies issued per life-
licensed sales representative per month was

slightly lower than the productivity rate in 2018,
resulting in a decline in the number of new
policies issued year-over-year. The rate of
productivity in 2019 continues to be within our
historical range of 0.18 to 0.22.

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

ITEM 7. MD&A

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

Year ended December 31,

% of
beginning
balance

2018

% of
beginning
balance

2017

% of
beginning
balance

2019

$781,041

$763,831

$728,385

(Dollars in millions)

Issued face amount
Terminations
Foreign currency

93,994
(71,519)
4,746

12%
(9)%
1%

95,209
(70,291)
(7,708)

12%
(9)%
(1)%

95,635
(65,958)
5,769

13%
(9)%
1%

Net change in face amount

27,221

17,210

35,446

Face amount in force, end of period

$808,262

$781,041

$763,831

The face amount of term life insurance policies
in force increased from 2018 to 2019 as the level
of face amount issued continued to exceed the
face amount of policy terminations. As a
percentage of the beginning face amount in
force, issued face amount as well as terminated
face amount during 2019 remained consistent
with 2018. The effect of a strengthening
Canadian dollar in relation to the U.S. dollar
favorably impacted the translated face amount

in force in 2019. Our average issued face amount
per policy in 2019 was consistent with 2018 at
approximately $248,500 and $246,200,
respectively.

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

Year ended December 31,

2019 vs. 2018
change

2018 vs. 2017
change

2019

2018

2017

(Dollars in millions)

Product sales:

Retail mutual funds
Annuities and other

$ 4,056 $ 3,964 $ 3,802 $
2,096

1,670

2,397

2% $ 162
426

4%
26%

301 14%

Total sales-based revenue generating

product sales
Managed investments
Segregated funds and other

6,453
739
341

6,060
753
227

5,472
428
292

393
(14)
114 50%

588
6%
(2)% 325
(65)

11%
76%
(22)%

Total product sales

$ 7,533 $ 7,040 $ 6,192 $ 493

7% $ 848

14%

Average client asset values:

Retail mutual funds
Annuities and other
Managed investments
Segregated funds

$39,896 $38,108 $35,174 $1,788
861
554 18%
(16)

17,002
2,195
2,420

18,315
3,009
2,410

19,176
3,563
2,394

5% $2,934
5% 1,313
814
(10)

8%
8%
37%
*

Total average client asset values

$65,029 $61,842 $56,791 $3,187

5% $5,051

Less than 1%.

Primerica 2019 Annual Report

ITEM 7. MD&A

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

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

Inflows
Redemptions

Net flows

Change in fair value, net
Foreign currency, net

Net change in asset values

Year ended December 31,

% of
beginning
balance

2018

% of
beginning
balance

2017

% of
beginning
balance

2019

(Dollars in millions)

$57,704

$61,167

$52,340

7,533
(6,428)

1,105
11,221
507

12,833

13%
(11)%

2%
19%
1%

22%

7,040
(5,944)

1,096
(3,712)
(847)

(3,463)

12%
(10)%

2%
(6)%
(1)%

(6)%

6,192
(5,147)

12%
(10)%

1,045
7,158
624

8,827

2%
14%
1%

17%

Asset values, end of period

$70,537

$57,704

$61,167

Average number of fee-generating positions was as follows:

Year ended December 31,

2019 vs. 2018
change

2018 vs. 2017
change

2019

2018

2017

Positions % Positions %

(Positions in thousands)

Average number of fee-generating positions(1):

Recordkeeping and custodial
Recordkeeping only

2,005
644

2,081
658

2,226
675

(76)
(14)

(4)% (145)
(2)% (17)

(7)%
(3)%

Total average number of fee- generating

positions

2,649

2,739

2,901

(90)

(3)% (162)

(6)%

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

mutual fund positions. We may also receive fees, which are earned on a per account basis, for custodial services that we
provide to clients with retirement plan accounts that hold positions in these mutual funds.

Product sales. The increase in investment and
savings product sales in 2019 from 2018 was
driven by strong demand for our variable
annuity and mutual fund products due to robust
equity market performance in 2019.

Client asset values. Client asset values increased
as of December 31, 2019 from December 31,
2018 primarily due to recovery from the market
correction in the fourth quarter of 2018 and
positive market performance in 2019. Average
client asset values also increased in 2019 from
2018 largely due to continued market
appreciation experienced throughout 2019.

Average number of fee-generating
positions. The average number of
fee-generating positions decreased in 2019 from

2018 primarily due to the completed transition
of our clients’ managed account investments
from Freedom Portfolios, for which we earned
transfer agent recordkeeping fees and, in some
cases, custodial fees, to the Lifetime Investments
Platform, for which we do not earn transfer
agent recordkeeping fees or custodial fees.
Partially offsetting the impact from the managed
account transition was an increase in the number
of retail mutual fund positions for which we do
earn these fees. With the transition of Freedom
Portfolios to the Lifetime Investments Platform
completed during 2019, we only earn transfer
agent recordkeeping fees and custodial fees on
retail mutual fund positions on our transfer
agent recordkeeping platform.

Significant regulatory changes.

Standards of care. On June 5, 2019, the SEC
adopted rules and interpretations addressing
the standards of conduct applicable to broker-
dealers and investment advisers and their
associated persons (collectively, the “SEC
Rulemaking”). Specifically, the SEC Rulemaking
(i) creates a new “best interest” standard of
conduct for broker-dealers (“Reg BI”), (ii)
imposes new disclosure requirements through
summary forms intended to clarify relationships
among brokers, advisers, and their retail
customers (“Form CRS”), (iii) provides
interpretative guidance regarding the standard
of conduct that applies to investment advisers
under the Investment Advisers Act of 1940
(“Advisers Act’), and (iv) provides interpretative
guidance on the scope of the broker-dealer
“solely incidental” exclusion from the definition
of “investment adviser” in the Advisers Act. The
SEC Rulemaking became effective on July 12,
2019, with a compliance date of June 30, 2020
for Reg BI and Form CRS. We anticipate making
certain changes to our sales processes, policies,
and procedures in order to comply with the SEC
Rulemaking. While we acknowledge that its
higher standards of care and enhanced
obligations increase regulatory and litigation
risk, we do not anticipate that the SEC
Rulemaking will cause significant disruption to
our business.

ITEM 7. MD&A

quantify the financial impact, if any, of any
changes to our business that may be necessary
in order to comply with such laws or regulations
at this time.

Restrictions on compensation models in
Canada. On February 20, 2020, the
organization of provincial and territorial
securities regulators (collectively referred to as
the “Canadian Securities Administrators” or
“CSA”) published final rule amendments,
applicable in all provinces except Ontario, to
prohibit upfront sales commissions by fund
companies for the sale of mutual funds offered
under a prospectus in Canada (“DSC Ban”). The
final amendments have an effective date of
June 1, 2022. The CSA indicated that the
participating provinces’ prohibition of upfront
sales commissions by fund companies will
require firms to discontinue the use of the
mutual fund deferred sales charge
compensation model, which is the primary
model for the mutual funds we distribute in
Canada. These rules will result in changes in
compensation arrangements with both the fund
companies that offer the mutual fund products
we distribute and sales representatives in the
participating provinces. The deferred sales
charge compensation model is permitted to be
used until the effective date. While Ontario has
disagreed with the prohibition of upfront sales
commissions by fund companies and is not at
this time participating in adoption of the DSC
Ban, the Ontario Securities Commission has
proposed several restrictions on the use of the
deferred compensation model, including a
$50,000 maximum account size and a limitation
on the maximum term of the deferred sales
charge schedule to three years compared to
current industry practice where the maximum
term can be up to seven years. These
restrictions, if any, will also be effective June 1,
2022. We have not finished the process of
determining the types of changes we will make
in response to the DSC Ban and the restrictions
in Ontario, therefore, we are unable to quantify
the potential impact on our financial condition
or results of operations.

Primerica 2019 Annual Report

ITEM 7. MD&A

FactorsAffectingOurResults

Term Life Insurance Segment. Our Term Life
Insurance segment results are primarily driven
by sales volumes, how closely actual experience
matches 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 in a
period will have a more immediate impact on
our cash flows than on revenue and expense
recognition in that period.

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 sales representatives
generally remains within a range (i.e., an average
monthly rate of new policies issued per life-
licensed sales representative between 0.18 and
0.22). The volume of our term life insurance
products sales will fluctuate in the short term,
but over the longer term, our sales volume
generally correlates to the size of the
independent 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, disability, 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 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 that are locked-in
at time of issue.

• Mortality. Our profitability will fluctuate to
the extent actual mortality rates differ from
the assumptions that are locked-in at time
of issue. We mitigate a significant portion of
our mortality exposure through reinsurance.

• Disability. Our profitability will fluctuate to
the extent actual disability rates, including
recovery rates for individuals currently

•

disabled, differ from the assumptions that
are locked-in at the time of issue or time of
disability.

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
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. We have generally reinsured
between 80% and 90% of the mortality risk on
our term life insurance (excluding coverage
under certain riders) on a quota share yearly
renewable term (“YRT”) basis. 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

ITEM 7. MD&A

specified percentage of the block of policies
subject to the reinsurance arrangement, the YRT
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 administer all such
policies subject to these coinsurance
agreements. Policies reaching the end of their
initial level term period are no longer ceded
under the IPO coinsurance transactions.

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.

Primerica 2019 Annual Report

ITEM 7. MD&A

• 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 transfer agent recordkeeping
positions and non-bank custodial fee-generating
accounts we administer.

Sales. We earn commissions and fees, such as
dealer re-allowances and marketing and
distribution 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 the independent 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

the independent 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 distribution fees (trail
commissions or, with respect to U.S. mutual
funds, 12b-1 fees) on mutual fund and annuity
assets in the United States and Canada. In the
United States, we also earn investment advisory
and administrative fees on assets in managed
investments. 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 transfer agent
recordkeeping fees for administrative functions
we perform on behalf of several of our mutual
fund providers. An individual client account may
include multiple fund positions for which we
earn transfer agent 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 spread the revenues generated over
time because we earn higher revenues
based on assets under management for
these accounts each period as opposed to
earning upfront revenues based on product
sales; and

sales of a higher proportion of mutual fund
products sold will impact the timing and
amount of revenue we earn given the
distinct transfer agent recordkeeping and
non-bank custodial services we provide for
certain mutual fund products we distribute.

Corporate and Other Distributed Products
Segment. We earn revenues and pay
commissions and referral fees within our
Corporate and Other Distributed Products
segment for various other insurance products,
prepaid legal services and other financial
products, all of which are originated by third
parties. Our Corporate and Other Distributed
Products segment also includes in-force policies
from several discontinued lines of insurance
underwritten by National Benefit Life Insurance
Company (“NBLIC”).

Corporate and Other Distributed Products
segment net investment income reflects actual
net investment income recognized 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 also includes 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,
redundant reserve financing transactions and

ITEM 7. MD&A

our revolving credit facility, 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”),
redundant reserve financing transactions, our
revolving credit facility, and our common stock.
See Note 10 (Debt), Note 12 (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.

The year-end exchange rates (USD per CAD)
used by the Company to translate our Canadian
dollar functional currency assets and liabilities
into U.S. dollars increased by 5% in 2019 from
2018. The average exchange rates used by the
Company in 2019 to translate our Canadian
dollar functional currency revenues and
expenses into U.S. dollars decreased 2%
compared to 2018.

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.

Income Taxes. The profitability of the
Company and its subsidiaries is affected by
income taxes assessed by federal, state, and U.S.
territorial jurisdictions in the U.S. and federal and
provincial jurisdictions in Canada. Changes in tax
legislation, such as the Tax Cuts and Jobs Act of

Primerica 2019 Annual Report

ITEM 7. MD&A

2017 (the “Tax Reform Act”), impact the
measurement of our deferred tax assets and
liabilities and the amount of income tax expense
we incur.

The Tax Reform Act reduced the U.S. federal
statutory tax rate from 35% to 21% effective
January 1, 2018 and included other tax reforms
affecting business, such as allowable business
deductions and international tax provisions. The
decrease in the federal corporate tax rate
reduced the Company’s overall effective tax rate
in 2018 and thereafter even after factoring in
certain increases from other provisions
introduced by the Tax Reform Act.

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 recoverable 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 level
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.

In particular, the balance of DAC in our Term Life
Insurance segment is susceptible to differences
between estimated persistency assumptions and
actual persistency experienced. If actual lapses
are different from pricing assumptions for a
particular period, the amount of DAC amortized
for that period will be affected. For example, if
actual annual lapses at each policy duration are
10% higher, the additional DAC balance as of
December 31, 2019 that would be amortized is
approximately $23 million. To further illustrate, if
we expect 1,000 policies in the first policy
duration to lapse, this sensitivity demonstration
assumes that an additional 10%, or 1,100 in
total, first duration policies actually lapse. We
believe that a 10% higher annual lapse rate 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.
Differences between actual and expected
persistency also impact the balance of future

policy benefit reserves and reinsurance
recoverables as discussed below.

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 are
reserves established for death claims and waiver
of premium benefits and have been computed
using a net level method and include
assumptions as to mortality, persistency, interest
rates, disability rates, and other 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
reinsurance recoverables 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. We cannot determine with
precision the ultimate amounts that we will pay
for actual claims or the timing of those
payments.

The net impact of differences between actual
and expected persistency on future policy
benefit reserves and reinsurance recoverables
will partially offset the earnings impact
recognized from DAC amortization noted above.
In our Term Life Insurance segment, if actual
annual lapses at each policy duration are 10%

ITEM 7. MD&A

higher, the additional future policy benefit
reserves that would be released is approximately
$25 million, partially offset by the release of the
corresponding recoverable from reinsurers asset
of approximately $11 million using balances as
of December 31, 2019. Higher lapses in later
policy 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.

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.

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 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.
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. For example, as of
December 31, 2017, we measured our deferred
tax assets and liabilities for temporary
differences subject to U.S. federal income tax
using the 21% statutory rate that became
effective on January 1, 2018 as a result of the Tax
Reform Act enacted on December 22, 2017. We
recognized the effect on deferred tax assets and
liabilities of a change in tax rates in income in
the period that includes the enactment date and,
therefore, we have recognized the impact from
the previous 35% statutory rate to the updated
21% statutory rate through income during the
year ended December 31, 2017.

Primerica 2019 Annual Report

ITEM 7. MD&A

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 require
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.

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

We also hold equity securities, including
common and non-redeemable preferred stock.
Effective January 1, 2018, the Company adopted
Accounting Standards Update No. 2016-01,
Financial Instruments—Overall (Subtopic 825-10)

– Recognition and Measurement of Financial
Assets and Financial Liabilities (“ASU 2016-01”).
As a result, these equity securities are measured
at fair value and changes in unrealized gains and
losses are recognized in net income. Prior to
adoption, equity securities were designated as
available-for-sale and reported at fair value
(except for other-than-temporary impairment)
with unrealized gains (losses) recorded in other
comprehensive income (loss). Changes in fair
value of trading securities are included in net
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
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
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.

Beginning in 2020, the Company will adopt
Accounting Standards Update No. 2016-13,
Financial Instruments—Credit Losses (Topic 326)
– Measurement of Credit Losses on Financial
Instruments (“ASC 326”). ASC 326 maintains the
fundamental incurred probable loss approach
for measuring losses in the statement of income
and replaces the other-than-temporary
impairment model with a subtly different credit
loss model. 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 will still recognize the impairment
in our statements of income by writing down the
amortized cost basis to the fair value under ASC
326. For available-for-sale securities in an
unrealized loss position that we do not intend to
sell or it is not more-likely-than-not that we will
be required to sell before the expected recovery
of the amortized cost basis, ASC 326 requires
that we recognize the portion of the impairment
that is due to a credit loss in our statements of
income through an allowance. Then, we will be
allowed to reverse credit losses previously
recognized in the allowance in situations where
the estimate of credit losses on those securities
has declined. The amendments in ASC 326 will

ITEM 7. MD&A

also preclude us from considering the length of
time an available-for-sale security has been in an
unrealized loss position and removes the
requirement to consider recoveries or declines in
fair value after the balance sheet date when
determining whether an impairment on a
security is due to a credit loss. The Company
does not expect the adoption of ASC 326 will
result in any material changes to impairment
losses recognized in our statements of income
for available-for-sale securities.

Analyses that we perform to determine losses
recognized in our statements of income for
impaired available-for-sale securities involve the
use of estimates, assumptions, and subjectivity.
If these factors or future events change, we
could experience material losses recognized in
our statements of income for impaired
available-for-sale securities 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.

• 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 distribution fees from
product originators, fees for non-bank
custodial services rendered in our capacity

Primerica 2019 Annual Report

ITEM 7. MD&A

as nominee on client retirement accounts
funded by mutual funds on our servicing
platform, transfer agent 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 available-for-sale
securities, OTTI charges, and changes in the
fair value of equity securities.

• Other, net. Reflects revenues generated
primarily from the fees charged for access
to Primerica Online (“POL”), our primary
sales force support tool, 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.

Sales commissions. Represents
commissions to the 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, 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 with respect to insurance
products that are not eligible for deferral.

Interest expense. Reflects interest on our
notes payable, any interest and the
commitment fee on our revolving credit
facility, the financing charges related to the
letter of credit issued under the credit
facility agreement with Deutsche Bank (the
“Peach Re Credit Facility Agreement”), 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, non-bank custodial and
transfer agent recordkeeping administrative
costs, outsourcing and professional fees,
and other corporate and administrative fees
and expenses.

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 using methods expected to reasonably
measure the benefit received by each

ITEM 7. MD&A

reporting segment. Such methods include time
studies, recorded usage, revenue distribution,
and sales force representative distribution. These
allocated items include fees charged for access
to POL and costs incurred for technology, sales
force support, occupancy and other general and

administrative costs. 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, Inc. and Subsidiaries Results. Our results of operations for the years ended
December 31, 2019, 2018, and 2017 were as follows:

Year ended December 31,

2019 vs. 2018
change

2018 vs. 2017
change(1)

2019

2018

2017(1)

(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

$ 2,753,866 $ 2,667,104 $ 2,562,109 $ 86,762
(11,435)

(1,600,771)

(1,569,729)

(1,581,164)

3% $104,995
(1)% (19,607)

1,184,137
713,804

1,085,940
677,607

961,338
591,317

98,197
36,197

9% 124,602
86,290
5%

4%
(1)%

13%
15%

142,398

118,915

105,882

23,483 20%

13,033

12%

(48,325)

(37,485)

(26,865)

10,840 29%

10,620

40%

94,073

81,430

79,017

12,643 16%

2,413

4,965
55,525

(2,121)
56,987

1,339
56,091

7,086
(1,462)

*
(3)%

(3,460)
896

*
2%

Total revenues

2,052,504

1,899,843

1,689,102

152,661

8% 210,741

12%

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

Total benefits and

expenses

Income before
income taxes

Income taxes

Net income

493,820
254,552
357,198
178,817
25,051
28,811
237,144

457,583
239,730
335,384
168,156
24,490
28,809
229,607

416,019
209,399
297,988
147,280
21,108
28,488
189,300

36,237
14,822
21,814
10,661
561
2
7,537

8%
6%
7%
6%
2%
*
3%

41,564
30,331
37,396
20,876
3,382
321
40,307

10%
14%
13%
14%
16%
1%
21%

1,575,393

1,483,759

1,309,582

91,634

6% 174,177

13%

477,111
110,720

416,084
91,990

379,520
29,265

61,027 15%
18,730 20%

$ 366,391 $ 324,094 $ 350,255 $ 42,297 13% $ (26,161)

10%
36,564
62,725 214%
(7)%

(1) Refer to the 2018 MD&A for discussions of 2017 items and comparisons between 2018 and 2017 financial results.
*

Less than 1% or not meaningful

Primerica 2019 Annual Report

ITEM 7. MD&A

Total revenues. Total revenues increased in
2019 from 2018 driven by incremental premiums
on term life insurance policies that are not
subject to the IPO coinsurance transactions. The
run-off of business subject to these transactions
is reflected in the decline in ceded premiums.
Commissions and fees from our Investment and
Savings Products segment increased largely due
to growth in client asset values as a result of
market performance and higher investment and
savings product sales.

