Primerica

2020 Annual Report

Financial Highlights 
(in millions, except per share amounts) 

GAAP 

Total Revenues 

Net Income 

Stockholders’ Equity 

Diluted Earnings Per Share1 

Book Value Per Share1 

2020 

2019 

Change5

$2,217.5 

$2,052.5 

$386.2 

$366.4 

$1,835.9 

$1,652.5 

$9.57 

$8.62 

$46.71 

$40.10 

Term Life Net Premiums 

$1,309.7 

$1,166.5 

End of Period Client Asset Value ($ in billions) 

$81.5 

$70.5 

Weighted Average Shares Used to Calculate Diluted EPS 

40.2 

Common Shares Repurchased 

End of Period Share Count2 

2.2 

39.3 

42.3 

1.9 

41.2 

Cash Dividends Declared Per Common Share 

$1.60 

$1.36 

Market Price Per Share at Year End 

$133.93 

$130.56 

Total Shareholder Return 

Debt-to-Capital3 

4% 

35% 

16.9% 

18.5% 

8%

5%

11%

11%

16%

12%

16%

-5%

17%

-5%

18%

3%

nm

nm

Operating4 

2020 

2019 

Change5

Adjusted Operating Revenues 

$2,224.5 

$2,042.2 

Adjusted Net Operating Income 

$391.6 

$358.4 

Diluted Adjusted Operating Income Per Share1 

$9.70 

$8.43 

Adjusted Net Operating Income Return  
on Adjusted Stockholders’ Equity

24.7% 

23.5% 

9%

9%

15%

nm

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 https://investors.primerica.com
5 Certain variances are noted as “nm” to indicate not meaningful

ON THE COVER: 
Primerica representative Angie Reed Hogans of Atlanta, GA uses virtual meeting tools and other technology innovations to stay in touch with her clients.

 
 
 
What we experienced in 2020 was

nothing short of unprecedented: 

unprecedented loss, 

unprecedented disruption, and the

unprecedented need for Primerica.

,

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,

Dear Fellow Stockholders,

What we experienced in 2020 was nothing 

short of unprecedented: unprecedented 

loss, unprecedented disruption, and the 

unprecedented need for Primerica. Our 

hearts go out to those who suffered the 

loss of a loved one, health, jobs or financial 

security. These losses created disruptions in 

the daily lives of families and in their plans 

for the future. Families reacted to their lack 

of financial preparation, which created an 

unprecedented demand for Primerica’s 

products and business opportunity and drove 

record business results.

Over the past 44 years, Primerica has become 

a leading provider of financial solutions to 

middle-income families. We offer valuable 

financial education to our clients about the 

importance of protecting income, reducing 

debt and investing for the future. The products 

and services we provide have never been more 

important to the families that we are privileged 

to serve. Our more than 134,000 independent 

life insurance licensed representatives and 

2,800 employees remain steadfast in our 

long-standing commitment to a single mission: 

creating financially independent families. 

The power of our distribution model is rooted 

in our sales force and their concern for clients. 
We ended 2020 with 134,9071 life insurance-

licensed representatives and 25,859 securities 

licensed representatives who remain singularly 

focused on helping our clients achieve 

their financial objectives. Their focus and 

accomplishments made this one of our most 

successful years in business.

1 Due to COVID-19, various states enacted special licensing measures. 
The number of life insurance representatives at year-end includes 
3,597 licenses issued on a temporary basis and 2,508 licenses with 
extended renewal dates.

90k

2016

2017

2018

2019

2020

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I

 
 
 
 
 
 
 
 
 
 
2020 RECORDS

400,345 

NEW RECRUITS 

$109 Billion 

NEW FACE AMOUNT ISSUED

$859 Billion 

TERM FACE AMOUNT IN FORCE

$7.8 Billion 

INVESTMENT & SAVINGS 
PRODUCTS SOLD

$82 Billion 

CLIENT ASSET VALUES

“We are so proud 

to be able to give 

our clients a way to 

change their financial 

future for the better. 

Knowing that you work 

with a company that 

follows through on 

their promises to their 

clients is priceless.”

LORENZO CARRION 
& DANIELA ALMARAZ

The People at the Heart of Primerica

The leadership, diversity and reach of 

positioned to educate clients by helping 

our sales force is the key to our success. 

them understand the appropriate level 

Our unique business model allows our 

of protection needed and assist them in 

representatives to successfully educate and 

creating a financial strategy.

serve middle-income families in the U.S. and 

Canada who are often overlooked by other 

traditional institutions. 

Our home office employees also play an 

important role in the company’s success. 

Our business continuity plans allowed us to 

For so many families across North America 

respond quickly to the pandemic and pivot 

and beyond, COVID-19 revealed the 

to a remote work setting in a matter of days, 

weaknesses in their financial game plan 

which helped maintain a high service level 

and the instability of their career outlook. 

for clients and our sales force.

Through our sales force, we were perfectly 

Straightforward Solutions for Middle-Income Families

The pandemic has illuminated the gaps that 

and recognized asset management firms 

exist in life insurance coverage for too many 
families across North America. Research2 

in the industry. Our products are simple to 

understand and are presented by our sales 

shows that the “protection gap,” the amount 

force with a focus on education, so that our 

of life insurance needed but not in force, in 

clients make informed purchase decisions.  

the United States could be as large as $25 

trillion, half of which is estimated to be in 

the middle market.

In 2020, after a successful pilot period, our 

mortgage distribution business expanded 

to five states, enabling us to address the 

As the #2 issuer of term life insurance 

needs of clients seeking to consolidate debt.   

coverage in North America, we have the 

While still small, this program offers clients 

breadth and scope to reach middle-income 

the opportunity to lower interest rates and 

families. We firmly believe that term life 

accelerate repayment of debt. We expect 

insurance offers the best income protection 

to continue to enlarge our footprint in 

at the most affordable price, which is why 

2021, and as of the writing of this letter we 

it is the only type of coverage we sell. 

are doing business in eight states. We will 

We also offer mutual funds, annuities and 

continue to explore other product options 

managed accounts, which are professionally 

that complement our current solutions and 

managed by some of the most respected 

meet client needs.

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

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2019

2020

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2020

Second 
Largest Issuer

OF TERM LIFE INSURANCE 
IN NORTH AMERICA

Mike and Rosie Harris 

of San Antonio, TX 

have been clients of 

Primerica representative 

David Lipsit since 2000. 

David helped them get 

on track for a better 

financial future. 

DAVID & VANESSA LIPSIT

DILUTED EARNINGS PER SHARENET INCOME ($ IN MILLIONS)CAGRCAGR20%15%EarningsIncomeMany Primerica 

representatives like 

René Turner quickly 

pivoted to using 

new and innovative 

technology tools 

that help keep their 

businesses moving 
forward. 

Looking Ahead

Our leading-edge technology is a strength 

through websites, social media and print. 

we will leverage for future support of our 

During 2021, we will continue to make better 

sales force and clients. Our business is 

use of technology to enhance the client 

capable of end-to-end electronic processing 

experience and allow our sales force to be 

and communication. Web-conferencing 

more productive.

tools allow for efficient digital client 

interaction, while our TurboApp technology 

is designed to submit digital applications 

and capture remote electronic signatures. 

We set a positive tone early in 2021 through 

a series of kickoff events that allowed us 

to engage with the most senior leaders in 

our sales force. Delivered virtually this year, 

Our advanced communications tools allow 

our message cast a powerful vision for the 

us to provide direction to the sales force 

year ahead and generated excitement to 

via our broadcast TV capabilities, as well as 

increase momentum.

9
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PRIMERICA IS 
ONE OF ONLY A 
FEW COMPANIES 
IN HISTORY TO 
CROSS OVER 
$100 BILLION 
OF DIRECT-
WRITTEN TERM 
FACE AMOUNT 
ISSUED IN A 
SINGLE YEAR.