Net investment income increased by
$12.6 million in 2019 largely due to the positive
impact a higher total return on the deposit asset
backing the 10% coinsurance agreement that is
subject to deposit method accounting. The
$9.8 million higher return on this deposit asset
was due to a favorable mark-to-market
adjustment as fixed income prices rose during
the current year, as well as higher book earnings
on the deposit asset as the duration and book
yield of the investments comprising the asset
both increased in 2019. A larger invested asset
portfolio also contributed approximately
$7.5 million to the higher net investment income
when compared to the prior year, partially offset
by $4.7 million of lower net investment income
due to lower portfolio yields. Investment income
net of investment expenses includes interest
earned on our held-to-maturity invested asset,
which is completely offset by interest expense
on the Surplus Note, thereby eliminating any
impact on net investment income. Amounts
recognized for each line item will remain
offsetting and will fluctuate from period to
period along with the principal amounts of the
held-to-maturity asset and the Surplus Note
based on the balance of reserves being
contractually supported under a redundant
reserve financing transaction used by Vidalia Re,
Inc. (“Vidalia Re”), a special purpose financial

captive insurance company and wholly owned
subsidiary of Primerica Life Insurance Company
(“Primerica Life”). 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
other-than-temporary impairment losses,
increased to a gain during 2019 compared to a
loss in 2018 as a result of changes in the value of
equity securities held in our investment portfolio
which are marked to market through the income
statement.

Total benefits and expenses. Total benefits and
expenses increased in 2019 from 2018 primarily
due to growth in premium-related costs, which
include benefits and claims and amortization of
DAC in our Term Life Insurance Segment. The
increase in sales commissions was generally
consistent with the increase in commissions and
fees as described in the total revenues
comparison above. Insurance expenses and
other operating expenses were higher due to an
increase of approximately $10.4 million in
technology-related expenses, $3.5 million of
increased expenses for annual employee merit
increases, and $4.2 million of other expenses
incurred to support the growth of the business.

Income taxes. Our effective income tax rate for
2019 was 23.2% compared to 22.1% in 2018. The
lower rate in the prior year was driven by
$2.7 million of lower income tax expenses
resulting from adjustments to provisional
amounts recognized due to the enactment of
the Tax Reform Act in 2017.

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

ITEM 7. MD&A

Term Life Insurance Segment. Our results for the Term Life Insurance segment for the years ended
December 31, 2019, 2018, and 2017 were as follows:

Year ended December 31,

2019 vs. 2018
change

2018 vs. 2017
change(1)

2019

2018

2017(1)

(Dollars in thousands)

Revenues:

Direct premiums

Ceded premiums

$ 2,728,844 $ 2,640,830 $ 2,534,068 $ 88,014

3% $106,762

(1,562,383)

(1,573,751)

(1,593,011)

(11,368)

(1)%

(19,260)

(1)%

Net Premiums

1,166,461

1,067,079

941,057

99,382

126,022 13%

Allocated net investment

income

Other, net

19,922

40,848

13,747

42,374

9,931

41,236

6,175 45%

3,816 38%

(1,526)

(4)%

1,138

Total revenues

1,227,231

1,123,200

992,224

104,031

130,976 13%

Benefits and expenses:
Benefits and claims

Amortization of DAC

Insurance expenses

Insurance commissions

Total benefits and

expenses

Income before income

taxes

475,330

248,711

172,316

10,781

441,775

228,613

160,645

10,263

398,212

201,751

139,876

6,728

33,555

20,098

11,671

518

43,563 11%

26,862 13%

20,769 15%

3,535 53%

907,138

841,296

746,567

65,842

94,729 13%

$ 320,093 $ 281,904 $ 245,657

38,189 14%

36,247 15%

(1) Refer to the 2018 MD&A for discussions of 2017 items and comparisons between 2018 and 2017 financial results.

Net premiums. Direct premiums increased in
2019 from 2018 largely due to the sale of new
policies in recent periods that have contributed to
growth in the in-force book of business. The
decline in ceded premiums includes $59.0 million
in lower coinsurance ceded premiums due to the
run-off of business subject to the IPO coinsurance
transactions. Partially offsetting the run-off of
business subject to IPO transactions was
$47.6 million in higher non-level YRT reinsurance
ceded premiums as business not subject to the
IPO coinsurance transactions ages. The continued
impact from the increase in direct premiums
combined with the decrease in ceded premiums
caused net premiums to grow at a higher rate
than direct premiums.

Allocated net investment income. Allocated net
investment income increased in 2019 from 2018
due to an increase in the assumed net interest
accreted to our Term Life Insurance segment’s
future policy benefit reserve liability less

deferred acquisition costs as our Term Life
Insurance segment’s in-force business continues
to grow.

Benefits and claims. Benefits and claims
increased in 2019 from 2018 primarily due to
growth in net premiums. Claims experience was
in line with historical trends.

Amortization of DAC. The amortization of DAC
increased in 2019 from 2018 largely due to
growth in net premiums. Persistency trended
favorably as we progressed through 2019 when
compared to 2018.

Insurance expenses

Insurance expenses.
increased in 2019 from 2018 largely due to
increases of $7.1 million to support growth in
the business and increased technology-related
expenses of $2.6 million. Also contributing to the
year-over-year increase in insurance expenses
was an increase of $1.5 million in employee-
related costs.

Primerica 2019 Annual Report

ITEM 7. MD&A

Investment and Savings Products Segment. Our results of operations for the Investment and
Savings Products segment for the years ended December 31, 2019, 2018, and 2017 were as follows:

Year ended December 31,

2019 vs. 2018
change

2018 vs. 2017
change(1)

2019

2018

2017(1)

(Dollars in thousands)

Revenues:

Commissions and fees:

Sales-based revenues

$282,887 $259,991 $233,005 $22,896

9% $26,986 12%

Asset-based revenues

318,149

303,652

275,157

14,497

28,495 10%

Account-based revenues

Other, net

80,555

10,017

81,802

55,030

(1,247)

(2)% 26,772 49%

9,631

9,555

386

Total revenues

691,608

655,076

572,747

36,532

Expenses:

Amortization of DAC

4,549

9,766

6,168

(5,217)

(53)%

3,598 58%

Insurance commissions

12,735

12,567

12,505

168

82,329 14%

Sales commissions:

Sales-based

Asset-based

Other operating expenses

141,167

139,667

106,664

Total expenses

499,796

481,164

409,911

18,632

199,690

185,221

166,061

14,469

141,655

133,943

118,513

7,712

1,500

19,160 12%

15,430 13%

33,003 31%

71,253 17%

Income before income taxes

$191,812 $173,912 $162,836 $17,900

10% $11,076

(1) Refer to the 2018 MD&A for discussions of 2017 items and comparisons between 2018 and 2017 financial results.
*

Less than 1%

Commissions and fees. Commissions and fees
increased in 2019 from 2018 driven by growth in
Sales-based revenues as a result of higher
demand for variable annuity products and mutual
fund products. Also contributing to the increase
in commissions and fees was growth in asset-
based revenues largely reflecting higher average
client asset values driven by favorable market
performance. The increase in commissions and
fees was partially offset by a decrease in account-
based revenues driven by the factors discussed in
the “Business Trends and Conditions” section
above.

Amortization of DAC. Amortization of DAC
decreased in 2019 from 2018 largely due to
favorable market performance of the funds
underlying our Canadian segregated funds in the
first and fourth quarters of 2019 compared to

unfavorable market performance in the first and
fourth quarters of 2018.

Sales commissions. The increase in sales-based
and asset-based commissions in 2019 from 2018
was relatively consistent with the growth in sales-
based and asset-based revenues, respectively.

Other operating expenses. Other operating
expenses increased in 2019 from 2018 primarily
due to $4.4 million of increased spending on
technology-related expenses and $1.4 million of
employee-related costs, partially offset by
approximately $5 million of lower expenses from
the following items: reduced fees paid to a service
provider for the Company’s transfer agent
recordkeeping platform; negotiated fee
reductions with a managed accounts service
provider; and other operational efficiencies within
the business.

Corporate and Other Distributed Products Segment. Our results of operations for the Corporate
and Other Distributed Products segment for the years ended December 31, 2019, 2018, and 2017 were
as follows:

ITEM 7. MD&A

Year ended December 31,

2019 vs. 2018
change

2018 vs. 2017
change(1)

2019

2018

2017(1)

(Dollars in thousands)

$ 25,022 $ 26,274 $ 28,041 $ (1,252)

(5)% $ (1,767)

(7,346)

(7,413)

(7,760)

(67)

(1)%

(347)

(6)%

(4)%

17,676

32,213

18,861

32,162

20,281

28,125

(1,185)

(6)% (1,420)

(7)%

4,037

14%

Revenues:

Direct premiums

Ceded premiums

Net Premiums

Commissions and fees

Allocated investment income net

of investment expenses

122,476

105,168

95,951

17,308

16%

9,217

Interest expense on surplus note

(48,325)

(37,485)

(26,865)

10,840

29% 10,620

10%

40%

74,151

67,683

69,086

6,468

10% (1,403)

(2)%

Total revenues

133,665

121,567

124,131

12,098

10% (2,564)

4,965

4,660

(2,121)

4,982

1,339

5,300

7,086

(3,460)

(322)

(6)%

(318)

(6)%

(2)%

18,490

15,808

17,807

2,682

17% (1,999)

(11)%

1,292

6,501

1,535

15,853

28,811

95,977

1,351

7,511

1,660

16,220

28,809

89,940

1,480

7,404

1,875

13,414

28,488

82,636

(59)

(4)%

(129)

(9)%

(1,010)

(13)%

107

(125)

(8)%

(215)

(11)%

(367)

(2)% 2,806

21%

6,037

321

7,304

8,195

Total benefits and expenses

168,459

161,299

153,104

7,160

Loss before income taxes

$ (34,794) $ (39,732) $ (28,973) $ (4,938)

(12)% $10,759

37%

(1) Refer the 2018 MD&A for discussions of 2017 items and comparisons between 2018 and 2017 financial results.
*

Less than 1% or not meaningful

Total revenues. Total revenues increased in 2019
from 2018 largely due to the higher net investment
income and realized investment gains (losses),
including other-than-temporary impairment losses
as discussed in “Total revenues” under the
consolidated “Primerica, Inc. and Subsidiaries
Results” section. The increase in total revenues was
partially offset by a reduction in net premiums as a

result of the continued run-off of non-term life
insurance lines of business at NBLIC. Commissions
and fees remained consistent in 2019 versus 2018.

Total Benefits and Expenses. Total benefits and
expenses increased in 2019 from 2018 primarily
due to higher claims experienced on a run-off
block of life insurance business and the

Primerica 2019 Annual Report

Allocated net investment

income

Realized investment gains (losses),
including other-than-temporary
impairment losses

Other, net

Benefits and expenses:
Benefits and claims

Amortization of DAC

Insurance expenses

Insurance commissions

Sales commissions

Interest expense

Other operating expenses

ITEM 7. MD&A

recognition of $2.3 million in losses for business
ceded on a closed block of life insurance business
that may not be collected from a reinsurer that
was ordered into receivership. Also contributing
to the increase is $3.4 million of increased
spending on technology-related expenses and
$1.0 million of increased spending on business
development and employee-related costs.

FinancialCondition

Investments. Our insurance business is
primarily focused on selling term life insurance,
which does not include an investment
component for the policyholder. The invested
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, 2019, 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 invest a portion of our portfolio in assets
denominated in Canadian dollars to support our
Canadian operations. 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.

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
held-to-maturity security. The LLC Note, which is
scheduled to mature on December 31, 2030, was
obtained in exchange for the Surplus Note of
equal principal amount issued by Vidalia Re. 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.

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:

ITEM 7. MD&A

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Mortgage- and asset-backed securities

Short-term investments

Equity securities

Trading securities

Cash and cash equivalents

Total

Less than 1%.

December 31, 2019 December 31, 2018

Fair
value

Cost or
amortized
cost

Fair
value

Cost or
amortized
cost

56%

21%

55%

21%

—

60%

17%

60%

17%

10%

11%

100%

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, 2019 December 31, 2018

3.6 years

3.5 years

Average book yield of our fixed-maturity portfolio

3.54%

3.89%

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:

AAA

BBB

Below investment grade

Not rated

Total

December 31, 2019

December 31, 2018

Amortized
cost(1)

(Dollars in thousands)

$ 555,640

24% $ 444,466

271,936

543,351

885,497

59,190

12%

23%

38%

217,541

469,044

898,694

59,368

21%

10%

23%

43%

2,389

3,319

$2,318,003 100% $2,092,432 100%

(1)
*

Includes trading securities at carrying value and available-for-sale securities at amortized cost.
Less than 1%.

Primerica 2019 Annual Report

ITEM 7. MD&A

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

December 31, 2019

Fair value

Amortized
cost(1)

Unrealized
gain (loss)

Credit
rating

23,938 $

(Dollars in thousands)
23,717

$ 221

Issuer

Government of Canada

Province of Quebec Canada

Enbridge Inc.

Cigna Corp.

Province of Ontario Canada

Province of Alberta Canada

Province of British Columbia Canada

Wells Fargo & Co.

Bank of America Corp.

City of Houston Texas

13,811

11,553

11,224

10,888

10,743

10,693

10,320

10,190

9,940

12,764

11,211

10,844

10,488

10,375

10,494

9,997

9,916

1,047

342

380

400

368

199

323

274

AAA

AA-

A+

A-

A+

AAA

A-

10,088

(148)

AA-

Total – ten largest holdings

$ 123,300 $ 119,894

$3,406

Total – fixed-maturity securities

$2,400,229 $2,318,003

Percent of total fixed-maturity securities

(1)

Includes trading securities at carrying value and available-for-sale securities at amortized cost.

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:

Reinsurance recoverables

Deferred policy acquisition costs, net

Liabilities:

Future policy benefits

December 31,

2019

2018

Change

(Dollars in thousands)

$4,169,823 $4,141,569 $ 28,254

2,325,750

2,133,920

191,830

$6,446,569 $6,168,157 $278,412

Reinsurance recoverables. Reinsurance
recoverables reflects future policy benefit
reserves and claim reserves ceded to reinsurers,
including the IPO coinsurers. Reinsurance
recoverables as of December 31, 2019 increased
compared with December 31, 2018 primarily due
to the timing of collections. The balance of

reinsurance recoverables at December 31, 2019
included two months of accumulated ceded
claims while the balance at December 31, 2018
included only one month of accumulated ceded
claims as a result of when claims were
contractually due from the IPO coinsurers
relative to year-end.

Deferred policy acquisition costs, net. The
increase in DAC was primarily a result of the
cumulative impact of incremental commissions
and expenses deferred as a result of new
business in 2019 not subject to the IPO
coinsurance agreements.

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 of our common
stock outstanding. During 2019, our life
insurance underwriting companies declared and
paid ordinary dividends of $292.5 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, in 2019 our non-life
insurance subsidiaries declared and paid
dividends of $105.6 million to the Parent
Company. At December 31, 2019, the Parent
Company had cash and invested assets of
$269.9 million.

The Parent Company’s subsidiaries generate
operating cash flows primarily from term life
insurance premiums (net of premiums ceded to

ITEM 7. MD&A

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 the 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.

Primerica 2019 Annual Report

ITEM 7. MD&A

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

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,

2019

2018

2017(1)

(In thousands)
$ 485,513 $ 478,067 $ 391,544

(201,884)

(232,801)

(131,301)

(290,134)

(260,997)

(193,461)

1,243

(2,093)

1,204

Change in cash and cash equivalents

(5,262) $ (17,824) $ 67,986

(1) Refer to the 2018 MD&A for discussions of 2017 items and comparisons between 2018 and 2017 financial results.

Cash provided by

Operating activities.
operating activities increased in 2019 from 2018
driven by higher cash receipts from the collection
of premium revenues in excess of benefits and
claims paid in our Term Life Insurance segment.
The impact of direct premium growth and the
additional layering of net premiums from term life
insurance policies not subject to the IPO
coinsurance transactions has continued to drive
positive incremental cash flows from operating
activities. Partially offsetting this increase was a
reduction in cash generated from the timing
effect of when cash payments to/from reinsurers
were due for ceded premiums and ceded claims.
The year-over-year increase in cash provided by
operating activities was also partially offset by the
purchase of more trading securities in 2019 as the
Company was able to invest excess cash in
trading securities rather than holding the balance
in cash and cash equivalents.

Cash used in investing

Investing activities.
activities decreased in 2019 from 2018 driven by
higher cash received due to the timing of
maturities of fixed-maturity securities. Partially
offsetting the decrease in cash used in investing
activities was higher purchases of fixed assets to
support technology-related initiatives.

Cash used in financing

Financing activities.
activities increased in 2019 compared to 2018 as
expected due to a larger common stock share
repurchase program in 2019. Also contributing
to the increase in cash used in financing
activities was higher dividends paid to
stockholders as the Company increased its per
share dividend in 2019.

The National

Risk-Based Capital (“RBC”).
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, 2019, our U.S. life insurance
subsidiaries maintained statutory capital and
surplus substantially in excess of the applicable
regulatory requirements and remain 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, 2019, Primerica Life
Insurance Company of 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
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 through 2017 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.
Primerica Life adopted PBR as of January 1,
2018. The adoption of PBR facilitated extending
the premium guarantees for Primerica Life for
the entire initial term period for new sales. The
new principle-based reserve regulation will

ITEM 7. MD&A

significantly reduce the statutory policy benefit
reserve requirements, but will only apply for
business issued after the effective date. As a
result, we expect that the adoption of PBR will
significantly reduce the need to engage in future
redundant reserve financing transactions for
business issued after the effective date. 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.

The Company has

Notes Payable.
$375.0 million of publicly-traded, Senior Notes
outstanding issued at a price of 99.843% with an
annual interest 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, 2019. No events of
default occurred on the Senior Notes during the
year ended December 31, 2019.

Financial Ratings. As of December 31, 2019,
the investment grade credit ratings for our
Senior Notes were as follows:

Agency

Moody’s

Senior Notes rating

Baa1, stable outlook

Standard & Poor’s

A-, stable outlook

A.M. Best Company

a-, stable outlook

As of December 31, 2019, Primerica Life’s
financial strength ratings were as follows:

Agency

Moody’s

Financial strength rating

A1, stable outlook

Standard & Poor’s

AA-, stable outlook

A.M. Best Company

A+, stable outlook

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.

Primerica 2019 Annual Report

ITEM 7. MD&A

Short-Term Borrowings. We had no short-
term borrowings as of or during the year ended
December 31, 2019.

Vidalia Re issued a Surplus

Surplus Note.
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, 2030. 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. We have
no transactions, agreements or other contractual
arrangements to which an entity unconsolidated
with the Company is a party, under which the
Company maintains any off-balance sheet
obligations or guarantees as of December 31,
2019.

Credit Facility Agreement. We maintain an
unsecured $200.0 million revolving credit facility
(“Revolving Credit Facility”) with a syndicate of
commercial banks that has a scheduled
termination date of December 19, 2022.
Amounts outstanding under the Revolving

Credit Facility bear interest at a periodic rate
equal to LIBOR or the base rate, plus in either
case an applicable margin. The Revolving Credit
Facility contains language that allows for the
Company and the lenders to agree on a
comparable or successor reference rate in the
event LIBOR is no longer available, as is
expected to happen in 2022. The Revolving
Credit Facility also permits the issuance of letters
of credit. The applicable margins are based on
our debt rating with such margins for LIBOR rate
loans and letters of credit ranging from 1.125%
to 1.625% per annum and for base rate loans
ranging from 0.125% to 0.625% per annum.
Under the Revolving Credit Facility, we incur a
commitment fee that is payable quarterly in
arrears and is determined by our debt rating.
This commitment fee ranges from 0.125% to
0.225% per annum of the aggregate
$200.0 million commitment of the lenders under
the Revolving Credit Facility. As of December 31,
2019, no amounts have been drawn under the
Revolving Credit Facility and we were in
compliance with its covenants. Furthermore, no
events of default have occurred under the
Revolving Credit Facility in 2019.

Contractual Obligations. Our contractual obligations, including payments due by period, were as
follows:

December 31, 2019

Total
Liability

Total
Payments

Less
than
1 year

1-3
years

3-5
years

More
than
5 years

(In millions)

Future policy benefits

$6,447

$24,758

$1,632 $3,130 $2,924 $17,072

Policy claims and other benefits payable

Other policyholder funds

Long-term debt principal

Interest obligations

Commissions

Purchase obligations

Lease obligations

Income tax payable

Other liabilities

340

389

375

340

389

375

118

340

389

—

450

418

384

—

375

—

Total contractual obligations

$8,134

$26,570

$2,872 $3,623 $2,954 $17,121

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.

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 commitment fee on our Revolving Credit
Facility, 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,
2019. We did not include the principal or interest
on the Surplus Note in the table above as the

ITEM 7. MD&A

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 the sales force but have not
been paid as of December 31, 2019. We are only
obligated to pay commissions as earned from
sales of our products. The total liability amount
is reported within other liabilities in our
consolidated balance sheets.

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 the
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 lease obligations primarily represent
payments for leases related to office, warehouse,
printing, and distribution properties. For
additional information on leases see Note 19
(Leases) to our consolidated financial statements
included elsewhere in this report.

Income tax payable represents income taxes
owed at year-end.

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 2019 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.

The fair value of the fixed-

Interest Rate Risk.
maturity securities (excluding the held-to-maturity
security) in our invested asset portfolio as of
December 31, 2019 and 2018 was $2.4 billion and
$2.1 billion, respectively. One of the primary

market risks 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 fair value
of our fixed-maturity securities portfolios to
decline by $81.6 million, or 3%, based on our
actual securities positions as of December 31,
2019. For comparative purposes, the same increase
in rates would have caused the fair value of our
fixed-maturity securities portfolios to decline by
$64.0 million, or 3%, based on our actual securities
positions as of December 31, 2018.

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, 2019, 15% of our revenues
from operations, excluding realized investment
gains, and 18% of income before income taxes were
generated by our Canadian operations. For the year
ended December 31, 2018, 15% of our revenues
from operations, excluding realized investment
gains, and 19% of income 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, 2019.
Net exposure was measured assuming a 10%
decrease in the value of the Canadian dollar relative
to the U.S. dollar. We estimated that such a

decrease would decrease our income before
income taxes for the year ended December 31, 2019
by $8.7 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 $32.4 million based on net assets as of
December 31, 2019. For comparative purposes, a
similar decrease in Canadian currency exchange
rates compared to the U.S. dollar would have
caused the translated value of our net investment in
our Canadian subsidiaries in U.S. dollars to decline
by $27.8 million based on net assets as of
December 31, 2018. 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 the Peach Re Redundant Reserve
Financing Transaction, the Company assumes credit

ITEM 7A. MARKET RISK

risk associated with Deutsche Bank’s ability to make
payment to us in fulfillment of its obligations under
a 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 Vidalia Re
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 the Peach Re Redundant
Reserve Financing Transaction, see Note 16
(Commitments and Contingent Liabilities) and
for information on the Surplus Note Purchase
Agreement, see 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”
for details on our investment portfolio, including
investment strategy, asset mix, and credit ratings.

Primerica 2019 Annual Report

ITEM 8. FINANCIAL STATEMENTS

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors Primerica, Inc.:

OpinionontheConsolidatedFinancialStatements

We have audited the accompanying consolidated balance sheets of Primerica, Inc. and subsidiaries (the
Company) as of December 31, 2019 and 2018, 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, 2019, and the related notes and financial statement schedules I, II, III, and
IV (collectively, the consolidated financial statements). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 2019, 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) (PCAOB), the Company’s internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our
report dated February 27, 2020 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.

BasisforOpinion

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 are a public accounting firm registered with the PCAOB and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the consolidated
financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable
basis for our opinion.

CriticalAuditMatter

The critical audit matter communicated below is a matter arising from the current period audit of the
financial statements that was communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. The communication of critical

ITEM 8. FINANCIAL STATEMENTS

audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing separate opinions on the
critical audit matter or on the accounts or disclosures to which it relates.

Assessmentofmortality,persistency,anddisabilityrateassumptionsutilizedtoestimate
thefuturepolicybenefitsfortermlifeinsurancecontracts

As described in Note 1, the Company estimates future policy benefits for term life insurance contracts
using assumptions, such as mortality – the likelihood of death, persistency – how long an insurance
contract stays active, and disability rate – the period of time a policyholder remains disabled. These
assumptions are based on historical experience modified as necessary to reflect anticipated trends.
These assumptions are locked in at contract inception. The liability for future policy benefits for term
life insurance contracts was $6,447 million as of December 31, 2019.

We identified the assessment of mortality, persistency, and disability rate assumptions (assumptions)
utilized to estimate future policy benefits at contract inception as a critical audit matter. Specialized
actuarial skills and knowledge and subjective judgment were required to assess the Company’s
assumptions. A high degree of auditor judgment and an increased extent of effort were required due
to the judgmental nature of and level of disaggregation used in determining the assumptions.

The primary procedures we performed to address this critical audit matter included the following. We
tested certain internal controls over the Company’s development, review, and approval of the
assumptions utilized for estimating the future policy benefits at the time of contract inception. We
involved actuarial professionals with specialized skills and knowledge, who assisted in:

• Comparing the methodology and models the Company utilized to determine the liability for future

policy benefits to generally accepted actuarial standards;

• Comparing the Company’s assumptions to 2019 term life insurance contract pricing assumptions;

•

Evaluating the Company’s assumptions utilized for term life insurance contracts issued during the
year by (1) comparing the assumptions to the Company’s most recent actual term life insurance
historical experience studies and (2) assessing modifications for anticipated trends and assessment
for the provision for possible adverse deviation;

• Assessing the level of disaggregation and granularity of the Company’s term life insurance

historical experience studies for the assumptions;

• Performing an analysis of the trends in the Company’s future policy benefits based on historical

development trends to assess the Company’s ability to develop assumptions; and

• Developing independent estimates, based on the Company’s data and assumptions, of the future
policy benefits for a selection of term life insurance contracts issued during the year and in prior
years and comparing to the Company’s estimated future policy benefits.

/s/ KPMG LLP

We have served as the Company’s auditor since 2007.

Atlanta, Georgia
February 27, 2020

Primerica 2019 Annual Report

ITEM 8. FINANCIAL STATEMENTS

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

Assets:

Investments:

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $2,274,770 in 2019 and $2,078,822 in 2018)
Fixed-maturity security held-to-maturity, at amortized cost (fair value: $1,299,102 in 2019 and $945,331 in 2018)
Short-term investments available-for-sale, at fair value (amortized cost: $0 in 2019 and $8,171 in 2018)
Equity securities, at fair value (historical cost: $32,671 in 2019 and $34,997 in 2018)
Trading securities, at fair value (cost: $43,257 in 2019 and $13,597 in 2018)
Policy loans

Total investments
Cash and cash equivalents
Accrued investment income
Reinsurance recoverables
Deferred policy acquisition costs, net
Agent balances, due premiums and other receivables
Intangible assets, net
Income tax receivable
Deferred income taxes
Operating lease right-of-use assets
Other assets
Separate account assets

Total assets

Liabilities and Stockholders’ Equity:

Liabilities:

Future policy benefits
Unearned and advance premiums
Policy claims and other benefits payable
Other policyholders’ funds
Notes payable
Surplus note
Income tax payable
Deferred income taxes
Operating lease liabilities
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 2019 and 2018; issued and outstanding 41,207 shares

in 2019 and 42,694 shares in 2018)

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) on available-for-sale securities:

Net unrealized investment gains (losses) not other-than-temporarily impaired
Net unrealized investment losses other-than-temporarily impaired

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements.

December 31,
2019

December 31,
2018

(In thousands)

$ 2,356,996
1,184,370

—
40,684
43,233
32,927

3,658,210
256,876
17,361
4,169,823
2,325,750
227,100
45,275
1,020
69,472
47,265
384,634
2,485,745

$ 2,069,635
970,390
8,171
37,679
13,610
31,501

3,130,986
262,138
17,057
4,141,569
2,133,920
215,139
48,111
—
59,336
—

391,291
2,195,501

$13,688,531

$12,595,048

6,446,569
15,470
339,954
388,663
374,037
1,183,728
20,224
188,997
53,487
510,443
28,723
2,485,745

6,168,157
15,587
313,862
370,644
373,661
969,685
22,699
164,405

—

486,772
52,562
2,195,501

12,036,040

11,133,535

412
—

427
—

1,593,281

1,489,520

(5,765)

(21,064)

64,595
(32)

(7,253)
(117)

1,652,491

1,461,513

$13,688,531

$12,595,048

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 before income taxes

Income taxes

Net income

Earnings per share:

Basic earnings per share

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 (losses)

Net gains (losses) recognized on equity securities

Year ended December 31,

2019

2018

2017

(In thousands, except per-share amounts)

$ 2,753,866

$ 2,667,104

$ 2,562,109

(1,569,729)

(1,581,164)

(1,600,771)

1,184,137

1,085,940

713,804

142,398

677,607

118,915

961,338

591,317

105,882

(48,325)

(37,485)

(26,865)

94,073

81,430

79,017

4,965

55,525

(2,121)

56,987

1,339

56,091

2,052,504

1,899,843

1,689,102

493,820

254,552

357,198

178,817

25,051

28,811

457,583

239,730

335,384

168,156

24,490

28,809

416,019

209,399

297,988

147,280

21,108

28,488

237,144

229,607

189,300

1,575,393

1,483,759

1,309,582

477,111

110,720

416,084

91,990

379,520

29,265

$ 366,391

$ 324,094

$ 350,255

8.65

8.62

7.35

7.33

7.63

7.61

42,181

43,854

45,598

42,314

43,985

45,689

(1,333) $

(152) $

(1,700)

—

(1,333)

1,091

5,207

—

(152)

487

(2,456)

147

(1,553)

2,892

—

Net realized investment gains (losses), including other-than-temporary

impairment losses

4,965

(2,121) $

1,339

See accompanying notes to consolidated financial statements.

Primerica 2019 Annual Report

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) on available-for-sale

securities:

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,

2019

2018

2017

(In thousands)
$366,391 $324,094 $350,255

91,160

(59,661)

(3,950)

253

(45)

(1,589)

Change in unrealized foreign currency translation gains (losses)

15,299

(25,059)

17,383

Total other comprehensive income (loss) before income taxes

106,712

(84,765)

11,844

Income tax expense (benefit) related to items of other

comprehensive income (loss)

19,480

(12,690)

(2,126)

Other comprehensive income (loss), net of income taxes

87,232

(72,075)

13,970

Total comprehensive income

$453,623 $252,019 $364,225

See accompanying notes to consolidated financial statements.

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

Balance, end of period

Retained earnings:

Balance, beginning of period
Cumulative effect from the adoption of new accounting

standards, net

Net income
Dividends
Repurchases of common stock

Balance, end of period

Accumulated other comprehensive income (loss):

Balance, beginning of period

Cumulative effect from the adoption of new accounting

standards, net

Change in foreign currency translation adjustment, net of

income tax expense (benefit)

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

Change in net unrealized investment gains (losses) other-

than-temporarily impaired

Balance, end of period

Total stockholders’ equity

Dividends declared per share

Year ended December 31,

2019

2018

2017

(In thousands)

427 $
(19)
4

412

443 $
(21)
5

427

457
(19)
5

443

—
27,208
(4)
(27,204)

—
26,707
(5)
(26,702)

52,468
26,095
(5)
(78,558)

—

1,489,520

1,375,090

1,138,851

—
366,391
(57,630)
(205,000)

24,610
324,094
(44,140)
(190,134)

—
350,255
(35,821)
(78,195)

1,593,281

1,489,520

1,375,090

(28,434)

43,568

29,598

—

15,299

(25,059)

17,188

71,848

(47,012)

(3,166)

(4)

(52)

58,798

(28,434)

43,568

$1,652,491 $1,461,513 $1,419,101

1.36 $

1.00 $

0.78

See accompanying notes to consolidated financial statements.

Primerica 2019 Annual Report

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
Accretion and amortization of investments
Depreciation and amortization
Change in reinsurance recoverables
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

Year ended December 31,

2019

2018

2017

(In thousands)

$ 366,391

$ 324,094

$ 350,255

297,832
(424,106)
254,552
(841)
(5,187)
(4,965)
(720)
18,300
(12,825)
(11,965)
(29,601)
17,533
21,115

266,513
(432,390)
239,730
2,590
2,365
2,121
(1,894)
12,417
37,261
14,383
(8,808)
17,251
2,434

306,122
(422,749)
209,399
(53,788)
(2,159)
(1,339)
(1,596)
13,551
9,124
(19,074)
1,137
15,267
(12,606)

Net cash provided by (used in) operating activities

485,513

478,067

391,544

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 — sold
Short-term investments — matured or called

Equity securities — sold
Available-for-sale investments acquired:

Fixed-maturity securities
Equity securities
Short-term investments
Equity securities — acquired
Purchases of property and equipment and other investing activities, net
Cash collateral received (returned) on loaned securities, net
Sales (purchases) of short-term investments using securities lending collateral, net

42,202
403,969

51,726
362,413

—
8,250
3,136

—
—
2,093

(633,106)

(626,826)

—
—
(898)
(25,437)
(23,839)
23,839

—
(8,169)
(521)
(13,517)
(37,224)
37,224

77,444
223,088
5,771
—
—

(430,452)
(400)
—
—
(6,752)
16,140
(16,140)

Net cash provided by (used in) investing activities

(201,884)

(232,801)

(131,301)

Cash flows from financing activities:

Dividends paid
Common stock repurchased
Tax withholdings on share-based compensation
Payment of deferred financing costs
Finance leases

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

(57,630)
(225,037)
(7,186)
—
(281)

(44,140)
(210,146)
(6,711)
—
—

(35,821)
(150,038)
(6,734)
(868)
—

(290,134)
1,243

(260,997)
(2,093)

(193,461)
1,204

(5,262)
262,138

(17,824)
279,962

67,986
211,976

$ 256,876

$ 262,138

$ 279,962

$ 115,051
28,053

$ 88,348
27,899

$ 83,304
27,816

See accompanying notes to consolidated financial statements.

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 provider of financial
products to middle-income households in the
United States and Canada through a network of
independent contractor sales representatives
(“sales representatives” or “sales force”). 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, LLC (“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 Tennessee, owns National Benefit
Life Insurance Company (“NBLIC”), a New York
insurance company. Peach Re, Inc. (“Peach Re”)
and Vidalia Re, Inc. (“Vidalia Re”) are 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.
GAAP”). These principles are established
primarily by the Financial Accounting Standards
Board (“FASB”).

Use of Estimates. 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. 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”), future policy benefit reserves and
corresponding amounts recoverable from
reinsurers, 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 U.S. GAAP. 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.

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

Primerica 2019 Annual Report

FINANCIAL STATEMENTS — NOTE 1

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, are carried at fair value.

• AFS short-term investments, consist of
highly-liquid investments such as
commercial paper and certificates of
deposit, with remaining maturities greater
than ninety days at the date of purchase,
but not in excess of one year. These
securities are carried at fair value.

• Our held-to-maturity fixed-maturity security

is carried at amortized cost.

•

Equity securities, including common and
nonredeemable preferred stocks, are carried
at fair value. Changes in fair value of equity
securities are included in realized
investment gains (losses) in the period in
which the change occurred.

Trading securities, which primarily consist of
bonds held by PFS Investments, are carried
at fair value. Changes in fair value of trading
securities are included in realized
investment gains (losses) 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 (loss), except for other-
than-temporary impairments (“OTTI”) discussed
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 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 (loss) in the accompanying consolidated
statements of comprehensive income. 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
(loss) in the accompanying consolidated
statements of comprehensive income.

Interest income on fixed-maturity securities and
short-term investments 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.

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, 2019 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 associated
with reinsured policies. Ceded policy reserves and
claims liabilities relating to insurance ceded are
shown as reinsurance recoverables 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

FINANCIAL STATEMENTS — NOTE 1

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.

Intangible Assets.
Intangible assets, which are
included in other assets, are 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.

Primerica 2019 Annual Report

FINANCIAL STATEMENTS — NOTE 1

The components of intangible assets were as follows:

December 31,

2019

2018

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

(In thousands)

$45,275

n/a

$45,275

$ 45,275

n/a

$45,275

Indefinite-lived

intangible asset

Amortizing intangible

asset

Total intangible assets

$45,275

—

$—

—

84,871

(82,035)

2,836

$45,275

$130,146

$(82,035)

$48,111

We have an indefinite-lived intangible asset
related to the 1989 purchase of the right to
contract with the 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, 2019 and
determined that no impairment had occurred.
There have been no subsequent events requiring
further analysis.

We also had an amortizing intangible asset
related to a 1995 sales agreement termination

payment to Management Financial Services, Inc.
This asset, which was fully amortized in 2019,
was supported by a non-compete agreement
with the founder of our business model that
expired in 2019. We calculated the amortization
of this contract buyout on a straight-line basis
over 24 years, which represented the life of the
non-compete agreement. Intangible asset
amortization expense was $2.8 million in 2019,
$3.4 million in 2018 and $3.4 million in 2017.

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:

Data processing equipment and software

Leasehold improvements

Furniture and other equipment

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 $15.7 million, $9.0 million, and
$10.1 million for the years ended December 31,
2019, 2018, and 2017, respectively.