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$100 BILLION

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$82INVESTMENT & SAVINGS PRODUCTS SALES AND CLIENT ASSET VALUES ($ IN BILLIONS)SalesEnding Assets$859TERM LIFE INSURANCE FACE AMOUNT ($ IN BILLIONS)Annual IssuedIn Force 
Creating Value for Our Stakeholders

Since 1977, Primerica has embraced 

is comprised of 380 companies across 

having a sales force and an employee 

11 sectors; representing 44 countries 

base that reflects the diverse population 

and regions. This is Primerica’s second 

that we serve. We continually work 

consecutive year to be included in the 

to foster an environment of diversity, 

Bloomberg index. 

equality and inclusion, which results in a 

collaborative culture with our employees. 

This commitment to our people has helped 

Primerica earn multiple awards, with the 

most recent honor of earning the 2021 “Top 

Workplaces USA” recognition. We placed 

fifth in the Financial Services category and 

third in the “Top Leader” category for a 

company of our size. 

Our business success is reflected in our 

2020 financial results with 9% growth in 

adjusted operating revenues and 15% growth 

in diluted adjusted operating EPS year-over-

year. As shown in the chart below, total 

stockholder return over the last five years 

was 200% compared to 56% for the S&P 

500 Insurance Index. In 2020, we returned 

76% of our adjusted operating earnings 

Primerica was also included in the 2021 

to stockholders through a combination of 

Bloomberg Gender-Equality Index, which 

share repurchases and quarterly dividends.

56%

200%201620152017201820192020TOTAL STOCKHOLDER RETURN VS. THE S&P 500 INSURANCE INDEXS&P 500 Insurance IndexPrimerica, Inc.COMPANY RECOGNITION

USA

3RD | TOP LEADER 
5TH | FINANCIAL SERVICES

2ND CONSECUTIVE YEAR

Primerica continues to 

foster an environment 

of growth, leadership 

and success within 

the home office. 

Shanthala Rao began 

her Primerica career  

in 2001 and currently 

works in Information 

Technology. 

We demonstrated our resilience 

throughout the COVID-19 disruptions in 

2020 and we are a stronger company 

as a result of working together through 

these challenges. The pandemic cast a 

spotlight on the need for middle-income 

families to prepare for the unexpected 

and the Primerica team is positioned to 

meet clients’ financial needs in 2021 and 

beyond. We look forward to continuing 

our positive impact on the lives of our 

clients, our representatives and our 

stockholders in the future.

Thank you for your 

commitment to Primerica.

GLENN J. WILLIAMS

CHIEF EXECUTIVE OFFICER

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

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

For the fiscal year ended December 31, 2020
OR

For the transition period from

to

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 has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b))
by the registered public accounting firm that prepared or issued its audit report. È
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, 2020, was
$4,603,734,941. The number of shares of the registrant’s Common Stock outstanding at February 28, 2021, with $0.01 par
value, was 39,344,207.

Documents Incorporated By Reference
Certain information contained in the Proxy Statement for the Company’s Annual Meeting of Stockholders to be held on
May 12, 2021 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.

Item 3.

Item 4.

Properties

Legal Proceedings

Mine Safety Disclosures

Item X.

Information About Our Executive Officers and Certain Significant Employees

PART II

Item 5.

Item 7.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities

Management’s Discussion and Analysis of Financial Condition and Results of
Operations

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8.

Item 9.

Financial Statements and Supplementary Data

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

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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;

• 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;

• 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

Primerica 2020 Annual Report

i

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

•

•

•

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 the Department of Labor,
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;

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

•

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

• our U.S. mortgage distribution business is
highly regulated and 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;

•

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

pandemic, or other catastrophic events,
could materially adversely impact 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;

if one of our, or a third-party partner’s,
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;

credit deterioration in, and the effects of
interest rate fluctuations and changes to
benchmark reference interest rates 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 expected credit losses
when the fair value of our available-for-sale
invested assets is below amortized costs 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 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;

•

•

•

•

•

•

•

• major public health pandemics, epidemics

• we are subject to various federal, state and

or outbreaks, specifically, the novel
coronavirus COVID-19 (“COVID-19”)

provincial laws and regulations in the United
States and Canada, changes in which or

ii

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

violations of which may require us to alter
our business practices and could materially
adversely affect our business, financial
condition and results of operations;

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

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

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 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;

•

any acquisition, of or investment in,
businesses that we may undertake that does

not perform as we expect or that is difficult
for us to integrate could materially
adversely impact our business, financial
condition and results of operations; 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 2020 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 134,907
licensed sales representatives as of
December 31, 2020. 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 5.5 million lives and had approximately
2.6 million client investment accounts as of
December 31, 2020. 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

Licensed sales representatives

needs.
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 either in person or
through remote communication tools,
usually while clients are in their 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

Primerica 2020 Annual Report

1

ITEM 1. BUSINESS

Insurance Company (“NBLIC”),
domiciled life insurance underwriting company.

is a New York-

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 2019 U.S. Census Bureau
Current Population Survey, the latest period for
which data is available, almost 50% of U.S.
households fall in this range. We believe that we
understand the financial needs of the middle-
income segment, which include:

• Many have inadequate or no life insurance

coverage.
Individual life insurance sales in
the United States declined from 12.5 million

2

policy sales in 1975 to 9.4 million policy
sales in 2019, the latest period for which
data is available, according to 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. We allow our
clients to establish monthly contributions to
investment savings plans with as little as $25
per month.

• 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 134,000 life insurance-licensed
sales representatives. Due to the COVID-19
pandemic, in-person meetings with clients
were limited during 2020. Our life-licensed
representatives have pivoted to the use of
remote communication tools to readily meet
our clients’ desire for digital face-to-face
meetings.

OurDistributionModel

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:

•

•

•

Sales

Independent entrepreneurs:
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

ITEM 1. BUSINESS

•

•

they earn commissions, in achieving
compliance with applicable regulatory
requirements. RVPs’ efforts to expand their
businesses are a primary driver of our
success.

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, which are
subject to chargebacks, 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.

Primerica 2020 Annual Report

3

ITEM 1. BUSINESS

• 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
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

4

broadcasts, conduct compliance functions, and
house field office business records. Some
business locations house more than one field
office. At December 31, 2020, approximately
5,500 field offices in 3,000 locations were
managed by sales representatives that served as
RVPs. Due to the COVID-19 pandemic, in-person
meetings were limited during 2020. Many
meetings and functions of field offices have
been performed using remote communication
tools. 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,
conducted in person or through remote
communication tools, 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,
attendees who are interested 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

Number of new recruits

ITEM 1. BUSINESS

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
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,

2020

2019

2018

400,345 282,207 290,886

Number of newly life insurance-licensed sales representatives

48,106

44,739

48,041

Number of life insurance-licensed sales representatives, at period end(1)

134,907 130,522 130,736

Average number of life insurance-licensed sales representatives during
period

133,302 130,370 128,977

(1) Number of life insurance-licensed sales representatives, at December 31, 2020 includes 3,597 temporary licenses that were
issued in response to the COVID-19 pandemic and 2,508 licenses that were extended due to the COVID-19 pandemic.

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.

Primerica 2020 Annual Report

5

ITEM 1. BUSINESS

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. Challenges
associated with the COVID-19 pandemic led to a
temporary suspension of in-person licensing
preparation classes and the temporary closing of
examinations centers, both of which led to
representatives taking additional time to
complete the licensing process in 2020. 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 largely by
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;

•

•

•

6

•

•

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; and

conducting numerous local, regional and
national meetings to help inform and
motivate the sales force.

We have historically hosted a biennial
international convention. In previous years, tens
of thousands of sales representatives, including
new recruits, have attended our conventions and
associated meetings at their own expense, which
we believe further demonstrates their
commitment to our organization and mission. In
July 2021, we planned to host our biennial
international convention and associated
meetings. However, due to the current level of
uncertainty related to the COVID-19 pandemic
and the social-distancing requirements that
might still be in place, we have made the
decision to reschedule the biennial international
convention to the summer of 2022.