Property and equipment balances were as
follows:

Data processing

equipment and
software

December 31,

2019

2018

(In thousands)

$ 86,794 $ 68,447

Leasehold improvements

19,079

16,531

Other, principally
furniture and
equipment

31,391

26,586

137,264

111,564

Accumulated depreciation

(91,148)

(75,568)

Net property and
equipment

$ 46,116 $ 35,996

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 insurance contracts.
Purchasers of variable insurance 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 fair value of the Funds’ net 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 contract holders’
interests in the Funds’ net 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.

FINANCIAL STATEMENTS — NOTE 1

Primerica Life Canada’s contract offerings
guarantee the maturity value at the date of
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.

Future policy benefits

Policyholder Liabilities.
are accrued over the current and renewal
periods of the contracts. Liabilities for future
policy benefits on traditional life insurance
products are reserves established for death
claims and waiver of premium benefits and have
been computed using a net level method, using
assumptions as to interest rates, mortality,
persistency, disability rates 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, 2019 and
2018 ranged from 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 a premium deficiency is identified.
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 judgment and, therefore, are

Primerica 2019 Annual Report

FINANCIAL STATEMENTS — NOTE 1

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

Unearned and Advance Premiums. Unearned
and advance premiums primarily consist of
premiums received from policyholders in
advance of the premiums due date. Unearned
and advance premiums are deferred upon
collection and recognized as premiums revenue
upon the premium due date.

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
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.

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 commissions
and fees revenue from the sale of various non-life
insurance products. Commissions revenue is
generally received on the sale of mutual funds and
annuities. We also receive trail commissions
revenue from mutual fund and annuity products
based on the net asset value of shares sold by us.
We, in turn, pay sales commissions to the sales
force. We also receive investment advisory and
administrative fees based on the average daily net
asset value of client assets held in managed
investments programs and contracts related to
separate account assets issued by Primerica Life
Canada. We, in turn, pay asset-based commissions
to the sales force. We earn recordkeeping fees for
transfer agent recordkeeping services 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. See Note 18 (Revenue from
Contracts with Customers) for details related to our
commission and fees revenues recognition policies.

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 actual forfeitures, in the
consolidated statements of income on a
straight-line basis 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
grant date, which occurs in the same quarter as
the service period. To the extent 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 and
amortize the fair value of the awards in the same
manner as other deferred policy acquisition
costs.

Earnings Per Share (“EPS”). The Company
has outstanding 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.

In February 2016,

New Accounting Principles.
the FASB issued Accounting Standards Update
No. 2016-02, Leases (ASC 842) (“ASC 842”),
which requires lessees to recognize right-of-use
operating lease assets and operating lease
liabilities on the balance sheet. The Company
adopted the amendments in ASC 842 on
January 1, 2019 using the modified retrospective
approach through a cumulative-effect
adjustment to beginning retained earnings. The
cumulative-effect adjustment to beginning

FINANCIAL STATEMENTS — NOTE 1

retained earnings was zero. In addition, we
elected the package of practical expedients
permitted under ASC 842, which included not
reassessing whether existing contracts contained
leases and not reassessing the lease
classification of existing leases. The effect of
adopting ASC 842 resulted in an increase to
both total assets and total liabilities of
$52.7 million on January 1, 2019. The increase to
both assets and liabilities is less than 1% of our
total assets and total liabilities. The adjustment
recognized upon adoption of ASC 842 included
the recognition of our operating lease
obligations and corresponding right-of-use
assets on our consolidated balance sheet, which
mainly consist of our executive office operations
and other real estate leases of office space. The
adoption of ASC 842 did not affect the
Company’s results of operations or liquidity. The
Company’s reporting for the comparative
periods prior to adoption continues to be
presented in the consolidated financial
statements in accordance with previous lease
accounting guidance, Accounting Standards
Codification Topic 840, Leases (“ASC 840”). Refer
to Note 19 (Leases) for more information on
leases.

In August 2018, the FASB issued

Future Application of Accounting
Standards.
Accounting Standards Update No. 2018-12,
Financial Services—Insurance (Topic 944) —
Targeted Improvements to the Accounting for
Long-Duration Contracts (“ASU 2018-12”). The
amendments in this update change accounting
guidance for insurance companies that issue
long-duration contracts, including term life
insurance. ASU 2018-12 requires companies that
issue long-duration insurance contracts to
update assumptions used in measuring future
policy benefits, including mortality and
persistency, at least annually instead of locking
those assumptions at contract inception and
reflecting differences in assumptions and actual
performance as the experience occurs. ASU
2018-12 also includes changes to how insurance
companies that issue long-duration contracts
amortize DAC and determine and update the
discount rate assumptions used in measuring
future policy benefits reserves while increasing

Primerica 2019 Annual Report

FINANCIAL STATEMENTS — NOTE 1

the level of financial statement disclosures
required. The guidance in ASU 2018-12 will be
applied to the earliest period presented in the
consolidated financial statements beginning on
the effective date. In November 2019, the FASB
issued Accounting Standards Update
No. 2019-09, Financial Services-Insurance (Topic
944) – Effective Date, which defers the effective
date of ASU 2018-12 for the Company by one
year, from January 1, 2021 to January 1, 2022.
We anticipate that the adoption of ASU 2018-12
will have a pervasive impact on our consolidated
financial statements and related disclosures and
will require changes to certain of our processes,
systems, and controls. We are currently working
on processes that will allow us to obtain the
requisite data, enhance our valuation system,
and develop key assumptions that will be
necessary to evaluate and implement this
standard. As such, we are unable to determine
the magnitude of the impact ASU 2018-12 will
have on our consolidated financial statements at
this time.

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 (“ASC 326”). ASC 326
introduces new guidance for accounting for
credit losses on financial instruments within its
scope, including reinsurance recoverables, 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
broader range of forward-looking information,
which is expected to result in earlier recognition
of credit losses on financial instruments. AFS
securities are excluded from the scope of
financial instruments that require measurement
of credit losses on the basis of a forward-looking

100

expected loss estimate under ASC 326. The
incurred probable loss approach for measuring
losses on AFS securities in the consolidated
statement of income will remain under ASC 326,
however, an entity will be allowed to reverse
credit losses previously recognized in an
allowance for AFS securities in situations where
the estimate of credit losses on those securities
has declined. The amendments in ASC 326 also
preclude an entity from considering the length
of time an AFS security has been in an
unrealized loss position to avoid recording a
credit loss and removes the requirement to
consider recoveries or declines in fair value after
the balance sheet date. We will adopt the
amendments in ASC 326 as of the January 1,
2020 application date through a cumulative-
effect adjustment to beginning retained
earnings. The primary impact of adopting ASC
326 will be the recognition of an immaterial
allowance for the lifetime expected credit losses
related to our reinsurance recoverables.
Furthermore, we do not expect the adoption of
ASC 326 to result in any material changes to
impairment losses recognized in our
consolidated statements of income for AFS
securities.

In December 2019, the FASB issued Accounting
Standards Update No. 2019-12, Income Taxes
(Topic 740): Simplifying the Accounting for
Income Taxes (“ASU 2019-12”), which is intended
to simplify various aspects related to accounting
for income taxes. ASU 2019-12 removes certain
exceptions to the general principles in Topic 740
and also clarifies and amends existing guidance
to improve consistent application. The guidance
in ASU 2019-12 is effective for the Company
beginning January 1, 2021. We do not expect the
impact of ASU 2019-12 to have a material effect
on our consolidated financial statements.

Recently-issued accounting guidance not
discussed above is not applicable, is immaterial
to our consolidated financial statements, or did
not or is not expected to have a material impact
on our business.

FINANCIAL STATEMENTS — NOTE 2

(2) 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,

2019

2018

2017

(In thousands)

Foreign currency translation adjustments:

Change in unrealized foreign currency translation gains

(losses) before income taxes

$15,299

$(25,059)

$17,383

Income tax expense (benefit) on unrealized foreign

currency translation gains (losses)

—

195

Change in unrealized foreign currency translation gains

(losses), net of income taxes

$15,299

$(25,059)

$17,188

Unrealized gain (losses) on available-for-sale securities:
Change in unrealized holding gains (losses) arising during

period before income taxes

$91,160

$(59,661)

$ (3,950)

Income tax expense (benefit) on unrealized holding gains

(losses) arising during period

19,427

(12,681)

(1,765)

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

from accumulated OCI to net income

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

71,733

(46,980)

(2,185)

253

(45)

(1,589)

(9)

(556)

200

(36)

(1,033)

$71,933

$(47,016)

$ (3,218)

(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
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
transfer agent recordkeeping functions and
non-bank custodial services that we provide for
certain mutual funds products we distribute. In

Primerica 2019 Annual Report

101

FINANCIAL STATEMENTS — NOTE 3

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
discontinued lines of insurance other than our
core term life insurance products and the
distribution of various other financial products

Revenues:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

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,

2019

2018

2017

(In thousands)

$1,227,231 $1,123,200 $ 992,224

691,608

133,665

655,076

121,567

572,747

124,131

Total revenues

$2,052,504 $1,899,843 $1,689,102

Net investment income:

Term life insurance segment

19,922 $

13,747 $

9,931

Investment and savings products segment

—

Corporate and other distributed products segment

74,151

67,683

69,086

Total net investment income

94,073 $

81,430 $

79,017

Amortization of DAC:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

$ 248,711 $ 228,613 $ 201,751

4,549

1,292

9,766

1,351

6,168

1,480

Total amortization of DAC

$ 254,552 $ 239,730 $ 209,399

Non-cash share-based compensation expense:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

3,605 $

4,135 $

3,440

10,475

2,695

10,421

2,662

2,208

10,397

Total non-cash share-based compensation expense

17,520 $

17,251 $

15,267

102

Income (loss) before income taxes:

Term life insurance segment

FINANCIAL STATEMENTS — NOTE 3

Year ended December 31,

2019

2018

2017

(In thousands)

$ 320,093 $ 281,904 $ 245,657

Investment and savings products segment

191,812

173,912

162,836

Corporate and other distributed products segment

(34,794)

(39,732)

(28,973)

Total income before income taxes

$ 477,111 $ 416,084 $ 379,520

force representative distribution. These allocated
items include fees charged for access to
Primerica Online (“POL”) and costs incurred for
technology, sales force support, occupancy and
other general and administrative costs. Costs
that are not directly charged or allocated to our
two primary operating segments are included in
our Corporate and Other Distributed Products
segment.

Total assets by segment were as follows:

Assets:

Term life insurance segment

December 31,
2019

December 31,
2018

December 31,
2017

(In thousands)

$ 6,546,129 $ 6,322,555 $ 6,205,837

Investment and savings products segment (1)

2,598,493

2,298,238

2,684,717

Corporate and other distributed products segment

4,543,909

3,974,255

3,570,149

Total assets

$13,688,531 $12,595,048 $12,460,703

(1) The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the

Investment and Savings Products segment assets were $112.8 million, $102.8 million, and $112.0 million as of December 31,
2019, 2018, and 2017, 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.

Primerica 2019 Annual Report

103

FINANCIAL STATEMENTS — NOTE 3

Geographical Information. Results of operations by country and long-lived assets — primarily
tangible assets reported in other assets in our consolidated balance sheets —were as follows:

Revenues by country:

United States

Canada

Total revenues

Income before income taxes by country:

United States

Canada

Year ended December 31,

2019

2018

2017

(In thousands)

$1,747,609 $1,607,140 $1,419,658

304,895

292,703

269,444

$2,052,504 $1,899,843 $1,689,102

$ 390,431 $ 337,914 $ 299,764

86,680

78,170

79,756

Total income before income taxes

$ 477,111 $ 416,084 $ 379,520

Long-lived assets by country:

United States

Canada

December 31,
2019

December 31,
2018

December 31,
2017

(In thousands)

$41,200

$30,999

$27,443

4,916

4,997

656

Total long-lived assets

$46,116

$35,996

$28,099

104

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 securities were as follows:

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

Amortized
cost

December 31, 2019

Gross
unrealized
gains

Gross
unrealized
losses

(In thousands)

Fair value

10,197

287

$ — $

10,484

154,945

120,000

6,362

3,288

(235)

(695)

161,072

122,593

1,436,877

63,892

(1,118)

1,499,651

305,897

128,913

117,941

6,848

3,191

970

(222)

(99)

(243)

312,523

132,005

118,668

Total fixed-maturity securities

2,274,770

84,838

(2,612)

2,356,996

Short-term investments

—

Total fixed-maturity and short-term

investments

$2,274,770

$84,838

$(2,612) $2,356,996

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

Amortized
cost

December 31, 2018

Gross
unrealized
gains

Gross
unrealized
losses

(In thousands)

Fair value

12,115

176

(58) $

12,233

155,723

59,075

3,347

1,202

(958)

(271)

158,112

60,006

1,447,075

11,916

(24,773)

1,434,218

191,245

131,279

82,310

2,439

1,712

205

(1,733)

(1,636)

(755)

191,951

131,355

81,760

Total fixed-maturity securities(1)

2,078,822

20,997

(30,184)

2,069,635

Short-term investments

8,171

—

8,171

Total fixed-maturity and short-term

investments

$2,086,993

$20,997

$(30,184) $2,077,806

(1)

Includes $0.1 million of OTTI losses related to corporates and mortgage- and asset-backed securities recognized in
accumulated other comprehensive income (loss).

Primerica 2019 Annual Report

105

FINANCIAL STATEMENTS — NOTE 4

All of our AFS mortgage- and asset-backed
securities represent beneficial 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 securities portfolio as of
December 31, 2019 was as 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 AFS fixed-maturity securities

Amortized cost

Fair value

(In thousands)

$ 206,168

$ 207,483

929,957

461,081

124,813

964,738

488,466

133,113

1,722,019

1,793,800

552,751

563,196

$2,274,770

$2,356,996

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 on available-for-sale securities including

OTTI:
Available-for-sale securities

OTTI

Net unrealized investment gains on available-for-sale securities

excluding OTTI

Deferred income taxes

December 31,
2019

December 31,
2018

(In thousands)

$ 82,226

$(9,187)

147

82,266

(17,671)

(9,040)

1,787

Net unrealized investment gains on available-for-sale securities

excluding OTTI, net of tax

$ 64,595

$(7,253)

106

Trading Securities. The costs and fair values of the fixed-maturity securities classified as trading
securities were as follows:

FINANCIAL STATEMENTS — NOTE 4

Fixed-maturity securities

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.
Both the LLC Note and the Surplus Note mature
on December 31, 2030 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

December 31, 2019

December 31, 2018

Cost

Fair
value

Cost

Fair
value

(In thousands)
$43,257 $43,233 $13,597 $13,610

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, 2019, the LLC Note, which was
rated A+ by Fitch Ratings, had an estimated
unrealized holding gain of $114.7 million based
on its amortized cost and estimated fair value.
The estimated fair value of the LLC Note is
expected to be at least equal to the estimated
fair value of the offsetting Surplus Note. See
Note 5 (Fair Value of Financial Instruments) for
information on the fair value of our financial
instruments and 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 $7.5 million and $10.1 million as of
December 31, 2019 and 2018, 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

Primerica 2019 Annual Report

107

FINANCIAL STATEMENTS — NOTE 4

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 $28.7 million and $52.6 million as of
December 31, 2019 and 2018, respectively.

Investment Income. The components of net
investment income were as follows:

Year ended December 31,

2019

2018

2017

(In thousands)
$ 81,828 $ 79,356 $ 76,877

48,325

37,485

26,865

1,845

1,069

4,758

1,955

1,159

3,433

3,643

2,095

1,179

1,357

2,970

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(1)

13,429

Gross investment income

Investment expenses

Investment income net of investment expenses

Interest expense on surplus note

Net investment income

151,254

127,031

111,343

(8,856)

(8,116)

(5,461)

142,398

118,915

105,882

(48,325)

(37,485)

(26,865)

$ 94,073 $ 81,430 $ 79,017

(1)

Includes $5.4 million of net gains and $1.7 million of net losses recognized for the change in fair value of the deposit asset
underlying the 10% coinsurance agreement for the year ended December 31, 2019 and December 31, 2018, respectively. The
change in fair value of the deposit asset underlying the 10% coinsurance agreement for the year ended December 31, 2017
was not material.

The components of net realized investment gains (losses), as well as details on gross realized
investment gains and (losses) were as follows:

Net realized investment gains (losses):

Gross gains from sales of available-for-sale securities

Gross losses from sales of available-for-sale securities

OTTI losses of available-for-sale securities

Net gains (losses) recognized in net income during the period on equity

securities

Gains (losses) from bifurcated options

Gains (losses) on trading securities

Net realized investment gains (losses)

108

Year ended December 31,

2019

2018
(In thousands)

2017

$ 1,373 $ 1,162 $ 3,249

(293)

(965)

(107)

(1,333)

(152)

(1,553)

5,207

(2,456)

—

290

—

(250)

—

$ 4,965 $(2,121) $ 1,339

The proceeds from sales or other redemptions of available-for-sale securities were as follows:

FINANCIAL STATEMENTS — NOTE 4

Proceeds from sales or other redemptions

Year ended December 31,

2019

2018

2017

(In thousands)
$454,421 $414,138 $306,303

The components of net gains (losses) recognized in net income on equity securities still held as of
period-end were as follows:

Net gains (losses) recognized on equity securities

Less: Net gains (losses) recognized on equity securities sold

Net gains (losses) recognized in net income on equity securities still held as

of period-end

Year ended December 31,

2019

2018

2017

(In thousands)
$5,207 $(2,456) $—

(254)

(48) —

$5,461 $(2,408) $—

OTTI. We conduct a review each quarter to
identify and evaluate impaired investments that
have indications of possible OTTI. An investment
in a debt security is impaired if its fair value falls
below its cost. Factors considered in determining
whether an impairment 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.

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;

• 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 investments, as

required based on the type of investment;
and

• Analysis of downward credit migrations that

occurred during the quarter.

The amortized costs of AFS securities with a cost
basis in excess of their fair values were
$234.8 million and $1,239.6 million as of
December 31, 2019 and 2018, respectively.

Primerica 2019 Annual Report

109

FINANCIAL STATEMENTS — NOTE 4

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, 2019

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

$ — $ —

—

$ —

—

Foreign government

States and political subdivisions

Corporates

Residential mortgage-backed

securities

Commercial mortgage-backed

securities

Other asset-backed securities

11,824

39,379

52,474

(144)

(690)

(453)

40,690

(207)

11,526

22,501

(28)

(190)

8,578

4,000

(91)

(5)

21,739

(665)

2,071

(15)

12,835

4,613

(71)

(53)

Total fixed-maturity securities

$178,394

$(1,712)

$53,836

$(900)

December 31, 2018

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

1,668

(10)

Foreign government

States and political subdivisions

7,326

2,644

(170)

(9)

4,541

(48)

52,086

23,324

(788)

(262)

Corporates

489,880

(10,649)

396

360,516

(14,124)

321

Residential mortgage-backed

securities

Commercial mortgage-backed

securities

Other asset-backed securities

32,725

(86)

31,129

19,363

(173)

(184)

71,308

(1,647)

78,911

33,989

(1,463)

(571)

Total fixed-maturity securities

$584,735

$(11,281)

$624,675

$(18,903)

110

As of December 31, 2019, the unrealized losses
on our AFS invested asset portfolio were largely
caused by interest rate sensitivity and, to a lesser
extent, changes in credit spreads. We believe
that fluctuations caused by movement in interest
rates and credit spreads have little bearing on
the recoverability of our investments. We do not

FINANCIAL STATEMENTS — NOTE 4

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.