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:

•

Training and Licensing Tools: POL 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

ITEM 1. BUSINESS

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 automatically
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 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

Primerica 2020 Annual Report

7

ITEM 1. BUSINESS

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 sales
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, follow-ups, and
marketing campaigns, in one 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

8

as an insurance agency. Sales representatives,
who are independent contractors, 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.

ITEM 1. BUSINESS

We also pay the sales force with respect to
mortgage originations, sales of prepaid legal
services subscriptions, and referrals for
customers purchasing other distributed
products. Mortgage originations commissions
paid to the sales force are earned for each
closed mortgage loan based on a fixed
percentage of the loan amount. 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 she passes the applicable
exam and obtains the applicable life insurance
license. In addition, new recruits are eligible to earn
compensation if they participate in field training
observations with experienced sales
representatives and complete the licensing process
within a specified timeframe. 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

Primerica 2020 Annual Report

9

ITEM 1. BUSINESS

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.

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.

Canadian sales representatives selling mutual
fund products are required to be registered 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.

SupervisionandCompliance

To ensure compliance with various federal, state,
provincial and territorial legal requirements, we
and 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.

10

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 person or through remote
communication tools, 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. Our
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

Products are designed to address

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

ITEM 1. BUSINESS

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, 2020.

Operating Segment
Term Life Insurance

Principal Product Offerings

Term Life Insurance

Investment and Savings

Products

Mutual Funds and Certain
Retirement Plans

Managed Investments

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.)
Equitable Distributors, LLC (U.S.)
Franklin Templeton Investments (U.S. and

Canada)

Legg Mason Global Asset Management

(U.S.) (1)

VOYA Financial, Inc. (U.S.)
Invesco (U.S. and Canada)
AGF Investments (Canada)
PFSL Fund Management Ltd. (Canada)
Mackenzie Investments (Canada)
Fidelity Investments (U.S. and Canada)
PFS Investments (dba Primerica Advisors) (as a

program sponsor) (U.S.)

Variable Annuities

American General Life Insurance Company and

its affiliates (U.S.)

Equitable Distributors, LLC (U.S.)
Brighthouse Financial, Inc. (U.S.)
Lincoln National Life Insurance Company and

its affiliates (U.S.)

Fixed Indexed Annuities

American General Life Insurance Company and

Fixed Annuities

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 2020 Annual Report

11

ITEM 1. BUSINESS

Operating Segment

Principal Product Offerings

(Applicable Geographic Territory)

Corporate and Other

Distributed Products

Employer Sponsored
Retirement Plans

Segregated Funds
Mortgage Loans (2)

Prepaid Legal Services
ID Theft Defense
Supplemental Health and
Accidental Death &
Disability Insurance
Auto and Homeowners’
Insurance (3)

Home Automation
Solutions (3)

American Funds (U.S.)
Equitable Distributors, LLC (U.S.)
VOYA Financial, Inc. (U.S.)
Primerica Life Canada (Canada)
Quicken Loans, LLC. (U.S.)
B2B Bank (Canada)
8Twelve Mortgage Corp. (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)
Vivint, Inc. (U.S.) and Vivint Canada, Inc.

(Canada)

(1) On July 31, 2020, Franklin Resources, Inc., operating as Franklin Templeton Investment, completed its acquisition of Legg

Mason, Inc., the parent company of Legg Mason Global Asset Management.
In the U.S., mortgage loans are made by Quicken Loans, LLC. In Canada, representatives can refer mortgage loans to B2B
Bank and 8Twelve Mortgage Corp.
Referrals only.

(2)

(3)

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 2019, 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

12

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

expiration 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).

ITEM 1. BUSINESS

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, clinical lab, 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 2020 was approximately $240,600. The
following table sets forth selected information regarding our term life insurance product portfolio:

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

Year ended December 31,

2020

2019

2018

352,868

287,809

301,589

$ 109,436 $

93,994 $

95,209

December 31,

2020

2019

2018

2,787,992

2,641,483

2,606,825

$ 858,818 $ 808,262 $ 781,041

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.

Primerica 2020 Annual Report

13

ITEM 1. BUSINESS

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. The report
resulting from this process is electronically
transmitted to us and is evaluated in our
underwriting process. Paramedical requirements
are also normally required on applicants
applying for Custom Advantage, our
traditionally-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 97% of the life
insurance applications we received in 2020 were
submitted electronically via TurboApps. Sales
representatives utilize video collaboration tools
to assist with the completion of the life
insurance application and submit completed
applications through TurboApps. The majority of
applications completed in 2020 resulted from
remote meetings with applicants. 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 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 18,200 life insurance
benefit claims in 2020 on policies underwritten
by us and sold by sales representatives. In 2020,
we experienced elevated claims volumes due to
premature deaths of our insureds caused by the

14

COVID-19 pandemic. For additional information
regarding the impact of COVID-19 on our claims
expense, the related reinsurance effects, and
policyholder persistency, see Item 7
(Management’s Discussion and Analysis of
Financial Condition and Results of Operations)
included elsewhere in this report.

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,

2020

2019

2018

(In thousands)
$1,676,017 $1,447,375 $1,391,755

51,823

49,712

46,690

11,501

14,584

16,474

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

ITEM 1. BUSINESS

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, 2020, approximately
25,859 sales representatives were licensed to
distribute mutual funds in the United States
(including Puerto Rico) and Canada. As of
December 31, 2020, approximately 13,689 sales
representatives were licensed and appointed to
distribute annuities in the United States and
approximately 12,244 sales representatives were
licensed to sell segregated funds in Canada.

Mutual Funds.
licensed sales representatives primarily distribute
mutual funds from the following select asset

In 2020, in the United States,

Primerica 2020 Annual Report

15

ITEM 1. BUSINESS

management firms: American Century
Investments, American Funds, Franklin
Templeton, Legg Mason (a wholly-owned
subsidiary of Franklin Templeton as of July 31,
2020), and Invesco. 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 2020, Franklin Templeton, Legg Mason,
Invesco, and American Funds accounted for
approximately 97% 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 SuRPAS 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.

In Canada, sales representatives offer Primerica-
branded Concert™ Series funds, which accounted

16

for approximately 26% of our Canadian mutual
fund product sales in 2020. Our Concert™ Series
funds consist of five different asset allocation
funds and a money market fund with varying
investment objectives. Each Concert™ Series fund
is a money market fund and a fund of funds that
allocates fund assets among equity, income and
money market 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 72% of mutual fund product sales
in Canada in 2020. 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 for as little as $25 per month.
During the year ended December 31, 2020,
average client assets held in individual
retirement accounts in the United States and
Canada accounted for an estimated 74% and
69% of total average client account assets,
respectively. The Canadian counterpart to our
individual retirement accounts (“IRAs”) are
Registered Retirement Savings Plans (“RRSPs”).
RRSPs and IRAs behave similarly, providing
up-front tax deductions on contributions and
enabling clients to earn income 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”),
Equitable Financial Life Insurance Company
(“Equitable 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 Equitable 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

ITEM 1. BUSINESS

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 Financial, Inc. 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

Employer Sponsored Retirement Plans.
the United States, we also offer Employer
Sponsored Retirement Plans (“ESRPs”), such as
401(k) plans, primarily to small and
medium-sized businesses. The ESRPs we
distribute are offered by a limited number of
third-party providers, including American Funds
Distributors, Inc. (“American Funds”), Equitable
Distributors, LLC, and VOYA Financial, Inc., which
together account for most of our ESRP business.
In addition, we distribute 457(b) plans to
governmental entities. Our licensed
representatives generally provide educational
and administrative services with respect to
ESRPs, which includes helping our ESRP clients

Primerica 2020 Annual Report

17

ITEM 1. BUSINESS

understand the benefits of offering a
tax-deferred retirement plan and assisting their
employees realize the need to save for
retirement and the benefits of doing so in an
ESRP.

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
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.

18

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 because its investment
allocations are conservatively aligned with the
risks of the client contracts.

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
mortgage loans through mortgage-licensed loan
originators, prepaid legal services, auto and
homeowners’ insurance referrals, and home
automation solutions. In Canada, we also offer
mortgage loan referrals and insurance offerings
for small businesses. While some of these

ITEM 1. BUSINESS

products are Primerica-branded, all of them are
underwritten or otherwise provided by a third
party.

We have an arrangement with Quicken Loans,
LLC. (“Quicken Loans”), a mortgage lender,
whereby Primerica Mortgage, LLC (“Primerica
Mortgage”), a state-licensed mortgage broker,
offers mortgage loans through its mortgage
loan originator licensed representatives. We
launched the program as a pilot in 2019 offering
refinance mortgages. During 2020, we
introduced additional pilot programs, which
included offering purchase-money mortgages,
and expanded the number of states in which we
are licensed. We plan to continue to expand our
mortgage program in 2021. 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 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 Vivint, Inc.
(“Vivint”), a company that offers homeowners in

Primerica 2020 Annual Report

19

ITEM 1. BUSINESS

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 the Canadian provinces of Alberta, Ontario
and British Columbia (with respect to
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 and 8Twelve Mortgage Corp., a
mortgage broker. Due to regulatory
requirements, sales representatives in Canada
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

20

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.

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, grace periods,
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. As of December 31,
2020, Primerica Life and NBLIC were undergoing
scheduled examinations by their respective
domiciliary states.

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

ITEM 1. BUSINESS

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,

Primerica 2020 Annual Report

21

ITEM 1. BUSINESS

other corporations or persons so as to constitute
an insurance holding company system. These
laws also affect the acquisition of control of
insurance companies as well as transactions
between insurance companies and companies
controlling them.

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

Primerica Life

Primerica Life Canada

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

Policy and Contract Reserve Sufficiency
Analysis. Under the laws and regulations of
their jurisdictions of domicile, our U.S. insurance
subsidiaries are required to conduct annual
analyses of the sufficiency of their life insurance
statutory reserves. In addition, other U.S.
jurisdictions in which our U.S. subsidiaries are
licensed may have certain reserve requirements
that differ from those of their domiciliary
jurisdictions. In each case, a qualified actuary
must submit an opinion that states that the
aggregate statutory reserves, when considered
in light of the assets held with respect to such
reserves, make good and sufficient provision for
the associated contractual obligations and
related expenses of the insurer. If such an
opinion cannot be provided, then the affected
insurer must set up additional reserves by
moving funds from surplus. Our U.S. insurance
subsidiaries most recently submitted these

22

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 subsidiary’s 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,

2020

2019

2018

(In thousands)
$170,000 $270,000 $200,000

22,532

22,544

22,755

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
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;

ITEM 1. BUSINESS

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

Primerica 2020 Annual Report

23

ITEM 1. BUSINESS

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,
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

24

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
registered representative making
recommendations is subject to a “best interest”
standard under SEC regulations and FINRA rules
and in some cases, state rules. 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

ITEM 1. BUSINESS

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.

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.

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

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.

In

Regulation of Mortgage Loan Products.
the United States, state mortgage banking,
brokering and lending laws regulate our
mortgage distribution 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
distribution 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

Primerica 2020 Annual Report

25

ITEM 1. BUSINESS

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 mortgage 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 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 Wall
Street Reform and Consumer Protection 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 and
8Twelve Mortgage Corp. The sales
representatives are not required to obtain
mortgage loan licensure from any regulatory
entity to make these referrals.

Other Laws and Regulations. Our business is
subject to a number of additional laws and
regulations.

26

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

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

The Federal Trade Commission (“FTC”), through
the Federal Trade Commission Act (the “FTC
Act”), is responsible for protecting consumers
and competition by preventing anticompetitive,
deceptive, and unfair business practices. This
includes regulation of deceptive trade practices
such as pyramiding and unsubstantiated
earnings or lifestyle claims in advertisements,
including on social media.

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, 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 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

ITEM 1. BUSINESS

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
Primerica’s Board of Directors (the “Board of
Directors” or the “Board”) at least quarterly.

The Company has two core policies that govern
our home office initiatives in this critical area:

Primerica 2020 Annual Report

27

ITEM 1. BUSINESS

(i) Information Security Policy; and (ii) 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
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.

HumanCapitalManagement

Employees.

General. As of December 31, 2020, we had
1,966 full-time employees in the United States
and 264 full-time employees in Canada. In
addition, as of December 31, 2020, we had 525
on-call employees in the United States and 69
on-call employees in Canada who provided
services on an as-needed hourly basis. The
following table provides information about the
diversity of our full-time and on-call U.S.
employees(1) at December 31, 2020:

Executive Management(2)
Non-Executive Management(3)
Professionals(4)
All Other Employees(5)

Number of
Employees

94
407
638
1,352

2,491

Black or
African
American

Asian

Hispanic
or Latino
Female Male
46.8% 53.2% 3.2%
6.4% 2.1%
60.0% 40.0% 4.2% 23.8% 5.7%
53.1% 46.9% 17.2% 25.7% 6.3%
68.1% 31.9% 4.3% 38.2% 13.1%

Other White
1.1% 87.2%
0.5% 65.8%
2.2% 48.6%
3.0% 41.5%

62.1% 37.9% 7.5% 31.4% 9.7%

2.3% 49.0%

(1)

Reflects U.S. employees only, as comparable data is not required by law to be collected in Canada.

28

ITEM 1. BUSINESS

(2)

(3)

Includes employees at the Senior Vice President level and above.
Includes employees at the Assistant Vice President and Vice President levels and non-Assistant
Vice President managers.

(4) All remaining exempt (as defined by the Fair Labor Standards Act) employees.
(5) All remaining non-exempt employees.

Because management recognized that racial
diversity at senior management levels lags other
employee levels, we engaged a diversity
consulting firm in late 2019 to review the racial
and ethnic diversity of our employee workforce
and provide recommendations to enhance the
pipeline of racially diverse talent within the
Company. Further, in the fourth quarter of 2020
we enhanced our senior executive management
team with a seasoned leader who brings deep
experience in employee and leadership
development to, among other things, serve as
our Chief Administrative Officer, and lead our
efforts to create and implement programs,
processes and protocols that focus on diversity,
equality, and inclusion. For more information on
the role and responsibilities of this new member
of Primerica’s operating team, see “Information
About Our Executive Officers and Certain
Significant Employees.”

Primerica prides itself on having a collaborative
culture with our employees. As such, none of our
employees are members of any labor union, and
we have never experienced any business
interruption as a result of any labor disputes. For
a more detailed description of our employee
initiatives, see our 2020 Corporate Sustainability
Report (available at www.investors.primerica.com),
which is not incorporated by reference into this
report or any filings with the SEC into which this
report is incorporated by reference.

Talent Development. A core strength is that our
senior executives average approximately 30
years with the Company, and many employees
have been with Primerica for over 20 years. The
result of this longevity and loyalty is that many
of our long-term executives and employees will
reach retirement age over the coming years.
Management is focused on enhancing
succession planning and talent pipeline
identification and development both through
the hiring of external talent and the adoption of

new internal programs that focus on
performance management and employee
development.

Compensation and Total Rewards. Primerica’s
compensation philosophy is designed to attract,
retain and motivate highly competent
employees at all levels through compensation
programs and practices. The Company strives for
a pay for performance culture with a
combination of individual and Company
performance as factors in determining total
rewards. Approximately 350 of our employees
participate in an annual incentive program that
reflects both corporate performance and
individual achievement. Incentive awards to
officers are paid in both cash and equity (with a
higher proportion being paid in equity for
higher level officers) while Assistant Vice
Presidents receive all of their incentive awards in
cash. Employees below the level of Assistant
Vice President are eligible for cash bonuses
based on individual performance. In 2020, all
non-bonus eligible employees received a small
cash payment to recognize the results of their
extraordinary efforts during the COVID-19
pandemic.