The amortized cost and fair value of AFS fixed-
maturity securities in default were as follows:

December 31, 2019

December 31, 2018

Amortized cost

Fair value Amortized cost

Fair value

(In thousands)

Fixed-maturity securities in default

$—

$240

$227

OTTI recognized in earnings on AFS securities were as follows:

Year ended December 31,

2019

2018

2017

OTTI on fixed-maturity securities not in default
OTTI on fixed-maturity securities in default
OTTI on equity securities(1)

$1,330

(In thousands)
$152
3 —
—

$1,001
267
285

—

Total OTTI recognized in earnings

$1,333

$152

$1,553

(1) Subsequent to the adoption of ASU Accounting Standards Update No. 2016-01, Financial Instruments – Overall (Subtopic
825-10) – Recognition and Measurement of Financial Assets and Financial Liabilities, all changes in the fair value of equity
securities are recognized in net income and thus OTTI no longer applies to equity securities.

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 recognize OTTI related to
invested assets held at the Parent Company that
we intend to sell to fund share repurchases
where we do not expect to recover its cost basis.

OTTI recognized in earnings for AFS securities
were as follows:

Total OTTI 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 recognized in accumulated other comprehensive

income (loss)

OTTI 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

OTTI recognized in earnings for securities which the Company intends to sell

or more-likely-than-not will be required to sell before recovery

OTTI recognized in earnings

Year ended December 31,

2019

2018

2017

(In thousands)

3 $152 $1,476

—

147

152

1,329

1,330 —

224

$1,333 $152 $1,553

Primerica 2019 Annual Report

111

FINANCIAL STATEMENTS — NOTE 5

The rollforward of the OTTI recognized in net income for all AFS fixed-maturity securities still held was
as follows:

Cumulative OTTI recognized in net income for securities still held, beginning of

period

Additions for securities where no OTTI were recognized prior to the beginning

of the period

Additions for 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,

2019

2018

(In thousands)

$2,511

$ 4,346

1,126

207

—

152

(543)

(1,987)

—

$3,301

$ 2,511

As of December 31, 2019, no OTTI have been
recognized on the LLC Note held-to-maturity
security.

Derivatives. 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 (loss) was $26.4 million
as of December 31, 2019 and 2018. These
deferred losses will not be recognized until such
time as we sell or substantially liquidate our
Canadian operations, although we have no such
intention.

(5) Fair Value of Financial Instruments

Fair value is the price that would be received
upon the sale of an asset or paid to transfer a
liability in an orderly transaction between market
participants at the measurement date. Invested
assets recorded at fair value are measured and
classified in accordance with a three-tier fair
value hierarchy based on observable and
unobservable inputs. Observable inputs reflect
market data obtained from independent

112

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 levels:

•

Level 1. Quoted prices for identical
instruments in active markets. Level 1
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 are observable in active markets.
Level 2 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 and yield curves, 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; and certain mortgage- and asset-
backed securities; and

•

Level 3. Valuations derived from valuation
techniques in which one or more significant
inputs 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

FINANCIAL STATEMENTS — NOTE 5

information. Valuations for this category
primarily consist of non-binding broker
quotes. Financial instruments in this
category primarily include less liquid
mortgage- and asset-backed securities and
equity 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 in the hierarchy) 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 2019 Annual Report

113

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

Short-term investments

Total available-for-sale securities

Equity securities

Trading securities

Separate accounts

December 31, 2019

Level 1

Level 2

Level 3

Total

(In thousands)

$ — $

10,484

$ — $

10,484

—

161,072 —

122,593 —

161,072

122,593

5,865

1,493,786 —

1,499,651

312,497

132,005 —

118,244

312,523

132,005

118,668

2,356,996

—

2,356,996

40,684

43,233

424

450

—

450

135

43,233 —

2,485,745 —

2,485,745

—

5,865

2,350,681

39,499

1,050

—

Total available-for-sale fixed-maturity securities

5,865

2,350,681

Total fair value assets

$45,364 $4,880,709

$585

$4,926,658

Fair value liabilities:
Separate accounts

$ — $2,485,745

Total fair value liabilities

$ — $2,485,745

114

FINANCIAL STATEMENTS — NOTE 5

December 31, 2018

Level 1

Level 2

Level 3

Total

(In thousands)

$ — $

12,233

$ — $

12,233

—

158,112 —

60,006 —

158,112

60,006

2,869

1,431,346

1,434,218

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

191,720

231

131,355 —

81,259

501

735

191,951

131,355

81,760

2,069,635

2,077,806

37,679

13,610

—

Total available-for-sale fixed-maturity securities

2,869

2,066,031

Short-term investments

—

8,171 —

8,171

Total available-for-sale securities

Equity securities

Trading securities

Separate accounts

2,869

2,074,202

36,473

1,020

735

186

13,610 —

2,195,501 —

2,195,501

Total fair value assets

$39,342 $4,284,333

$921

$4,324,596

Fair value liabilities:
Separate accounts

$ — $2,195,501

Total fair value liabilities

$ — $2,195,501

In estimating 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), liquidity and yield based on
quality rating, average life and U.S. Treasury
yields. All observable data inputs are
corroborated by independent third-party data.
We also corroborate pricing information
provided by our third-party pricing service 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 year and as of year-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
requesting a reassessment from an alternative
pricing service or other qualified source as
necessary. We do not adjust quotes or prices

Primerica 2019 Annual Report

115

FINANCIAL STATEMENTS — NOTE 5

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 corporates, governments, 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 asset-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 one or more of these
input 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 U.S. 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

Settlements

Transfers into Level 3

Transfers out of Level 3

Level 3 assets, end of period

Year ended
December 31,

2019

2018

(In thousands)
$ 921 $ 567

(18)

(8)

(52)

—

500

(197)

(169)

424 —

(493)

(7)

$ 585 $ 921

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,
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, industry and economic events. There

116

were no material transfers between Level 1 and
Level 3 during the years ended December 31,
2019 and 2018.

The carrying values and estimated fair values of
our financial instruments were as follows:

FINANCIAL STATEMENTS — NOTE 5

December 31, 2019

December 31, 2018

Carrying
value

Estimated
fair value

Carrying
value

Estimated
fair value

(In thousands)

Assets:

Fixed-maturity securities (available-for-sale)

$2,356,996 $2,356,996 $2,069,635 $2,069,635

Fixed-maturity security (held-to-maturity)(3)

1,184,370

1,299,102

970,390

945,331

Short-term investments (available-for-sale)

Equity securities

Trading securities

Policy loans(3)

Deposit asset underlying 10% coinsurance

agreement(3)

Separate accounts

Liabilities:

Notes payable(1) (2)

Surplus note(1) (3)

Separate accounts

(1) Carrying value amounts shown are net of issuance costs.
(2) Classified as level 2 fair value measurement.
(3) Classified as level 3 fair value measurement.

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.

Financial Instruments Recognized at Fair
Value in the Balance Sheet. Estimated fair
values of investments in AFS securities are
principally a function of current spreads and
interest rates that are corroborated by
independent third-party data. Therefore, the fair
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 and equity securities,
including common and nonredeemable
preferred stocks, are carried at fair value.

—

40,684

43,233

32,927

—

40,684

43,233

32,927

8,171

37,679

13,610

31,501

8,171

37,679

13,610

31,501

233,499

228,974

2,485,745

2,195,501

374,037

395,522

1,183,728

1,296,972

373,661

969,685

384,909

945,331

2,485,745

2,195,501

Segregated funds in separate accounts are
carried at the underlying value of the variable
insurance contracts, which is fair value.

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 financial
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

Primerica 2019 Annual Report

117

FINANCIAL STATEMENTS — NOTE 6

limited to such circumstances as material breach
of contract or nonpayment of premiums by the
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. For the year
ended December 31, 2019 we recognized credit
losses of $2.3 million for claims ceded on a
closed block of business as a result of one of our
reinsurance counterparties being ordered into
receivership. No credit losses were experienced
by the Company for the years ended
December 31, 2018 and 2017.

Reinsurance recoverables represents ceded
policy reserve balances and ceded claim
liabilities. The amounts of ceded claim liabilities
included in reinsurance recoverables that we
paid and which are recoverable from those
reinsurers were $24.3 million and $24.6 million
as of December 31, 2019 and 2018, respectively.
Benefits and claims ceded to reinsurers for 2019,
2018, and 2017 were $1,311.3 million,
$1,279.0 million, and $1,337.3 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

118

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. Beginning in 2017,
policies reaching the end of their initial term
period are no longer ceded under the IPO
coinsurance transactions, but the existing YRT
reinsurance already in place prior to the IPO will
continue.

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 reinsurance
recoverables. 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.

In a fourth IPO coinsurance agreement, (the
“10% Coinsurance Agreement”), we ceded to
Prime Reinsurance Company (“Prime Re”), an
affiliate of Citigroup, 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 $233.5 million and $229.0 million at
December 31, 2019 and 2018, 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

FINANCIAL STATEMENTS — NOTE 6

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. The finance charge on
the statutory reserves in excess of economic
reserves funded by Prime Re in support of the
10% Coinsurance Agreement is 0.5% per annum
and is reflected in interest expense in our
consolidated statements of income.

The following table represents the Company’s in-force life insurance as of December 31, 2019 and
2018:

Direct life insurance in force

Amounts ceded to other companies

Net life insurance in force

December 31, 2019 December 31, 2018

(Dollars in thousands)

$ 810,995,295

$ 783,979,673

(702,727,956)

(682,708,797)

$ 108,267,339

$ 101,270,876

Percentage of reinsured life insurance in force

87%

Reinsurance recoverables includes ceded reserve balances and ceded claim liabilities. Reinsurance
recoverables and financial strength ratings by reinsurer were as follows:

December 31, 2019

December 31, 2018

Reinsurance
recoverables

A.M. Best
rating

Reinsurance
recoverables

A.M. Best
rating

(In thousands)
NR

$2,701,326

Pecan Re Inc.(1)(2)

SCOR Global Life Reinsurance Companies(3)

Munich Re of Malta(2)(5)

Swiss Re Life & Health America Inc.(4)

$2,696,924

352,049

286,433

233,572

A+

American Health and Life Insurance Company(2)

167,471

B++

Munich American Reassurance Company

Korean Reinsurance Company

RGA Reinsurance Company

Hannover Life Reassurance Company

TOA Reinsurance Company

All other reinsurers

118,372

108,410

100,328

33,772

26,160

46,332

A+

—

348,109

276,154

234,643

170,628

114,604

104,101

90,989

31,729

25,434

43,852

A+

B+

A+

—

Reinsurance recoverables

$4,169,823

$4,141,569

NR – not rated
(1) Pecan Re Inc. (“Pecan Re”) is a wholly owned subsidiary of Swiss Re Life & Health America Inc. (“Swiss Re”).
(2) Entity is an IPO coinsurer. Reinsurance recoverables 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.

Primerica 2019 Annual Report

119

FINANCIAL STATEMENTS — NOTE 7

(3)

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) Entity is rated AA- by S&P.

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
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 associated with term life
insurance policies uses assumptions regarding
persistency, expenses, interest rates and
mortality consistent with the assumptions used
to calculate future policy benefit reserves. 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.

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, a materially different
experience from expected results could result in
a material increase or decrease of DAC
amortization in a particular period.

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.

The balances and activity in DAC were as follows:

DAC balance, beginning of period

Capitalization

Amortization

Foreign exchange translation and other

Year ended December 31,

2019

2018

2017

(In thousands)
$2,133,920 $1,951,892 $1,713,065

433,769

441,874

433,575

(254,552)

(239,730)

(209,399)

12,613

(20,116)

14,651

DAC balance, end of period

$2,325,750 $2,133,920 $1,951,892

120

(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

FINANCIAL STATEMENTS — NOTE 8

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, 2019 and 2018, an additional
liability for these contracts was deemed to be
unnecessary.

Primerica 2019 Annual Report

121

FINANCIAL STATEMENTS — NOTE 9

The following table represents the fair value of assets supporting separate accounts by major
investment category:

Fixed-income securities

Equity securities

Cash and cash equivalents

Due to/from funds

Other

Total separate accounts assets

Year ended December 31,

2019

2018

(In thousands)
$ 970,098 $ 996,014

1,318,351

1,150,848

199,723

(2,489)

50,041

(1,494)

$2,485,745 $2,195,501

(9) Policy Claims and Other Benefits Payable

Changes in policy claims and other benefits payable were as follows:

Policy claims and other benefits payable, beginning of period

Year ended December 31,

2019

2018

2017

(In thousands)
$ 313,862 $ 307,401 $ 268,136

Less reinsured policy claims and other benefits payable

318,653

322,137

323,195

Net balance, beginning of period

Incurred related to current year

Incurred related to prior years (1)

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

Foreign currency translation

Net balance, end of period

(4,791)

(14,736)

(55,059)

186,857

176,854

162,256

(869)

(1,355)

2,230

185,988

175,499

164,486

(244,997)

(187,453)

(181,670)

14,614

22,426

57,192

(230,383)

(165,027)

(124,478)

343

(527)

315

(48,843)

(4,791)

(14,736)

Add reinsured policy claims and other benefits payable

388,797

318,653

322,137

Balance, end of period

$ 339,954 $ 313,862 $ 307,401

(1)

Includes the difference between our estimate of claims incurred but not yet reported at year end and the actual incurred
claims reported after year end.

122

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

As of December 31, 2019, 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. As of December 31,
2019, we were in compliance with the covenants
of the Senior Notes. No events of default
occurred on the Senior Notes during the year
ended December 31, 2019.

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, 2019, the
principal amount outstanding on the Surplus
Note issued by Vidalia Re was $1.2 billion, which
is equal to the principal amount of the LLC Note.
The principal amount of both the Surplus Note
and the LLC Note will fluctuate over time to
coincide with the amount of policy reserves
being contractually supported under the Vidalia
Re Coinsurance Agreement. Both the LLC Note
and the Surplus Note mature on December 31,

December 31, 2019 December 31, 2018

(In thousands)

$375,000

(174)

(239)

$374,826

$374,761

2030 and bear interest at an annual interest rate
of 4.50%. Based on the estimated reserves for
policies issued in 2011 through 2017 that have
been ceded under the Vidalia Re Coinsurance
Agreement, the principal amounts of the Surplus
Note and the LLC Note are expected to reach
$1.5 billion 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 LLC Note’s credit
enhancement feature. 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.

Revolving Credit Facility. We maintain an
unsecured $200.0 million revolving credit facility
(“Revolving Credit Facility”) with a syndicate of
commercial banks that has a scheduled
termination date of December 19, 2022.
Amounts outstanding under the Revolving
Credit Facility bear interest at a periodic rate
equal to LIBOR or the base rate, plus in either
case an applicable margin. The Revolving Credit
Facility contains language that allows for the
Company and the lenders to agree on a
comparable or successor reference rate in the
event LIBOR is not available, as is expected to
happen in 2022. The Revolving Credit Facility
also permits the issuance of letters of credit. The
applicable margins are based on our debt rating
with such margins for LIBOR rate loans and
letters of credit ranging from 1.125% to 1.625%
per annum and for base rate loans ranging from
0.125% to 0.625% per annum. Under the

Primerica 2019 Annual Report

123

FINANCIAL STATEMENTS — NOTE 11

Revolving Credit Facility, we incur a commitment
fee that is payable quarterly in arrears and is
determined by our debt rating. This commitment
fee ranges from 0.125% to 0.225% per annum of
the aggregate $200.0 million commitment of the
lenders under the Revolving Credit Facility. As of

December 31, 2019, no amounts have been
drawn under the Revolving Credit Facility and we
were in compliance with its covenants.
Furthermore, no events of default have occurred
under the Revolving Credit Facility during the
year ended December 31, 2019.

(11) Income Taxes

Income tax expense. Income tax expense (benefit) consists of the following:

Current

Deferred

Total

(In thousands)

$ 76,289 $ 6,628 $ 82,917

32,239

(7,469)

24,770

3,033

—

3,033

$111,561 $

(841) $110,720

$ 50,691 $ 17,399 $ 68,090

36,028

(14,809)

21,219

2,681

—

2,681

$ 89,400 $ 2,590 $ 91,990

$ 53,084 $(46,622) $

6,462

28,613

(7,166)

21,447

1,356

—

1,356

$ 83,053 $(53,788) $ 29,265

Year ended December 31, 2019

Federal

Foreign

State and local

Total tax expense

Year ended December 31, 2018

Federal

Foreign

State and local

Total tax expense

Year ended December 31, 2017

Federal

Foreign

State and local

Total tax expense

124

FINANCIAL STATEMENTS — NOTE 11

Effective tax rate reconciliation. Total income tax expense is different from the amount determined
by multiplying income before income taxes by the U.S. statutory federal tax rate of 21% for the years
ended December 31, 2019 and 2018 and 35% for the year ended December 31, 2017. The
reconciliation for such difference follows:

Year ended December 31,

2019

2018

2017

Amount

Percentage

Amount

Percentage

Amount

Percentage

(Dollars in thousands)

Computed tax expense

$100,193

21.0% $87,378

21.0% $132,832

35.0%

Difference between foreign

statutory rate and U.S. statutory
rate

Transition impact of the Tax

Reform Act(1)

Recognition of foreign tax credits

Change in valuation allowance on

foreign tax credits

Other

4,898

1.0%

4,474

1.1%

(6,668)

(1.8)%

—

5,629

—%

1.2%

(2,737)

(6,069)

6,069

2,875

(.7)%

(95,457)

(25.1)%

(1.5)%

(40,386)

(10.6)%

1.5%

0.7%

40,386

10.6%

(1,442)

(0.4)%

Total tax expense / effective rate

$110,720

23.2% $91,990

22.1% $ 29,265

7.7%

(1) On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”) was enacted in the United States. The Tax

Reform Act introduced a broad range of tax reforms affecting businesses, including corporate tax rates, business deductions,
and international tax provisions. Under U.S. GAAP, the effects of new legislation are recognized upon enactment, which, for
federal legislation, is the date the president signs a bill into law. Accordingly, we recognized the tax effects of the Tax Reform
Act as of December 31, 2017. The SEC staff issued Staff Accounting Bulletin No. 118, which allowed companies to recognize
provisional amounts for the tax effects resulting from the enactment of the Tax Reform Act for which the accounting under
Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”) was incomplete as of December 31, 2017 but a
reasonable estimate could be determined. Adjustments to these provisional amounts were to be completed within a
measurement period not to exceed one year. Amounts recognized by the Company as of December 31, 2017 represented
reasonable estimates based on obtaining, preparing, and analyzing the information necessary at that time to account for the
tax effects of the Tax Reform Act under ASC 740. As of December 31, 2018, we finalized our analysis of the incomplete areas
and made the necessary adjustments to the provisional amounts recognized as of December 31, 2017.