Among other things, our employee benefits
package includes health and dental insurance,
various paid-leave options, parental leave,
in-office doctors’ visits, a robust employee
assistance program, and a 401(k) retirement
savings plan with a generous company match.
Although the Company was exempt from
coverage under the Family First Coronavirus
Response Act because we have more than 500
employees, we created a special paid sick leave
policy that provided new sick leave benefits (in
addition to our pre-existing policies) regarding
planned and unplanned time off and short-term
disability benefits.

Primerica 2020 Annual Report

29

ITEM 1. BUSINESS

Employee Engagement and Wellness. Employees
are highly satisfied at Primerica, as evidenced by
our employee retention rate in 2020 of 92%.
Further, in both 2019 and 2020 we were
recognized by Forbes as a Best Employer for
Women, and we were named to the 2020
Bloomberg Gender Equality Index. In January
2021, we were named to the 2021 Bloomberg
Gender Equality Index. We were also recognized
as a regional “Top Workplace” by the Atlanta
Journal-Constitution for eight consecutive years
from 2014 to 2021 with the most recent
recognition being confirmed in mid-December
2020. In 2021, we were nationally recognized for
the first time as a “Top Workplace USA” by the
employee engagement service partner that
conducted the regional survey. In order to
monitor employee satisfaction, we conduct
annual employee surveys and provide detailed
results to managers and our Board of Directors.
Changes to policies, programs, and benefits
packages are made based on this feedback. In
addition, each year we hold a series of town hall
meetings at our Georgia headquarters and our
Canadian head office during which all employees
hear Company updates and have the opportunity
to ask questions of senior management. Since
March 2020, our Chief Executive Officer has
shared a weekly video message with all
employees and held a company-wide virtual
Town Hall meeting with all employees. It is
anticipated this practice will continue in 2021 until
it is safe to resume traditional engagement
practices.

The Company took, and continues to take, steps
to ensure the health and safety of employees
during the COVID-19 pandemic. In addition to
moving the vast majority of employees to
remote work, we developed a four stage plan to
gradually repopulate our facilities as the risk of
the pandemic declines. The Company has been
in stage two of its re-opening plan (based on the
lifting of widespread stay at home orders) since
July 2020 and will assess in the second quarter
of 2021 when to move to stage three. For those
employees coming into our corporate offices, we
followed the guidelines of nationally recognized
health organizations to ensure we maintain a
clean, safe and comfortable working

30

environment. In addition, we provided masks for
employees, implemented sanitation stations and
conducted temperature checks as warranted.
Contact tracing protocols are in place and are
activated upon learning that any employee has
contracted COVID-19.

Independent Contractors. A description of
the independent contractor sales force is
included elsewhere in this section. See “– Our
Distribution Model”, “– Recruitment of Sales
Representatives”, “– Sales Force Motivation,
Training, Communication and Sales Support
Tools” “– Performance-Based Compensation
Structure” and “– Supervision and Compliance.”
The independent contractor sales force is
extremely diverse, as it reflects the communities
in which the sales representatives live and work.
Further, the sales force utilizes strategic market
groups to encourage professional and personal
growth and development, including Women in
Primerica, the African American Leadership
Council and the Hispanic American Leadership
Council, which we refer to as our Strategic
Markets. These groups provide opportunities for
networking and mentorship, sales and business
management training and deep learning
opportunities customized for these respective
market segments. For a more detailed
description of sales force initiatives, see our 2020
Corporate Sustainability Report (available at
www.investors.primerica.com), which is not
incorporated by reference into this report or any
filings with the SEC into which this report is
incorporated by reference.

Primerica’s Board of

Board of Directors.
Directors values diversity among its members. As
of December 2020, 27% of our Board members
were racially or ethnically diverse and 27% of our
Board members were women. In August 2020,
the Board adopted a Board Diversity policy,
requiring consideration of Board candidates
based on merit against objective criteria tied to
the needs of the Board and the Company at the
time of nomination to the Board while giving
due regard to diverse characteristics such as
gender, race, ethnicity, country of origin,
nationality or cultural background and other
personal characteristics. Further, diverse Board
candidates are to be considered whenever the

Board commences a director search. The Board
Diversity policy is available on the investor
relations page of our corporate website
(www.investors.primerica.com). In addition, our
Board receives regular updates on the
Company’s efforts to improve diversity, equality
and inclusion among its employees and
independent contractors.

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. 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. We routinely post financial and
other information, including information about
our corporate responsibility and sustainability
efforts on the investor relations page of our
corporate website (www.investors.primerica.com).
Information included on any Company websites is
not incorporated by reference into this report or
any other filings with the SEC into which this
report is incorporated by reference.

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

ITEM 1. BUSINESS

representatives. As is typical with distribution
businesses, we experience a high rate of
turnover among 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 depends in part on 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.

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,

Primerica 2020 Annual Report

31

ITEM 1A. RISK FACTORS

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. For
example, FINRA is considering changing the
continuing education (“CE”) regulatory
requirement from a three-year period to an
annual requirement for securities-licensed
representatives. In addition, the North American
Securities Administrators Association approved a
model rule for participating states that imposes
a CE requirement for investment advisor
representatives for the first time. Such changes
could place an increased burden on
representatives to maintain their securities
licenses, which could negatively impact the size
of the active securities sales force in the event
that representatives do not complete the
applicable CE requirements 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.

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 FTC’s Business

32

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 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.

Various unfair and deceptive trade practices laws
and regulations could potentially be invoked to
challenge aspects of our recruiting of sales
representatives. In particular, we and the sales
representatives use promotional materials in
recruiting that describe the potential business
opportunity available if someone becomes a
sales representative and information with
respect to earnings and lifestyle statements.
These materials and statements made by us or
the sales representatives may be deemed to be
unfair, deceptive, or misleading under the FTC
Act or other federal, state and provincial laws or
regulations and could result in regulatory fines,

penalties or other costs, or reputational harm.
Being out of compliance with the
aforementioned laws and regulations could
require changes to the recruiting of sales
representatives, which could have a materially
adverse effect on 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.
Although we believe that we have properly
classified sales representatives as independent
contractors, there is 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 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. Legislative and regulatory
proposals have been introduced by federal and
state authorities, and judicial decisions have
been made, that call for or result in greater
scrutiny of independent contractor
classifications. There is no assurance that our
business activities would be excluded. 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

ITEM 1A. RISK FACTORS

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, mortgage, 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
representatives. 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

Primerica 2020 Annual Report

33

ITEM 1A. RISK FACTORS

adverse effect on our business, financial
condition and results of operations.

RisksRelatedtoOurInsuranceBusiness
andReinsurance

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.

Various government bodies 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,
the cloud and mobile devices through a variety
of media, including the Internet and software
applications. We rely on 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.

34

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
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. 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.

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, which 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 Federal Insurance Office is authorized 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,
financial services regulation and federal taxation,

ITEM 1A. RISK FACTORS

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 “NY 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. Firms and insurance representatives
are required to ensure that transactions are
suitable and consistent with the customer’s “best
interest”. The NY Amended Suitability Rule
became effective for annuity products on
August 1, 2019 and for life insurance products
on February 1, 2020. In February 2020, the NAIC
approved revisions to the Suitability in Annuity
Transactions Model Regulation (“NAIC Annuities
Best Interest Rule”) requiring producers to act in
the “best interest” of consumers when
recommending an annuity, and several states
have adopted, and others are proposing to
adopt, the NAIC Annuities Best Interest Rule. The
NY Amended Suitability Rule and the NAIC
Annuities Best Interest Rule impose a higher
standard of care, enhanced disclosure, and other
obligations with respect to life and/or annuities
recommendations, which may increase our
regulatory or litigation risk.

Federal and provincial insurance laws regulate all
aspects of our Canadian insurance business.
Changes to federal or provincial statutes and
regulations may be more restrictive than current
requirements or may result in higher costs,
which could materially adversely affect our
business, financial condition and results of
operations. If OSFI determines that our
corporate actions do not comply with applicable
Canadian law, Primerica Life Canada could face
sanctions or fines, and be subject to increased
capital requirements or other requirements.

The Minister of Finance (Canada) approved our
indirect acquisition of Primerica Life Canada in
2010 with the expectation that we will provide
ongoing financial, managerial or operational
support to this subsidiary as necessary. If OSFI
determines Primerica Life Canada is not receiving

Primerica 2020 Annual Report

35

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.
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. Our insurance
subsidiaries may need additional capital and, if
needed, we may not be able to provide it to
maintain the targeted RBC and LICAT levels to
support their business operations, either of
which may impact our financial strength and
credit ratings.

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.

ITEM 1A. RISK FACTORS

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 are extraordinary changes to U.S. or
Canadian statutory or regulatory requirements,
we may be unable to fully comply with or
maintain all required insurance licenses and
approvals and 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.

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 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, many of which are outside of our
control.

36

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 (“S&P”) 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

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.

ITEM 1A. RISK FACTORS

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

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

We extensively use reinsurance in the United
States to diversify our risk and to manage our
loss exposure to mortality risk. Reinsurance does
not relieve us of our direct liability to our
policyholders, even when the reinsurer is liable
to us. We, as the insurer, are required to pay the
full amount of death benefits even in
circumstances where we are entitled to receive
payments from the reinsurer. Our reinsurers may
be unable 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. Two of our reinsurers are in
receivership, both of which are associated with
small blocks of business that are in runoff. While
it is uncertain at this time how much of their
claim obligations these reinsurers will ultimately

Primerica 2020 Annual Report

37

ITEM 1A. RISK FACTORS

be able to pay, we have recognized an allowance
for the expected credit losses associated with
their reinsurance recoverable balances in our
statement of financial position.

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 coinsurer 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 coinsurer, 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

38

insufficient to pay such coinsurer’s obligations to
us and we fail to enforce our right to recapture
the business, it could have a material adverse
effect on our business, financial condition and
results of operations.

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. If the financial strength of these
counterparties 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 or lower cost
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.
Investment advisory representatives likewise are
held to a high standard of conduct. Our

ITEM 1A. RISK FACTORS

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 and may impose
sanctions that could materially adversely affect
our business, financial condition and results of
operations.

If heightened standards of conduct or more
stringent licensing requirements, such as
those adopted by the SEC and those
proposed or adopted by the Department of
Labor (“DOL”) 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

Primerica 2020 Annual Report

39

ITEM 1A. RISK FACTORS

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”). Among other things, the SEC
Rulemaking: (i) creates a new “best interest”
standard of conduct for broker-dealers (“Reg
BI”), and (ii) imposes new disclosure
requirements through summary forms intended
to clarify relationships among brokers, advisers,
and their retail customers (“Form CRS”). The SEC
Rulemaking had a compliance date of June 30,
2020 for Reg BI and Form CRS. On December 15,
2020, the DOL published an interpretation of,
and class exemption regarding, the rules
governing fiduciary investment advice with
respect to IRAs and other retirement accounts
(the “DOL Rule”). The effective date of the DOL
Rule is February 16, 2021 and the DOL extended
its non-enforcement policy through
December 20, 2021. The SEC Rulemaking and
the DOL Rule in their current forms impose
higher standards of care and enhanced
obligations that increase regulatory and
litigation risk 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

40

the content of the legislation or regulation and
how it would be applied by state regulators and
interpreted by the courts, but 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 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
was 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. The
implementation date to address conflicts
changed from December 31, 2020 to June 30,
2021 to provide additional time due to
COVID-19. 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
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.

ITEM 1A. RISK FACTORS

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, for compliance with the SEC
Rulemaking and the DOL Rule, and for
compliance with other federal or state
regulations governing standards of care. We
believe that the policies and procedures we
implement to help sales representatives assist
clients in making investment choices are
reasonably designed to achieve compliance with
applicable securities laws and regulations and to
satisfy other applicable federal, state, and
provincial standards of care. Nonetheless, 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.

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.

If our suitability policies and procedures, or
our policies and procedures for
compliance with federal or state

PFS Investments is a non-bank custodian of
retirement accounts, as permitted under
Treasury Regulation 1.408-2. A non-bank

Primerica 2020 Annual Report

41

ITEM 1A. RISK FACTORS

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.

RisksRelatedtoOurMortgage
DistributionBusiness

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

42

requirements would adversely affect the size of
the mortgage loan sales force, which could
materially adversely affect our mortgage
distribution business.

Our mortgage distribution business is
highly regulated and subject to various
federal, state and provincial laws and
regulations in the U.S. and Canada,
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 distribution business is
subject to a wide array of laws at the federal,
state, and local levels, and it is regulated by the
Consumer Financial Protection Bureau and state
mortgage regulators, which have the authority
to examine, supervise and enforce applicable
laws, regulations and policies. Federal law and
regulations impose prohibitions and restrictions
on the manner and amount of compensation
paid in connection with a mortgage loan
transaction and establish a federal ability to
repay standard for all mortgage loans. Other
laws 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
lender, compensation, fair lending, supervision,
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
business, financial condition, and results of
operations. Remediation for noncompliance with
federal, state or local laws could be costly and
significant fines may be incurred. Failure to
comply with applicable laws could result in
potential litigation liability. Further, the lender

ITEM 1A. RISK FACTORS

must comply with applicable federal, state, and
local laws and regulations, and any
noncompliance by such lender may adversely
impact our U.S. mortgage distribution business.

lapses or surrenders of insurance policies, and
some of our policyholders may choose to defer
paying insurance premiums or stop paying
insurance premiums altogether.

In Canada, sales representatives offer mortgage
loans on a referral basis only. Various provincial
mortgage brokerage laws strictly prescribe the
requirements applicable to a mortgage referral
program in order for individuals who make the
referrals to be exempt from the requirement to
be licensed as mortgage brokers. Differing
interpretations of, changes in, or violations of,
any of the applicable exemptions under
mortgage brokerage laws could subject us to
damages, fines or sanctions and could have a
material adverse effect on our ability to offer
mortgage loan referrals in Canada. In addition,
sales representatives selling mutual funds must
comply with the disclosure requirements of the
MFDA and applicable securities laws governing
mortgage referral arrangements. Failure to
comply with such disclosure requirements could
result in regulatory sanctions, which could have
a material adverse effect on our ability to offer
mortgage loan referrals in Canada.

RisksRelatedtoEconomicDowncycles,
PublicHealthCrisesorCatastrophes,
andDisasters

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.
We may experience an elevated incidence of

Our investment and savings products business is
sensitive to the performance of the equity
markets. A protracted long-term downturn in
equity market performance brought about in an
economic downturn could adversely affect new
sales and cause clients to liquidate mutual funds
and other investments sold by sales
representative. 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. 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.

Major public health pandemics, epidemics
or outbreaks, specifically, the COVID-19
pandemic, or other catastrophic events,
could materially adversely impact our
business, financial condition and results of
operations.

Our operations are exposed to the risk of major
public health pandemics, epidemics or outbreaks
(a “major public health crisis”), such as the
COVID-19 pandemic, or other catastrophic
events (“catastrophic events”), which, among
other things, could cause a large number of
premature deaths of our insureds. Although we
have ceded a significant majority of our
mortality risk to reinsurers, a major public health
crisis or catastrophic event could cause
substantial volatility in our financial results for a
period of time and could also materially harm
the financial condition of our reinsurers, increase
the probability of default on reinsurance
recoveries or decrease the availability of
reinsurance on new business. In addition, most
of the jurisdictions in which our insurance
subsidiaries are licensed to transact business
require life insurers to participate in guaranty

Primerica 2020 Annual Report

43

ITEM 1A. RISK FACTORS

associations, which raise funds to pay
contractual benefits owed pursuant to insurance
policies issued by impaired, insolvent or failed
issuers. A major public health crisis or
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.