Primerica 2019 Annual Report

125

FINANCIAL STATEMENTS — NOTE 11

Deferred tax assets and liabilities. The main components of deferred income tax assets and
liabilities were as follows:

Deferred tax assets:

Future policy benefit reserves and unpaid policy claims

$ 245,247 $ 218,461

December 31,

2019

2018

(In thousands)

Intangibles and tax goodwill

Future deductible liabilities

State income taxes

Foreign tax credits

Other

Total deferred tax assets before valuation allowance

Valuation allowance on foreign tax credits

Total deferred tax assets after valuation allowance

Deferred tax liabilities:

Deferred policy acquisition costs

Investments

Transitional amount for future policy benefit reserves prescribed in the Tax

Reform Act

Unremitted earnings on foreign subsidiaries

14,713

17,920

12,940

46,455

13,962

17,115

13,372

12,755

46,455

12,653

351,237

320,811

(46,455)

$ 304,782 $ 274,356

(314,969)

(293,729)

(17,630)

—

(15,256)

(17,798)

(5,772)

(4,669)

(49,035)

(48,085)

(21,645)

(15,144)

(424,307)

(379,425)

$(119,525) $(105,069)

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 respective
jurisdictional tax codes in the U.S. and Canada.
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.

126

The Company has state net operating losses
resulting in a deferred tax asset of approximately
$12.2 million, which are available for use through
2037. The Company has no other material net
operating loss or credit carryforwards other than
foreign tax credit carryforwards.

In assessing the realizability of deferred tax
assets, management considers whether it is
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. As of December 31, 2019,

management identified excess foreign tax
credits of approximately $46.5 million that could
not be used to offset the mandatory deemed
repatriation of foreign earnings tax stipulated by
the Tax Reform Act and believes it will not be
able to utilize these foreign tax credits in the
future. Therefore, the Company established a
deferred tax asset for these foreign tax credits
with a corresponding full valuation allowance.
These foreign tax credits are available for use
through 2027. With the exception of these
foreign tax credits, management believes that it
is more likely than not that the results of future
operations will generate sufficient taxable
income to realize its deferred tax assets.
Therefore, there were no other deferred tax
asset valuation allowances as of December 31,
2019 or 2018.

Controlled foreign corporations. The
Company has direct ownership of a group of
controlled foreign corporations in Canada. We
have not made a permanent reinvestment
assertion for any unremitted earnings in Canada;
therefore, we have recorded a deferred tax
liability to account for Canadian withholding
taxes that will occur upon repatriation of such
earnings and we continue to record deferred tax
liabilities to account for Canadian withholding
taxes as earnings are recognized.

The Company has no intentions to sell or
substantially liquidate our Canadian operations

FINANCIAL STATEMENTS — NOTE 11

and, therefore, has not provided for any
additional outside basis difference for the
amount of book basis in excess of tax basis in its
Canadian subsidiaries. In addition, it is not
practicable to determine the amount of the
unrecognized deferred tax liability related to any
additional outside basis difference in these
entities.

Unrecognized tax benefits. The total amount
of unrecognized benefits on uncertain tax
positions that, if recognized, would affect our
effective tax rate was approximately
$14.7 million and $13.9 million as of
December 31, 2019 and 2018, respectively. We
recognize interest expense related to
unrecognized tax benefits in tax expense net of
federal income tax. The total amount of accrued
interest and penalties in the consolidated
balance sheets was $2.3 million and $1.9 million
as of December 31, 2019 and 2018, respectively.
Additionally, we recognized less than
$0.3 million of interest expense related to
unrecognized tax benefits in the consolidated
statements of income for the years ended
December 31, 2019, 2018 and 2017.

A reconciliation of the change in the
unrecognized income tax benefit for the years
ended December 31, 2019 and 2018 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,

2019

2018

(In thousands)
$15,173 $14,385

(583)

(101)

3,036

3,105

(1,821)

(2,216)

$15,805 $15,173

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.

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, 2016 and thereafter for federal
income tax purposes. We are currently open to

Primerica 2019 Annual Report

127

FINANCIAL STATEMENTS — NOTE 12

audit in Canada for tax years ended
December 31, 2015 and thereafter for federal
and provincial income tax purposes.

(12) Stockholders’ Equity

A reconciliation of the number of shares of our
common stock follows:

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, 2019, we had a total of 360,220
RSUs and 92,108 PSUs outstanding. The PSU
outstanding balance is based on the number of
PSUs granted pursuant to the award agreement;
however, the actual number of common shares
earned could be higher or lower based on actual
versus targeted performance. See Note 14
(Share Based Transactions) for a discussion of
the PSU award structure.

On February 7, 2019 our Board of Directors
authorized a share repurchase program for up to
$275.0 million of our outstanding common stock
for purchases through June 30, 2020 (the “share
repurchase program”). Under the share
repurchase program, we repurchased 1,870,521
shares of our common stock in the open market
for an aggregate purchase price of
$225.0 million through December 31, 2019.
$50.0 million remains available for repurchases
of our outstanding common stock under the
share repurchase program as of December 31,
2019. On February 10, 2020, our Board of
Directors authorized a new share repurchase
program for up to $300.0 million of our
outstanding common stock (including
$50.0 million from the prior repurchase
program) for purchases through June 30, 2021.

128

Year ended December 31,

2019

2018

2017

(In thousands)
42,694 44,251 45,721

438

528

504

(1,929)

(2,118)

(2,012)

41,207 42,694 44,251

(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
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 from net
income any dividends and undistributed
earnings allocated to unvested RSUs 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 and the cash received for
the exercise price on 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

FINANCIAL STATEMENTS — NOTE 13

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.

Primerica 2019 Annual Report

129

FINANCIAL STATEMENTS — NOTE 14

The calculation of basic and diluted EPS was as follows:

Year ended December 31,
2018

2017

2019

Basic EPS:

Numerator:

Net income

(In thousands, except
per-share amounts)

$366,391 $324,094 $350,255

Income attributable to unvested participating securities

(1,654)

(1,893)

(2,526)

Net income used in calculating basic EPS

$364,737 $322,201 $347,729

Denominator:

Weighted-average vested shares

Basic EPS

Diluted EPS:
Numerator:

Net income

42,181

43,854

45,598

8.65 $

7.35 $

7.63

$366,391 $324,094 $350,255

Income attributable to unvested participating securities

(1,650)

(1,888)

(2,521)

Net income used in calculating diluted EPS

$364,741 $322,206 $347,734

Denominator:

Weighted-average vested shares

42,181

43,854

45,598

Dilutive effect of incremental shares to be issued for

contingently-issuable shares

133

131

Weighted-average shares used in calculating diluted EPS

42,314

43,985

45,689

Diluted EPS

8.62 $

7.33 $

7.61

(14) Share-Based Transactions

The Company has outstanding equity awards
under the Primerica, Inc. Second Amended and
Restated 2010 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, and stock payment awards, 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

130

Directors (“directors”), and sales force leaders
under the OIP. As of December 31, 2019, we had
1.5 million shares available for future grants
under this plan.

Employee and Director Share-Based
Compensation. As of December 31, 2019, 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.

RSUs.

• RSUs granted to management generally

have time-based vesting requirements with
equal and annual graded vesting over

approximately three years subsequent to
the grant date, but also generally 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.

• RSUs granted to directors have time-based

vesting requirements with equal and
quarterly graded vesting over four quarters
subsequent to the grant date.

FINANCIAL STATEMENTS — NOTE 14

•

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 employee and director
RSU awards are eligible for dividend equivalents
regardless of vesting status.

We recognized expense and tax benefit offsets
as follows for employee and director RSU share-
based compensation:

Total equity awards expense recognized

Tax benefit associated with total employee and director share-based

compensation

Year ended December 31,

2019

2018

2017

(In thousands)
$10,557 $10,684 $11,364

1,434

1,495

1,893

The following table summarizes employee and director RSU activity during the years ended
December 31, 2019, 2018, and 2017.

Unvested employee and director RSUs, December 31, 2016

Granted

Forfeited

Vested

Unvested employee and director RSUs, December 31, 2017

Granted

Forfeited

Vested

Unvested employee and director RSUs, December 31, 2018

Granted

Forfeited

Vested

Unvested employee and director RSUs, December 31, 2019

(1) Less than 1,000 shares

Weighted-average
measurement-date fair
value per share

(Shares in thousands)

396

130

(1)

(213)

312

106

—(1)

(186)

232

—(1)

(145)

180

$ 45.37

80.33

57.53

46.54

59.10

100.00

82.20

58.51

78.22

123.04

104.38

70.53

107.59

Primerica 2019 Annual Report

131

FINANCIAL STATEMENTS — NOTE 14

As of December 31, 2019, total compensation
cost not yet recognized in our consolidated
financial statements related to employee and
director RSU awards with time-based vesting
conditions yet to be reached was $4.2 million,
and the weighted-average period over which
cost will be recognized was 0.8 year.

PSUs.

The Company issues PSUs to certain of its
executive officers under the OIP as part of their
annual equity compensation. To date, PSU
awards have included a performance target of a
specified average annual Return on Adjusted
Equity (“ROAE”) for the Company over a three-
year performance period, as well as a threshold
ROAE and an ROAE at which the maximum
number of shares can be earned. Awards are
earned two months after the performance
period ends. 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.

In connection with our granting of PSU awards,
we recognized expense and tax benefit offsets
as follows:

Total employee PSU award expense

Tax benefit associated with total employee PSU award expense

Year ended December 31,

2019

2018

2017

(In thousands)
$3,516 $3,240 $2,761

—

191

187

132

The following table summarizes PSU activity during the years ended December 31, 2019, 2018, and
2017.

FINANCIAL STATEMENTS — NOTE 14

Unvested employee PSUs, December 31, 2016

Granted

Forfeited

Vested

Unvested employee PSUs, December 31, 2017(1)

Granted

Forfeited

Vested

Unvested employee PSUs, December 31, 2018(2)

Granted

Forfeited

Performance Adjustment

Vested

Unvested employee PSUs, December 31, 2019(3)

Weighted-average
measurement-date fair
value per share

(Shares in thousands)

—

(23)

$ 41.88

80.45

—

67.42

100.55

—

79.34

122.62

—

41.88

98.79

(1) The 2017 PSU awards outstanding are based on target. Based on the actual ROAE achieved within the three-year

performance period ended December 31, 2019, recipients will receive 41,162 shares of common stock on the vesting date,
March 1, 2020.

(2) The 2018 PSU awards outstanding are based on target. Depending upon the ROAE achieved within the performance period,

recipients may receive between 0 and 45,869 shares of common stock.

(3) The 2019 PSU awards outstanding are based on target. Depending upon the ROAE achieved within the performance period,

recipients may receive between 0 and 38,225 shares of common stock.

As of December 31, 2019 total unrecognized
compensation related PSU awards was
$0.6 million, and the weighted-average period
over which cost was 0.9 years.

Stock Options. From 2013 to 2016, the Company
issued stock options to certain of its executive
officers under the OIP as part of their annual
equity compensation. Stock options were
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 had time-based restrictions
with equal and annual graded vesting over a
three-year period and are all fully vested. Upon
retirement, employees have the lesser of three
years or the remaining option term to exercise
any vested options. We did not issue any stock
options in 2019, 2018 or 2017.

Compensation expense and related tax benefits
recognized for stock option awards were as
follows:

Year ended December 31,

2019

2018

2017

Expense recognized for stock option awards

Tax benefit recognized for stock option awards

(In thousands)
$39

$ 6

$162

—

Primerica 2019 Annual Report

133

FINANCIAL STATEMENTS — NOTE 14

The following table summarizes activity related to stock options outstanding and exercisable during the
years ended December 31, 2019, 2018, and 2017:

Outstanding at December 31, 2016

Granted

Exercised

Outstanding at December 31, 2017

Granted

Exercised

Outstanding at December 31, 2018

Granted

Exercised

Outstanding at December 31, 2019

Range of granted option exercise prices outstanding at December 31,

2019

$41.20 (average term remaining — 4.1 years)

$53.50 (average term remaining — 5.2 years)

$41.88 (average term remaining — 6.2 years)

Outstanding

Exercisable

Number
of
shares

Weighted
average
exercise
price

Number
of
shares

Weighted
average
exercise
price

145

—

(38)

107

—

(33)

—

(4)

(Shares in thousands)
$44.75

$53.50

—

43.63

45.15

—

47.59

44.07

—

41.20

47.26

45.55

44.23

$41.20

53.50

41.88

$41.20

53.50

41.88

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, 2019. 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, 2019

(In thousands)
$6,036

—

$6,036

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

134

Year ended December 31,

2019

2018

2017

(In thousands)
$369 $1,953 $1,453

—

509

161

1,562

1,673

FINANCIAL STATEMENTS — NOTE 14

As of December 31, 2019, there was no
unrecognized compensation cost related to
outstanding options.

Non-Employee Share-Based Compensation.
Non-employee share-based transactions relate
to the granting of RSUs to members of the sales
force (“agent equity 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
quarterly reporting period.

The following table summarizes non-employee
RSU activity during the years ended
December 31, 2019, 2018, and 2017.

Unvested non-employee RSUs, December 31, 2016

Granted

Vested

Unvested non-employee RSUs, December 31, 2017

Granted

Vested

Unvested non-employee RSUs, December 31, 2018

Granted

Vested

Unvested non-employee RSUs, December 31, 2019

Agent equity awards are measured using the fair
market value at the grant date and vest during
the service period, which occur within the same
quarterly reporting period. Equity awards
granted to the sales force prior to 2018
contained sales restrictions that expired over
three years. Because of such sales restrictions,
the fair market value of the awards incorporated
an illiquidity discount reflecting the risk
associated with the post-vesting restrictions. To
quantify this discount for each award, we used a
series of put option models with one-, two- and
three-year tenors to estimate a hypothetical cost
of eliminating the downside risk associated with
the sale restrictions. Starting in 2018, equity

Weighted-average
measurement-date fair
value per share

(Shares in thousands)

156

(166)

124

(122)

105

(115)

$ 61.55

75.69

68.96

91.88

102.43

101.01

97.71

124.51

115.01

132.68

awards granted under quarterly contests no
longer contain sales restrictions, thereby
eliminating the need to incorporate an illiquidity
discount. Awards granted before January 2018
maintain the post-vesting sales restrictions
established at the time of grant.

The most significant assumptions in estimating
the illiquidity discount for awards granted prior
to 2018 in the put option 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.

Primerica 2019 Annual Report

135

FINANCIAL STATEMENTS — NOTE 15

The following table presents the assumptions used in valuing quarterly RSU granted to agents prior to
2018:

Expected volatility

Quarterly dividends expected

Risk-free interest rates

Year ended December 31,

2019

2018

2017

n/a

18% to 34%

$0.19 to $0.20

Less than 3%

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 in
the quarter granted and earned.

Details on the granting and valuation of these
awards were as follows:

Year ended December 31,

2019

2018

2017

(Dollars in thousands, except
per-share amounts)

Total quarterly non-employee RSUs granted

105,348

124,471

155,996

Measurement date per-share fair value of

awards

Illiquidity discounts

Quarterly incentive awards expense

recognized currently

Quarterly incentive awards expense

deferred

Tax benefit associated with incentive

awards

$118.11 to $132.68 $96.60 to $120.55 $67.82 to $91.88

n/a

3,441 $

3,288 $

9,663

2,465

9,484

2,437

10%

980

10,821

2,259

As of December 31, 2019, all agent equity
awards were fully vested with the exception of
approximately 24 thousand shares that will vest
on January 1, 2020.

(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.

136

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 Tennessee Department of
Commerce and Insurance (“Tennessee DOCI”)
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 or 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 Law that provide
that dividends on 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). 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 and
require advance notice to the Tennessee DOCI,
and are subject to potential disapproval.
Dividends paid from other than statutory
unassigned surplus require approval of the
commissioner of the Tennessee DOCI.

FINANCIAL STATEMENTS — NOTE 15

Primerica Life’s statutory capital and surplus as
of December 31, 2019 and 2018 were as follows:

Statutory capital and

surplus

December
31, 2019

December
31, 2018

(In thousands)

$666,005 $674,165

Primerica Life’s statutory net gain from
operations was $508.6 million, $547.9 million,
and $398.8 million for 2019, 2018 and 2017,
respectively. Primerica Life made no pro rata
distributions of any class of its own securities
during 2019. During 2019, Primerica Life paid
ordinary dividends of $270.0 million to the
Parent Company. As of January 1, 2020, the
amount of dividends Primerica Life could pay
from statutory unassigned surplus without prior
approval of the commissioner of the Tennessee
DOCI was $168.3 million, which is prescribed by
the amount of statutory unassigned surplus on
that date.

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, 2019 was
$247.6 million on Peach Re’s statutory capital
and surplus. As of December 31, 2019, 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. There are no other
permitted accounting practices that are not
encompassed in prescribed statutory accounting
practices.

Primerica 2019 Annual Report

137

FINANCIAL STATEMENTS — NOTE 16

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
internal capital targets. OSFI requires 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, 2019 and 2018, Primerica Life
Canada’s statutory capital and surplus satisfied
regulatory requirements and was $454.6 million
and $377.6 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, 2020 is estimated to be
$107.3 million, which is calculated based on
satisfying the Company’s internal capital targets.

(16) Commitments and Contingent
Liabilities

Letter of Credit. Peach Re maintains 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.

138

Under the Credit Facility Agreement, Deutsche
Bank issued a letter of credit in the initial
amount of $450.0 million with a term expiring on
December 31, 2025 (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. As of December 31, 2019,
the amount outstanding under the LOC was
$247.6 million. This amount will continue to
decline over the remaining term of the LOC to
correspond with declines in the Regulation XXX
reserve. 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 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, 2019,
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 unclaimed property audits by 30
jurisdictions, currently focusing on the life
insurance claims paying practices of its
subsidiaries, Primerica Life and NBLIC. Other
jurisdictions may pursue similar audits. The
potential outcome of such audits 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
$8.9 million, $8.4 million, and $7.7 million in
2019, 2018, and 2017, respectively.

(18) Revenue from Contracts with
Customers

Our revenues from contracts with customers
primarily include:

• Commissions and fees earned for the

marketing and distribution of investment
and savings products underwritten by
mutual fund companies and annuity
providers. For purposes of revenue

FINANCIAL STATEMENTS — NOTE 17

recognition, mutual fund companies and
annuity providers are considered the
customers in marketing and distribution
arrangements.

•

Fees earned for investment advisory and
administrative services within our managed
investments programs.

• Account-based fees for transfer agent

recordkeeping functions and non-bank
custodial services.

•

Fees associated with the distribution of
other third-party financial products.

• Other revenue from the sale of

miscellaneous products and services
including monthly subscription fees from
the sales representatives for access to POL,
our primary sales force support tool.

Premiums from insurance contracts we
underwrite, fees received from segregated funds
insurance contracts, and income earned on our
invested assets are excluded from the definition
of revenues from contracts with customers in
accordance with U.S. GAAP.

Primerica 2019 Annual Report

139

FINANCIAL STATEMENTS — NOTE 18

The disaggregation of our revenues from contracts with customers were as follows:

Term Life Insurance segment revenues:

Other, net

Year ended December 31,

2019

2018

2017

(In thousands)

40,848 $

42,374 $ 41,236

Total segment revenues from contracts with customers
Revenues from sources other than contracts with customers

40,848
1,186,383

42,374
1,080,826

41,236
950,988

Total Term Life Insurance segment revenues

$1,227,231 $1,123,200 $992,224

Investment and Savings Products segment revenues:

Commissions and fees:

Sales-based revenues
Asset-based revenues
Account-based revenues

Other, net

$ 282,887 $ 259,991 $233,005
216,527
55,030
9,555

245,295
81,802
9,631

260,451
80,555
10,017

Total segment revenues from contracts with customers
Revenues from sources other than contracts with customers

(segregated funds)

633,910

596,719

514,117

57,698

58,357

58,630

Total Investment and Savings Products segment revenues

$ 691,608 $ 655,076 $572,747

Corporate and Other Distributed Products segment revenues:

Commissions and fees(1)

Other, net

Total segment revenues from contracts with customers
Revenues from sources other than contracts with customers

32,213 $

32,162 $ 28,125

4,660

36,873
96,792

4,982

5,300

37,144
84,423

33,425
90,706

Total Corporate and Other Distributed Products segment

revenues

$ 133,665 $ 121,567 $124,131

(1) Commissions and fees for the year ended December 31, 2019 include $5.5 million, attributable to

performance obligations satisfied in a previous reporting period and represent the collection of
variable consideration in the transaction price that had been previously constrained.

We recognize revenue upon the satisfaction of
the related performance obligation, unless the
transaction price includes variable consideration
that is constrained; in such case, we recognize
revenue when the uncertainty associated with
the constrained amount is subsequently
resolved. Variable consideration is not treated as
constrained to the extent it is probable that no
significant reversal in the amount of cumulative
revenue recognized will occur when the
uncertainty associated with the variable
consideration is resolved. We have no material
obligations for refunds of commission and fees

140

on contracts with customers subsequent to
completion of our performance obligation.

Investment and Savings Products Marketing
and Distribution Services. We receive
commissions and fees from mutual fund
companies and annuity providers for the
marketing and distribution by the licensed sales
representatives of investment and savings
products underwritten by such companies and
providers. We recognize the sales-based
marketing and distribution revenue received
from such companies and providers at the point

in time our performance obligation to them is
satisfied, which is the trade date. The sales-
based commissions from mutual fund
companies and annuity providers are known and
are due at the same time our performance
obligation to such mutual fund companies and
annuity providers is satisfied. We also receive
ongoing asset-based commissions from mutual
fund companies and annuity providers each
reporting period based on client asset values.
We do not recognize revenue for asset-based
marketing and distribution commissions until
the end of each subsequent reporting period
when the amount becomes known and due from
mutual fund companies or annuity providers as
this revenue represents variable consideration
that is fully constrained at the point in time our
distinct performance obligation to mutual fund
companies and annuity providers is satisfied. We
consider variable consideration in the form of
asset-based marketing and distribution
commissions to be fully constrained as the
amounts we will be entitled to collect are highly
uncertain and susceptible to factors outside of
our control. Such factors include the market
values of assets under management and the
length of time investors hold their accounts.
Asset-based marketing and distribution
commissions recognized during the current
period are almost exclusively attributable to
distinct performance obligations satisfied to
mutual fund companies and annuity providers in
previous periods.

Investment Advisory and Administrative
Services. We provide investment advisory and
administrative services over time to investors in
the managed investments programs we offer.
We recognize revenue as our performance
obligation is satisfied over time for daily
investment advisory and administrative services
that are substantially the same and have the
same pattern of delivery. Fees for these services,
which are based on a percentage of client assets
in managed investment programs, become
known and are charged to investors during the
same reporting period in which the daily
investment advisory and administrative services
are performed.

FINANCIAL STATEMENTS — NOTE 18

Account-based Services. We provide distinct
transfer agent recordkeeping services for certain
mutual funds we distribute and non-bank
custodial services to investors purchasing
investment products we distribute through
qualified retirement accounts in the United
States. Fees charged for these account-based
services consist primarily of a stated fee for each
investment position or each qualified retirement
account. Generally, our performance obligation
for each account-based service arrangement is
satisfied over time and is substantially the same
with the same pattern of delivery. We recognize
revenue to which we are entitled for each
investment position or each qualified account
over time based on the time-based pro-rata
amount earned each reporting period.

Distribution of Other Third-party Financial
Products. We distribute various other financial
products on behalf of third parties to consumers.
We receive upfront commissions and/or renewal
commissions from product providers for sales of
other financial product sales we have arranged.
We recognize revenue at the point in time our
performance obligation to product providers is
satisfied, which is generally on the date the
financial product is purchased by the consumer
from the product provider. For certain financial
products, most notably prepaid legal
subscriptions and auto and homeowners’
insurance referrals, we receive ongoing renewal
commissions that coincide with recurring
payments received by product providers from
active subscribers or policyholders. Ongoing
renewal commissions represent variable
consideration that will not be resolved until after
the reporting period in which our performance
obligation has been satisfied. We estimate
variable consideration in the transaction price
for these financial products (with the exception
of miscellaneous products for which we expect
nominal ongoing commissions) as the expected
amount of commissions to be received over the
life of the subscription or referred policy and
apply a constraint so that it is probable that a
subsequent change in estimate will not result in
a significant revenue reversal. Management
judgment primarily is required to determine the

Primerica 2019 Annual Report

141

FINANCIAL STATEMENTS — NOTE 19

average life of a subscription or referred policy,
which we establish based on historical
information. We recognize variable
consideration in excess of the amount
constrained in subsequent reporting periods
when the uncertainty is resolved and the excess
amounts are due from the product providers.

Revenue for Other Services. We recognize
revenue from the sale of other miscellaneous
products and services, including monthly
subscription fees from the sales representatives
for access to POL, upon the transfer of the
promised product or service. For POL
subscriptions, we satisfy our performance
obligation by providing subscribers access to the
promised services over time during each
monthly subscription period. Revenue
recognized from the sale of other miscellaneous

products and services becomes known and
charged at the same time we satisfy the
corresponding performance obligation.

Contract Balances.
For revenue associated
with ongoing renewal commissions on other
distributed financial products, we record a
contract asset for the amount of ongoing
renewal commissions we anticipate collecting in
reporting periods subsequent to the sale or
referral, less amounts that are constrained in
other assets. The contract asset is reduced for
commissions that are billed and become due
receivables from product providers during the
reporting period.

Activity in the contract asset account was as
follows:

Balance, beginning of period

Current period sales, net of collection of renewal commissions

Balance, at the end of period

December 31, 2019 December 31, 2018

(In thousands)

$50,119

1,582

$51,701

$48,533

1,586

$50,119(1)

(1) Reclassed to Other assets from Agents balances, due premiums and other receivables in the

consolidated balance sheets to conform with current year reporting.

No significant estimate adjustments were made
to the contract asset and no impairment losses
were recognized on the contract asset during
the year ended December 31, 2019. Incremental
costs to obtain or fulfill contracts, most notably
sales commissions to the sales representatives,
are not incurred prior to the recognition of the
related revenue. Therefore, we have no assets
recognized for incremental costs to obtain or
fulfill contracts.

(19) Leases

We have operating leases for our executive
office operations and other real estate leases of
office space and finance leases for certain office
equipment. Our leases have remaining lease
terms of 1 year to 11 years, some of which

include options to extend the leases for up to 10
years, and some of which include options to
terminate the leases within 4 years, exercisable
at the Company’s discretion. Operating lease
right-of-use assets and operating lease liabilities
are presented separately in our consolidated
balance sheets. As of December 31, 2019,
finance lease right-of-use assets of $0.7 million
and finance lease liabilities of $0.7 million were
recorded within Other assets and Other
liabilities, respectively, within our consolidated
balance sheets. The Company determines its
lease liabilities, which are measured at the
present value of future lease payments, using
the Company’s incremental secured borrowing
rate that is commensurate with the term of the
underlying lease or the rate implicit in the lease
if readily determinable.

142

The components of lease expense were as follows:

FINANCIAL STATEMENTS — NOTE 19

Operating lease cost
Operating lease cost

Variable lease cost (includes taxes, common area maintenance and insurance)

Finance lease cost

Depreciation of finance lease assets

Interest on lease liabilities

Total lease cost

Other information related to leases was as follows:

Supplemental Cash Flows Information

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used in operating leases(1)

Operating cash flows used in finance leases(1)

Financing cash flows used in finance leases

Year ended
December 31, 2019

(In thousands)

$7,650

675

277

$8,648

$7,656

281

(1)

Included in change in other operating assets and liabilities, net in the accompanying consolidated
statements of cash flows.

Weighted Average Remaining Lease Term

Operating leases

Finance leases

Weighted Average Discount Rate

Operating leases

Finance leases

December 31, 2019

(In thousands)

9 years

3 years

4.6%

6.8%

Primerica 2019 Annual Report

143

FINANCIAL STATEMENTS — NOTE 19

Future minimum lease payments under non-cancellable leases were as follows:

Year Ended December 31,

2020

2021

2022

2023

2024

Thereafter

Total minimum rental commitments for operating leases

Less imputed interest

Total lease liabilities

Operating Leases

Finance Leases

(In thousands)

$ 7,403

$331

7,241

7,234

7,242

7,218

28,622

64,960

11,473

284

116

—

812

$53,487

$736

The following disclosures for the comparative periods are presented in accordance with ASC 840:

Total minimum rent expense for operating leases for the years ended December 31, 2018 and 2017
was $8.0 million and $7.5 million. We had no contingent rent expense during the years ended
December 31, 2018 and 2017, respectively.

As of December 31, 2018, the minimum aggregate rental commitments for operating leases were as
follows:

2019

2020

2021

2022

2023

Thereafter

Total minimum rental commitments for operating leases

December 31, 2018

(In thousands)
$ 7,459

7,174

7,038

7,120

7,094

34,901

$70,786

As of December 31, 2018, the aggregate balance of our capital lease liabilities was not material.

144

FINANCIAL STATEMENTS — NOTE 20

(20) 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, 2019

Quarter ended
June 30, 2019

Quarter ended
September 30, 2019

Quarter ended
December 31, 2019

(In thousands, except per-share amounts)

$ 677,286

$ 687,262

$ 692,258

(389,795)

(400,588)

(388,982)

$ 697,060

(390,364)

287,491

167,315

24,111

2,847

13,223

494,987

392,619

102,368

23,203

286,674

178,468

24,868

1,067

13,825

504,902

377,442

127,460

30,014

303,276

179,719

22,675

285

14,698

520,653

395,514

125,139

28,916

306,696

188,302

22,418

766

13,778

531,960

409,815

122,145

28,588

Net income

$ 79,165

$ 97,446

$ 96,223

$ 93,557

Earnings per share:

Basic earnings per share

Diluted earnings per share

1.84

1.83

2.28

2.25

2.24

Primerica 2019 Annual Report

145

FINANCIAL STATEMENTS — NOTE 20

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, 2018

Quarter ended
June 30, 2018

Quarter ended
September 30, 2018

Quarter ended
December 31, 2018

(In thousands, except per-share amounts)

$ 656,087

$ 667,191

$ 670,222

(394,249)

(403,449)

(391,175)

$ 673,605

(392,290)

261,838

166,827

19,017

(1,656)

13,897

459,923

376,960

82,963

17,248

263,742

167,940

20,030

1,313

14,790

467,815

354,050

113,765

27,065

279,047

170,879

20,622

(126)

14,359

484,781

373,346

111,435

26,296

281,315

171,960

21,760

(1,651)

13,941

487,325

379,403

107,922

21,381

Net income

$ 65,715

$ 86,700

$ 85,139

$ 86,541

Earnings per share:

Basic earnings per share

Diluted earnings per share

1.46

1.96

1.95

1.94

1.99

Quarterly amounts may not agree in total to the corresponding annual amounts due to rounding.

146

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, 2019 and 2018.

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.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS

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 2019 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 the 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, 2019.

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.

Primerica 2019 Annual Report

147

9A. CONTROLS AND PROCEDURES

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors Primerica, Inc.:

OpiniononInternalControlOverFinancialReporting
We have audited Primerica, Inc. and subsidiaries’ (the Company) internal control over financial reporting as
of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31,
2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and
2018, 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, 2019, and the related notes and
financial statement schedules I, II, III, and IV (collectively, the consolidated financial statements), and our
report dated February 27, 2020 expressed an unqualified opinion on those consolidated financial statements.

BasisforOpinion
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 are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial
reporting 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.

DefinitionandLimitationsofInternalControlOverFinancialReporting
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.

/s/ KPMG LLP
Atlanta, Georgia
February 27, 2020

148

ITEM 9B. OTHER INFORMATION.

Not applicable.

ITEM 9B. OTHER INFORMATION

Primerica 2019 Annual Report

149

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 2020
Annual Meeting of Stockholders (the “Proxy
Statement”), which will be filed with the SEC
within 120 days of December 31, 2019, 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.
Information About Our Executive Officers and
Certain Significant Employees included
elsewhere in this report.

We have adopted a written Code of Conduct
that applies to all directors, officers and

150

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.
Information About Our Executive Officers and
Certain Significant Employees, 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 Directors;

• Governance — Director Independence;

• Governance — Environmental, Social, and

Governance (“ESG”) Matters – Our
Corporate Culture;

• Board of Directors — Board Members;

• Board of Directors — Board Committees;

• Board of Directors — Other Director

Matters;

•

Stock Ownership — Delinquent
Section 16(a) Reports;

Executive Compensation — Employment
Agreements;

• Audit Matters — Audit Committee Report;

and

• Related Party Transactions.

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.

SecuritiesAuthorizedforIssuanceUnderEquityCompensationPlans

We have two compensation plans under which our equity securities are authorized for issuance. The
Primerica, Inc. Second Amended and Restated 2010 Omnibus Incentive Plan was approved by our
stockholders in May 2017. 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, 2019.

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. Second Amended and

Restated 2010 Omnibus

Incentive Plan

Primerica, Inc. Stock Purchase Plan for

Agents and Employees

Total

Equity compensation plans not
approved by stockholders

365,457(1)

$44.23(2)

1,456,414(3)

—

365,457

—

$44.23

1,847,874(4)

3,304,288

n/a

(1) Consists of 203,427 and 69,922 shares to be issued in connection with unvested restricted stock units and outstanding stock
options, respectively. Also includes 92,108 shares to be issued to certain executive officers in connection with outstanding
performance stock units if the Company achieves the targeted level of performance specified in the award agreement over a
three-year period. Based on the actual Return on Adjusted Equity achieved within the three-year performance period ended
December 31, 2019, recipients of the 2017 performance-based stock units will receive 41,162 shares of common stock versus
the targeted 36,046 shares on the vesting date, March 1, 2020. 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.

(2) Represents the weighted average exercise price of the 69,922 stock options outstanding.
(3) The number of shares of our common stock available for future issuance is 12,200,000 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.

Primerica 2019 Annual Report

151

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Other 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;

• 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 4:

Ratification of the Appointment of KPMG
LLP as Our Independent Registered Public
Accounting Firm;

• Board of Directors — Board Committees —

• Governance — Director Independence;

Audit Committee; and

• Audit Matters — Fees and Services of

KPMG.

152

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, 2019 and 2018

Consolidated Statements of Income for each of the years in the three-year period ended

December 31, 2019

Consolidated Statements of Comprehensive Income for each of the years in the three-year

period ended December 31, 2019

Consolidated Statements of Stockholders’ Equity for each of the years in the three-year period

ended December 31, 2019

Consolidated Statements of Cash Flows for each of the years in the three-year period ended

December 31, 2019

Notes to Consolidated Financial Statements

Unaudited Quarterly Financial Data

2. FINANCIAL STATEMENT SCHEDULES

Included in Part IV of this report:

Schedule I — Consolidated Summary of Investments — Other than Investments in Related

Parties as of December 31, 2019

Schedule II — Condensed Financial Information of Registrant as of December 31, 2019 and
2018, and for each of the years in the three-year period ended December 31,
2019

Schedule III — Supplementary Insurance Information as of December 31, 2019 and 2018, and

for each of the years in the three-year period ended December 31, 2019

Schedule IV — Reinsurance for each of the years in the three-year period ended December 31,

2019

3. EXHIBIT INDEX –

145

160

161

167

169

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 2019 Annual Report

153

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;

• may have been qualified by disclosures that were made to the other party in connection with the
negotiation of the applicable 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.

Incorporated by reference to Exhibit 3.1 to
Primerica’s Current Report on Form 8-K filed
May 24, 2013 (Commission File
No. 001-34680).

Second Amended and Restated Bylaws of
the Registrant.

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Indenture, dated July 16, 2012, among the
Registrant and Wells Fargo Bank, National
Association, as trustee.

First Supplemental Indenture, dated July 16,
2012, among the Registrant and Wells Fargo
Bank, National Association, as trustee.

4.3

Form of 4.750% Senior Notes due 2022.

4.4

Description of Registrant’s Securities.

10.1

Credit Agreement, dated as of December 19,
2017.

10.2

Tax Separation Agreement dated as of
March 30, 2010 by and between the
Registrant and Citigroup Inc.

154

Incorporated by reference to Exhibit 4.1 to
Primerica’s Current Report on Form 8-K filed
July 16, 2012 (Commission File
No. 001-34680).

Incorporated by reference to Exhibit 4.2 to
Primerica’s Current Report on Form 8-K filed
July 16, 2012 (Commission File
No. 001-34680).

Incorporated by reference to Exhibit 4.3
(included in Exhibit 4.2 filed herewith) to
Primerica’s Current Report on Form 8-K filed
July 16, 2012 (Commission File
No. 001-34680).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Incorporated by reference to Exhibit 10.1 to
Primerica’s Current Report on Form 8-K filed
December 20, 2017 (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).

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

Amended and Restated 80% Coinsurance
Agreement dated March 31, 2016 by and
between Primerica Life Insurance Company
and Pecan Re Inc.

Incorporated by reference to Exhibit 10.2 to
Primerica’s Annual Report on Form 10-K for
the year ended December 31, 2016
(Commission File No. 001-34680).

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.

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.

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.

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).

Incorporated by reference to Exhibit 10.7 to
Primerica’s Annual Report on Form 10-K for
the year ended December 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).

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).

Primerica 2019 Annual Report

155

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Description

Reference

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 10.6 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).

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 of Canada and Financial
Reassurance Company 2010, Ltd. (currently
known as Munich Re Life Insurance
Company of Vermont).

Coinsurance Amending Agreement dated as
of October 20, 2016 among Primerica Life
Insurance Company of Canada, Munich Re
Life Insurance Company of Vermont
(formerly known as Financial Reassurance
Company 2010, Ltd.) and Munich-American
Holding Corporation.

Coinsurance Agreement Novation
Amendment dated as of December 15, 2016
among Primerica Life Insurance Company of
Canada, Munich Re Life Insurance Company
of Vermont and Munich Re of Malta P.L.C.

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).

Incorporated by reference to Exhibit 10.19 to
Primerica’s Annual Report on Form 10-K for
the year ended December 31, 2016
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.20 to
Primerica’s Annual Report on Form 10-K for
the year ended December 31, 2016
(Commission File No. 001-34680).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Exhibit
Number

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

156

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit
Number

10.20

10.21

Description

Reference

Coinsurance Amending Agreement dated as
of January 1, 2018 among Primerica Life
Insurance Company of Canada and Munich
Re of Malta P.L.C.

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Monitoring and Reporting Agreement dated
as of March 31, 2016 by and among
Primerica Life Insurance Company and
Pecan Re Inc.

Incorporated by reference to Exhibit 10.21
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2016
(Commission File No. 001-34680).

10.22*

Primerica, Inc. Stock Purchase Plan for
Agents and Employees.