A major public health crisis or catastrophic event
could negatively impact our ability to attract new
recruits, train and license the sales force, and
incentivize the sales force to sell our products. If
a significant number of sales representatives
were to be impacted by a major public health
crisis or catastrophic event, it could have a
material adverse effect on recruiting, licensing,
and our ability to write new business. A major
public health crisis or catastrophic event could
also cause significant volatility in global financial
markets and disrupt the economy and the
demand for the term life insurance, investment
and savings and other financial products that we
sell. Our investment portfolio and the valuations
of invested assets we hold could also be
materially adversely affected.

Specifically with respect to the COVID-19
pandemic, social distancing recommendations
(collectively, “prevention measures”) inhibited
and continue to inhibit the face-to-face setting
sales representatives primarily used to meet the
needs of clients, attract new recruits, and retain
and motivate sales representatives. Such
face-to-face interactions may not be adequately
replaced by technological solutions. Further,
prevention measures have negatively impacted
and may continue to impact completion of
paramedical tests necessary to underwrite some
of our life insurance applicants. Prevention
measures also caused and continue to cause
limited availability and capacity of licensing test
centers, which negatively impact the ability of
sales representatives to obtain the licenses
necessary to sell certain of our products,
including life insurance, securities and
mortgages. Finally, prevention measures have
caused the cancellation of large meetings that
we use to motivate the sales force to sell our
products. Throughout 2020 and into 2021,

44

prevention measures have been adopted,
relaxed and re-adopted by various jurisdictions,
and this is unlikely to change until a vaccine is
widely available in the United States and
Canada. We cannot predict the impact that any
such measures could have on our business and
results of operations.

The COVID-19 pandemic has led to an economic
downturn and it is uncertain how long this
economic downturn will last. This economic
downturn has resulted in higher unemployment
rates, lower household income and significant
fluctuations in consumer spending, all of which
could adversely affect the persistency of in force
business, the demand for the term life insurance,
investment and savings and other financial
products that we sell, our liquidity and our ability
to attract new recruits. It could also negatively
impact product providers and business partners
with whom we have long-standing business
relationships, which could materially adversely
affect our business. Many state governments
required that insurance companies temporarily
extend grace periods, and we have adopted
other measures intended to enable customers to
maintain life insurance policies when facing
financial hardships due to the COVID-19
pandemic. We do not yet know the impact this
will have on the future persistency of our life
insurance policies. Further, the significant
volatility in the North American equity markets
in the first quarter of 2020 impacted, and
potential future volatility could impact, the value
of clients’ investment accounts and may have a
negative effect on the Company’s sales of
investment and savings products, both of which
could have an adverse effect on our business,
financial condition and results of operations.

We cannot predict accurately how legal and
regulatory responses to concerns about the
COVID-19 pandemic will impact our business.
For example, liability could result if persons are
infected with COVID-19 at one of our offices or
by one of the sales representatives and it is
determined that we did not exercise reasonable
precautions in how we protect our workplaces.
The extent to which the COVID-19 pandemic
may impact our business, financial condition and
results of operations will depend on future

developments that are highly uncertain and
cannot be predicted accurately, including new
information that may emerge concerning the
severity of the COVID-19 pandemic, the duration
of the pandemic and actions taken to contain or
mitigate its impact.

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.

RisksRelatedtoInformation
TechnologyandCybersecurity

If one of our, or a third-party partner’s,
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

ITEM 1A. RISK FACTORS

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.
Further, our information technology systems and
applications run a variety of third-party and
proprietary software intended to support the
sales force. 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

Primerica 2020 Annual Report

45

ITEM 1A. RISK FACTORS

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.

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, health 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 or health
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

46

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. NYDFS’s
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
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 a significant number of states. In
addition, the California Consumer Protection Act
of 2018 and related laws and regulations
(“CCPA”) are designed to give consumers more
control over their personal data. The CCPA,
which imposes strict liability for security
incidents under certain circumstances, became
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.

FinancialRisksAffectingOurBusiness

Credit deterioration in, and the effects of
interest rate fluctuations and changes to
benchmark reference interest rates 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. 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.

The value of certain of our investments are tied
to benchmark reference interest rates, such as
the London Interbank Offered Rate (“LIBOR”). In
2022, financial markets will begin transitioning
away from LIBOR as a reference interest rate for
securities and contract terms, with full transition

ITEM 1A. RISK FACTORS

expected by June 30, 2023. 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, 2020, investments that are tied to
LIBOR represent less than 5% of our invested
asset portfolio.

Valuation of our investments and the
determination of expected credit losses
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 our
assessment of expected credit losses. 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 first determine if we intend to
sell or will more-likely-than-not be required to
sell the security before the expected recovery of
its amortized cost. If we intend to sell or will
more-likely-than-not be required to sell the
security, then we recognize the impairment as a
credit loss in our condensed consolidated
statements of income by writing down the
security’s amortized cost to its fair value. If we
do not intend to sell or it is not more-likely-
than-not that we will be required to sell the
security before the expected recovery of its
amortized cost, we recognize the portion of the
impairment that is due to a credit loss, if any, in
our condensed consolidated statement of
income through an allowance. The portion of the

Primerica 2020 Annual Report

47

ITEM 1A. RISK FACTORS

impairment that is due to factors other than a
credit loss is recognized in other comprehensive
income in the condensed consolidated
statement of comprehensive income as an
unrealized loss. The determination of whether an
impairment is due to credit factors is subjective
and involves a variety of assumptions and
estimates.

There are various risks and uncertainties
associated with determining whether an
impairment is due to credit factors when the fair
value of available-for-sale securities declines
below amortized cost. To the extent that we are
incorrect in our determination of the fair value of
our investment securities or our determination
of whether an impairment is due to factors 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

48

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 2023 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 Financial Accounting Standards
Board (“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. The
International Accounting Standard Board’s (the
“IASB”) new accounting standard for insurance
contracts (“IFRS 17”) will become effective in
2023. IFRS 17 will significantly overhaul the
measurement model for insurance contracts at
our Canadian life insurance subsidiary for
statutory reporting purposes. 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 this 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 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,
and Senior Note obligations, as well as to return
capital to our stockholders. The ability of our
subsidiaries to pay dividends to us depends on
their earnings, covenants contained in existing
and future financing or other agreements and
on regulatory restrictions. The ability of our
insurance subsidiaries to pay dividends will
further depend on their statutory income and
surplus. If the cash we receive from our
subsidiaries pursuant to dividend payments and
tax sharing arrangements is insufficient for us to
fund our obligations or if a subsidiary is unable
to pay dividends to us, we may be required to
raise cash through the incurrence of debt, the
issuance of equity or the sale of assets. However,
given the historic volatility in the capital markets,
there is no assurance that we would be able to
raise cash by these means.

The jurisdictions in which our insurance
subsidiaries are domiciled impose certain
restrictions on their ability to pay dividends to
us. In the United States, these restrictions are

ITEM 1A. RISK FACTORS

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. More stringent restrictions could 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

Primerica 2020 Annual Report

49

ITEM 1A. RISK FACTORS

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.

RisksRelatedtoLegislativeand
RegulatoryChanges

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.

Our business is subject to many regulations that
relate to, among other things, consumer
protection, fair credit reporting, financial privacy,
consumer fraud, anti-money laundering, worker
classification standards, corporate taxation and
transactions with certain countries. These laws
and regulations often are subject to the political
climate.

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.

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

50

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 also 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.

GeneralRisksFactors

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. 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.

For example, multi-state treasurer unclaimed
property audits by 30 jurisdictions are focused
on the life insurance claims paying practices of
our subsidiaries, Primerica Life and NBLIC, but
have been inactive in recent years. The potential
outcome of such actions is difficult to predict
but could subject us to adverse consequences.
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.

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

ITEM 1A. RISK FACTORS

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 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 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.