10.23*

Primerica, Inc. Second Amended and
Restated 2010 Omnibus Incentive Plan.

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 10.26
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2017
(Commission File No. 001-34680).

10.24*

10.25*

10.26*

10.27*

10.28*

10.29*

10.30*

Form of Revised Primerica, Inc. Performance
Stock Unit Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2017 awards).

Incorporated by reference to Exhibit 10.23
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2018
(Commission File No. 001-34680)

Form of Primerica, Inc. Performance Stock
Unit Award Agreement under the Primerica,
Inc. 2010 Omnibus Incentive Plan (2018
awards).

Incorporated by reference to Exhibit 10.24
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2018
(Commission File No. 001-34680)

Form of Primerica, Inc. Performance Stock
Unit Award Agreement under the Primerica,
Inc. 2010 Omnibus Incentive Plan (2019
awards).

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
(2017 awards).

Incorporated by reference to Exhibit 10.31
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2017
(Commission File No. 001-34680).

Form of U.S. Employee Restricted Stock Unit
Restated Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2018 awards).

Incorporated by reference to Exhibit 10.27
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2018
(Commission File No. 001-34680).

Form of U.S. Employee Restricted Stock Unit
Restated Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2019 awards).

Employee Restricted Stock Unit Award
Agreement, dated as of March 18, 2019,
between Registrant and Mr. William A. Kelly.

Filed with the Securities and Exchange
Commission as part of this Annual Report.

Primerica 2019 Annual Report

157

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Description

Reference

10.35*

Form of Indemnification Agreement for
Directors and Officers.

Form of Restated Nonqualified Stock Option
Award Agreement under the Primerica, Inc.
2010 Omnibus Incentive Plan (2014 awards).

Form of Restated Nonqualified Stock Option
Award Agreement under the Primerica, Inc.
2010 Omnibus Incentive Plan (2015 awards).

Form of Restated Nonqualified Stock Option
Award Agreement under the Primerica, Inc.
2010 Omnibus Incentive Plan (2016 awards).

Form of Director Restricted Stock Unit
Award Agreement under the Primerica, Inc.
2010 Omnibus Incentive Plan (2019 awards).

Amended and Restated Employment
Agreement, dated as of January 2, 2015,
between the Registrant and Mr. Glenn J.
Williams.

Amended and Restated Employment
Agreement, dated as of January 2, 2015,
between the Registrant and Mr. Peter W.
Schneider.

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 10.2 to
Primerica’s Quarterly Report on Form 10-Q
for the quarter ended September 30, 2014
(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, 2015
(Commission File No. 001-34680).

Incorporated by reference to Exhibit 10.33
to Primerica’s Annual Report on Form 10-K
for the year ended December 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 10.48
to Primerica’s Registration Statement on
Form S-1 (File No. 333-162918).

Incorporated by reference to Exhibit 99.4 to
Primerica’s Current Report on Form 8-K filed
January 5, 2015 (Commission File
No. 001-34680).

Incorporated by reference to Exhibit 99.5 to
Primerica’s Current Report on Form 8-K filed
January 5, 2015 (Commission File
No. 001-34680).

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 filed
January 5, 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 filed
January 5, 2015 (Commission File
No. 001-34680).

Exhibit
Number

10.31*

10.32*

10.33*

10.34

10.36*

10.37*

10.38*

10.39*

10.40*

10.41*

158

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit
Number

10.42*

10.43

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 Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2010
(Commission File No. 001-34680).

21.1

Subsidiaries of the Registrant.

23.1

31.1

31.2

32.1

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.

101.INS

Inline XBRL Instance Document

Incorporated by reference to Exhibit 21.1 to
Primerica’s Annual Report on Form 10-K for
the year ended December 31, 2018
(Commission File No. 001-34680).

Filed with the Securities and Exchange
Commission as part of this Annual Report.

The instance document does not appear in
the Interactive Data File because its XBRL
tags are embedded within the Inline XBRL
document.

101.SCH

Inline XBRL Taxonomy Extension Schema

101.CAL

101.DEF

101.LAB

101.PRE

104

Inline XBRL Taxonomy Extension Calculation
Linkbase

Inline XBRL Taxonomy Extension Definition
Linkbase

Inline XBRL Taxonomy Extension Label
Linkbase

Inline XBRL Taxonomy Extension
Presentation Linkbase

Cover Page Interactive Data File (formatted
as Inline XBRL with applicable taxonomy
extension information contained in
Exhibits 101).

Identifies a management contract or compensatory plan or arrangement.

Primerica 2019 Annual Report

159

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):

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

Total fixed maturities

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

December 31, 2019

Cost

Fair value

Amount at which
shown in the
balance sheet

(In thousands)

$ 273,502 $ 280,682

$ 280,682

120,000

158,052

122,593

164,178

122,593

164,178

—

2,945,372

3,126,013

3,011,281

—

5,447

—

5,865

—

5,865

3,502,373

3,699,331

3,584,599

6,469

18,924

5,440

1,838

11,344

20,359

7,931

1,050

32,671

40,684

—

11,344

20,359

7,931

1,050

40,684

—

32,927

—

Total investments

$3,567,971 $3,772,942

$3,658,210

(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 consolidated 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 consolidated balance sheet and all
other fixed maturities are carried at fair value.

See the report of independent registered public accounting firm.

160

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:

$206,550 in 2019 and $108,623 in 2018)

Short-term investments, available-for-sale, at fair value (cost: $0 in 2019

and $8,171 in 2018)

Equity securities, at fair value (historical cost: $2,090 in 2019 and $1,519

in 2018)

Total investments
Cash and cash equivalents
Due from affiliates*
Other receivables
Income tax receivable
Deferred income taxes
Investment in subsidiaries*
Other assets

Total assets

Liabilities and Stockholders’ Equity

Liabilities:

Notes payable
Current income tax payable
Deferred income taxes
Interest payable
Other liabilities
Commitments and contingent liabilities (see Note F)

Total liabilities

Stockholders’ equity:

Common stock ($0.01 par value; authorized 500,000 in 2019 and 2018;
issued and outstanding 41,207 shares in 2019 and 42,694 shares in 2018)
Paid-in capital
Retained earnings
Accumulated other comprehensive income, net of income tax

Total stockholders’ equity

Total liabilities and stockholders’ equity

Eliminated in consolidation.

See the accompanying notes to condensed financial statements.
See the report of independent registered public accounting firm.

December 31,

2019

2018

(In thousands)

$ 208,526 $ 109,415

—

2,250

210,776
59,150
1,267
1,383
1,026
12,151
1,756,845
608

8,171

1,447

119,033
32,745
2,492
1,086
3,490
12,151
1,678,231
729

$2,043,206 $1,849,957

374,037
—
7,441
8,214
1,023

373,661
—
6,126
8,214
443

390,715

388,444

412
—
1,593,281
58,798

427
—
1,489,520
(28,434)

1,652,491

1,461,513

$2,043,206 $1,849,957

Primerica 2019 Annual Report

161

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 before equity in undistributed earnings of

subsidiaries

Equity in undistributed earnings of subsidiaries*

Net income

Eliminated in consolidation.

See the accompanying notes to condensed financial statements.
See the report of independent registered public accounting firm.

Year ended December 31,

2019

2018

2017

(In thousands)

$398,129 $302,932 $256,913

4,973

2,306

1,484

256

(128)

179

403,358

305,110

258,576

18,669

18,695

18,210

9,898

7,478

8,441

28,567

26,173

26,651

374,791

278,937

231,925

(2,940)

(5,578)

(3,756)

377,731

284,515

235,681

(11,340)

39,579

114,574

$366,391 $324,094 $350,255

162

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,

2019

2018

2017

(In thousands)
$366,391 $324,094 $350,255

securities held by subsidiaries

70,998

(46,382)

(3,333)

Change in unrealized holding gains/(losses) on investment

securities

1,440

(931)

356

Reclassification adjustment for realized investment (gains) losses

included in net income

(256)

128

(179)

Foreign currency translation adjustments:

Equity in unrealized foreign currency translation gains of

subsidiaries

15,299

(25,059)

17,383

Total other comprehensive income (loss) before income taxes

87,481

(72,244)

14,227

Income tax expense (benefit) related to items of other

comprehensive income (loss)

249

(169)

257

Other comprehensive income (loss), net of income taxes

87,232

(72,075)

13,970

Total comprehensive income

$453,623 $252,019 $364,225

See the accompanying notes to condensed financial statements.
See the report of independent registered public accounting firm.

Primerica 2019 Annual Report

163

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
Adjustments to reconcile net income to cash provided by (used in) operating activities:

Equity in undistributed earnings of subsidiaries* (1)
Deferred tax provision
Change in income taxes
Realized investment (gains) losses, including other-than-temporary impairments
Accretion and amortization of investments
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

Year ended December 31,

2019

2018

2017

(In thousands)

$ 366,391

$ 324,094

$ 350,255

(95,014)
1,067
2,464
(256)
257
1,487
1,225
—
2,001

(44,095)
(1,983)
(6,151)
128
103
1,365
780
—
(120)

(145,113)
2,454
(1,235)
(179)
149
1,254
(4,380)
(1,377)
(1,514)

Net cash provided by (used in) operating activities

279,622

274,121

200,314

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 —sold
Short-term investments — matured or called

Equity securities — sold
Available-for-sale investments acquired:

Fixed-maturity securities(1)
Equity securities
Short-term investments
Equity securities acquired

6,481
179,950

1,603
104,836

—
8,250
76

—
—
150

(157,510)

(144,760)

—
—
(611)

—
(8,169)
(265)

12,204
56,678
36
—
—

(23,497)
(40)
—
—

Net cash provided by (used in) investing activities

36,636

(46,605)

45,381

Cash flows from financing activities:

Dividends paid
Common stock repurchased
Tax withholdings on share-based compensation
Payment of deferred financing costs

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

(57,630)
(225,037)
(7,186)
—

(44,140)
(210,146)
(6,711)
—

(35,821)
(150,038)
(6,734)
(868)

(289,853)

(260,997)

(193,461)

26,405
32,745

(33,481)
66,226

52,234
13,992

$ 59,150

$ 32,745

$ 66,226

$ 18,117

$ 18,146

$ 17,813

Eliminated in consolidation.

*
(1) Does not include $127.2 million, $27.6 million, and $35.5 million of fixed-maturity securities transferred from subsidiaries in

the form of noncash dividends for the years ended December 31, 2019, 2018 and 2017, respectively.

See the accompanying notes to condensed financial statements.
See the report of independent registered public accounting firm.

164

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, LLC, a general
agency and marketing company; Primerica Life
Insurance Company (“Primerica Life”), our
principal life insurance company; PFS
Investments Inc., an investment products
company and broker-dealer; and 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.
Primerica Life, domiciled in Tennessee, 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.

Financial Accounting Standards Board. 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.

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.

(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

Primerica 2019 Annual Report

165

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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.

our non-life insurance subsidiaries of
$105.6 million, $80.1 million, and $96.0 million,
respectively. For the years ended December 31,
2019, 2018, and 2017, the Company received
dividends from our life insurance subsidiaries of
$292.5 million, $222.8 million, and
$160.9 million, respectively.

We were in compliance with the covenants of
the Senior Notes as of December 31, 2019. No
events of default occurred on the Senior Notes
during the year ended December 31, 2019.

(D) Revolving Credit Facility

We maintain an unsecured $200.0 million revolving
credit facility (“Revolving Credit Facility”) with a
syndicate of commercial banks that has a
scheduled termination date of December 19, 2022.
Amounts outstanding under the Revolving Credit
Facility bear interest at a periodic rate equal to
LIBOR or the base rate, plus in either case an
applicable margin. The Revolving Credit Facility
contains language that allows for the Company
and the lenders to agree on a comparable or
successor reference rate in the event LIBOR is no
longer available, as is expected to happen in 2022.
The Revolving Credit Facility also permits the
issuance of letters of credit. The applicable margins
are based on our debt rating with such margins for
LIBOR rate loans and letters of credit ranging from
1.125% to 1.625% per annum and for base rate
loans ranging from 0.125% to 0.625% per annum.
Under the Revolving Credit Facility, we incur a
commitment fee that is payable quarterly in arrears
and is determined by our debt rating. This
commitment fee ranges from 0.125% to 0.225%
per annum of the aggregate $200.0 million
commitment of the lenders under the Revolving
Credit Facility. As of December 31, 2019, no
amounts have been drawn under the Revolving
Credit Facility and we were in compliance with its
covenants. Furthermore, no events of default have
occurred under the Revolving Credit Facility during
the year ended December 31, 2019.

(E) Dividends

For the years ended December 31, 2019, 2018,
and 2017, the Company received dividends from

166

(F) 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
these coinsurance agreements, we have capital
maintenance agreements with both Peach Re
and Vidalia Re. Each capital maintenance
agreement may require us at times to make
capital contributions to Peach Re and Vidalia Re
to ensure 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.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule III
Supplementary Insurance Information

PRIMERICA, INC.

December 31, 2019
Term Life Insurance

Investment and Savings

Products

Corporate and Other

Distributed Products

Deferred policy
acquisition costs

Future
policy
benefits

Unearned and
advance
premiums

Policy claims
and other
benefits payable

Separate
account
liabilities

(In thousands)

$2,239,515

$6,244,193

$14,933

$330,660

—

62,196

—

24,039

202,376

—

537

—

2,485,683

9,294

Total

$2,325,750

$6,446,569

$15,470

$339,954

$2,485,745

December 31, 2018
Term Life Insurance

Investment and Savings

Products

Corporate and Other

Distributed Products

$2,052,176

$5,963,707

$15,016

$303,866

—

56,548

—

25,196

204,450

—

571

—

2,195,409

9,996

Total

$2,133,920

$6,168,157

$15,587

$313,862

$2,195,501

Primerica 2019 Annual Report

167

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, 2019
Term Life Insurance

$1,166,461 $19,922

$475,330

$248,710

$183,097

$ —

Investment and Savings Products

—

4,549

495,248 —

Corporate and Other Distributed

Products

Total

17,676

74,151

18,490

1,293

148,676

741

$1,184,137 $94,073

$493,820

$254,552

$827,021

$741

Year ended December 31, 2018
Term Life Insurance

$1,067,079 $13,747

$441,775

$228,613

$170,908

$ —

Investment and Savings Products

—

9,766

471,398 —

Corporate and Other Distributed

Products

Total

18,861

67,683

15,808

1,351

144,140

792

$1,085,940 $81,430

$457,583

$239,730

$786,446

$792

Year ended December 31, 2017
Term Life Insurance

$ 941,057 $ 9,931

$398,212

$201,751

$146,604

$ —

Investment and Savings Products

—

6,168

403,743 —

Corporate and Other Distributed

Products

Total

20,281

69,086

17,807

1,480

133,817

821

$ 961,338 $79,017

$416,019

$209,399

$684,164

$821

See the report of independent registered public accounting firm.

168

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Schedule IV
Reinsurance

PRIMERICA, INC.

Year ended December 31, 2019

Gross amount

Ceded to other
companies

Assumed
from other
companies

Net amount

(Dollars in thousands)

Percentage
of amount
assumed
to net

Life insurance in force

$810,995,295 $702,727,956

$—

$108,267,339

— %

Premiums:
Life insurance

2,752,774 $

1,569,403

Accident and health insurance

1,092

326

Total premiums

2,753,866 $

1,569,729

$—

—

$—

1,183,371

766

1,184,137

— %

Year ended December 31, 2018

Gross amount

Ceded to other
companies

Assumed
from other
companies

Net amount

(Dollars in thousands)

Percentage
of amount
assumed
to net

Life insurance in force

$783,979,673 $682,708,797

$—

$101,270,876

— %

Premiums:
Life insurance

2,665,947 $

1,580,815

Accident and health insurance

1,157

349

Total premiums

2,667,104 $

1,581,164

$—

—

$—

1,085,132

808

1,085,940

— %

Year ended December 31, 2017

Gross amount

Ceded to other
companies

Assumed
from other
companies

Net amount

(Dollars in thousands)

Percentage
of amount
assumed
to net

Life insurance in force

$767,001,938 $668,446,638

$—

$ 98,555,300

— %

Premiums:
Life insurance

2,560,885 $

1,600,399

Accident and health insurance

1,224

372

Total premiums

2,562,109 $

1,600,771

$—

—

$—

960,486

852

961,338

— %

See the report of independent registered public accounting firm.

Primerica 2019 Annual Report

169

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, 2020

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/ Glenn J. Williams
Glenn J. Williams

/s/ Alison S. Rand
Alison S. Rand

/s/ John A. Addison, Jr.
John A. Addison, Jr.

/s/ Joel M. Babbit
Joel M. Babbit

/s/ P. George Benson
P. George Benson

/s/ C. Saxby Chambliss
C. Saxby Chambliss

/s/ Gary L. Crittenden
Gary L. Crittenden

/s/ Cynthia N. Day
Cynthia N. Day

/s/ Sanjeev Dheer
Sanjeev Dheer

/s/ Beatriz R. Perez
Beatriz R. Perez

/s/ Barbara A. Yastine
Barbara A. Yastine

170

Chairman of the Board

February 27, 2020

Chief Executive Officer (Principal
Executive Officer) and Director

February 27, 2020

Executive Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)

Director

February 27, 2020

STOCKHOLDER INFORMATION

Annual Meeting
The annual meeting of
stockholders of Primerica, Inc.
will be held on Wednesday,
May 13, 2020 at 10:00 a.m.
in the Primerica Theater
located in our Corporate Office.

Corporate Office
Primerica, Inc.
1 Primerica Parkway
Duluth, GA 30099
(770) 381-1000
www.primerica.com

Investor Contact
(866) 694-0420
investorrelations@primerica.com

Media Contact
(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, 2019,
including financial statements,
are available on the Company’s
Investor Relations website at
http://investors.primerica.com
or by written request to Investor
Relations.

Common Stock
Trading Symbol: PRI
New York Stock Exchange

Transfer Agent and Registrar
Computershare Inc.
150 Royall Street
Canton, MA 02021

Written Requests by Mail:
Computershare Inc.
P.O. Box 505000
Louisville, KY 40233-5000

Written Requests by
Overnight Delivery:
Computershare Inc.
462 South 4th Street
Suite 1600
Louisville, KY 40202

Toll Free Number:
1-866-517-2488
(US, Canada, Puerto Rico)

Phone Number:
1-781-575-4223 (non-US)

Stockholder Website:
www.computershare.com/investor

Board of Directors

John A. Addison, Jr.
CEO, Addison Leadership Group

Joel M. Babbit
Co-Founder and CEO, Narrative
Content Group, LLC

P. George Benson
Professor of Decision Sciences
and Former President,
The College of Charleston

C. Saxby Chambliss
Partner, DLA Piper

Gary L. Crittenden
Private Investor

Cynthia N. Day
President and CEO of Citizens
Bancshares Corporation and
Citizens Trust Bank

Sanjeev Dheer
President and CEO, Centrl Inc.

Beatriz R. Perez
SVP and Chief Communications,
Public Affairs, Sustainability
and Marketing Assets Officer for
The Coca-Cola Company

D. Richard Williams
Chairman of the Board

Glenn J. Williams
CEO, Primerica, Inc.

Barbara A. Yastine
Former Chairman and CEO,
Ally Bank