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

The Canadian dollar is the functional currency
for our Canadian subsidiaries and our financial
results, reported in U.S. dollars, are affected by
changes in the currency exchange rate. The
assets, liabilities, revenues, and expenses of our
Canadian subsidiaries are generally all
denominated in Canadian dollars. However, the
Canadian dollar financial statements of our
Canadian subsidiaries are translated into U.S.
dollars in our consolidated financial statements.
Therefore, significant exchange rate fluctuations

Primerica 2020 Annual Report

51

ITEM 1A. RISK FACTORS

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.

Any acquisition of or investment in
businesses that we may undertake that
does not perform as we expect or that is
difficult for us to integrate could materially
adversely impact our business, financial
condition and results of operations.

At any particular time, we may be in various
stages of assessment, discussion, and
negotiation with regard to one or more potential
acquisitions or investments, not all of which will
be consummated. Acquisitions involve numerous
risks and uncertainties and may be of businesses
in which we lack operational or market
experience. If we complete one or more
acquisitions, our results of operations and
financial condition may be adversely affected by
a number of factors, including but not limited to:
regulatory or compliance issues that could arise;
a rating downgrade by a rating agency if it
perceives an adverse change in our financial
condition; changes in regulations and laws; the
failure of the acquired businesses to achieve the
results we have projected in either the near or
long term; the assumption of unexpected
liabilities, including litigation risks; the difference
between the estimated and actual fair value of
assets acquired and liabilities assumed; the
difficulties of imposing adequate financial and
operating controls on the acquired companies
and their management and the potential cost
that might be incurred to implement adequate
controls; the difficulties in the integration of the
operations, technologies, services and products
of the acquired companies; and the failure to
achieve the strategic objectives of these

52

acquisitions. Further, completion of one or more
acquisitions may cause our Board to suspend the
payment of dividends and/or share repurchases.

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.

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.

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
lease expiring in March 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

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.

Primerica 2020 Annual Report

53

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

ITEM X.
SIGNIFICANT EMPLOYEES

INFORMATION ABOUT OUR EXECUTIVE OFFICERS AND CERTAIN

Our executive officers are elected by our Board of Directors.

The name, age at March 1, 2021, 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

61 Chief Executive Officer

Peter W. Schneider

Alison S. Rand

Gregory C. Pitts

John A. Adams

Michael C. Adams

Lisa A. Brown

Estee Faranda

Jeffrey S. Fendler

William A. Kelly

Kathryn E. Kieser

Michael W. Miller

Robert H. Peterman, Jr.

Brett A. Rogers

Julie A. Seman

64

53

58

President

Executive Vice President and Chief Financial Officer

Executive Vice President and Chief Operating Officer

62 Chief Executive Officer, Primerica Life Insurance Company of Canada

64

51

Executive Vice President and Chief Business Technology Officer

Executive Vice President and Chief Administrative Officer

46 Chief Executive Officer, PFS Investments

64

65

51

43

55

55

51

Executive Vice President and Chief Compliance and Risk Officer

Executive Vice President and Co-Head of Business Technology

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.
He currently serves on the board of trustees for
the Georgia Baptist Foundation.

54

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 was a Partner at the law firm of
Rogers & Hardin LLP in Atlanta, Georgia from
1988 to 2000. Mr. Schneider earned both his B.S.
in political science and industrial relations and
his J.D. 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

audit department of KPMG LLP. Ms. Rand earned
her B.S. in accounting from the University of
Florida 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. He serves on the board of directors
of the Boy Scouts of America Atlanta Area
Council.

Set forth below is biographical information
concerning certain significant employees.

John A. Adams has served as the Chief Executive
Officer of Primerica Life Insurance 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
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

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

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.

Lisa A. Brown has served as Executive Vice
President and Chief Administrative Officer since
October 2020. She oversees the Company’s
Human Resources, Talent Management, Facilities
and Physical Securities functions and leads the
Company’s efforts to create and implement
programs, processes and protocols that focus on
diversity, equality and inclusion. She also works
closely with Marketing leaders to support our
Strategic Markets affinity groups in the field. Prior
to joining Primerica, Ms. Brown held several
leadership positions at Delta Air Lines for more
than 20 years overseeing Delta’s wholly-owned
subsidiaries, fleet, procurement, talent
development and operations functions. She earned
her B.S. degree in Human Resources
Administration from Michigan State University and
a Masters of Business Administration from
Kennesaw State University. Ms. Brown is a member
of the board of directors of Cool Girls, Inc.

Estee Faranda has served as Chief Executive
Officer of PFS Investments since March 2020 and
as Executive Vice President from January 2020 to
March 2020. Before joining the Company in
January 2020, she was at Envestnet from March
2015 to January 2020 where she held several
leadership positions, built an asset management
network and was responsible for all asset
management products on the Envestnet platform.
Prior to Envestnet, Ms. Faranda spent eight years
at Morningstar Investment Management.
Ms. Faranda serves on the board of directors of
the American Securities Association (ASA). She
attended Kean University and spent six years in
the United States Naval Reserve.

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.

William A. Kelly has served as Executive Vice
President and Co-Head of Business Technology

Primerica 2020 Annual Report

55

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

since December 2017. He served as Executive
Vice President of PFS Investments from March
2020 to August 2020, as Chief Executive Officer
from May 2018 to March 2020, as President and
Chief Executive Officer from 2005 to May 2018,
and in various capacities at the Company since
1985. Mr. Kelly graduated from the University of
Georgia with a B.B.A. in accounting.

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

56

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 Executive
Vice President and General Counsel since May
2019. Previously, he was a Partner at Rogers &
Hardin LLP in Atlanta, Georgia, where he
represented Primerica as outside counsel for
more than 20 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, Digital 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
B.S. in Business Management from Southern
Illinois University.

PART II

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

MarketInformation

Our common stock of is listed for trading on the
New York Stock Exchange (“NYSE”) under the
symbol “PRI.”

Holders

As of February 28, 2021, we had 140 holders of
record of our common stock.

Dividends

In the first quarter of 2021, we declared a
quarterly dividend to stockholders of $0.47 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, 2020,
we repurchased shares of our common stock as
follows:

Period

Total number of
shares purchased (1)

Average price paid
per share (1)

October 1-31, 2020

115,433

November 1-30, 2020

December 1-31, 2020

Total

44

419

115,896

$115.68

111.65

134.06

$115.74

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)

115,433

—

—

$68,605,883

68,605,883

68,605,883

$115,433

$68,605,883

(1) Consists of (a) repurchases and withholdings of 463 shares at an average price of $131.93 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 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. No further repurchases will be made under this repurchase
program.

(3) On February 9, 2021, our Board of Directors authorized a share repurchase program, which was announced on February 10,

2021, for up to $300.0 million of our outstanding common stock (including $68.6 million remaining from the prior
repurchase program) for purchases through June 30, 2022. As a result, no further repurchases will occur under the prior
repurchase program.

Primerica 2020 Annual Report

57

ITEM 5. COMMON STOCK AND STOCKHOLDER MATTERS

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 S&P MidCap 400
Index and the S&P 500 Insurance Index by
assuming $100 was invested in each investment

option as of December 31, 2015 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 Performance

l

e
u
a
V
x
e
d
n
I

$350

$300

$250

$200

$150

$100

$50

5
1
0
2
/
1
3
/
2
1

6
1
0
2
/
1
3
/
2
1

7
1
0
2
/
1
3
/
2
1

8
1
0
2
/
1
3
/
2
1

9
1
0
2
/
1
3
/
2
1

0
2
0
2
/
1
3
/
2
1

Primerica, Inc.

S&P 500 Insurance

S&P MidCap 400

Index

Primerica, Inc.

S&P 500 Insurance

S&P MidCap 400

Period Ended

12/31/2015

12/31/2016

12/31/2017

12/31/2018

12/31/2019

12/31/2020

$100.00

$148.33

$219.88

$213.54

$288.50

$299.77

100.00

100.00

117.58

120.74

136.62

140.35

121.30

124.80

156.94

157.49

156.25

179.01

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

58

 
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, 2020. 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 2020 and 2019
items and comparisons between 2020 and 2019
financial results. Discussions of 2018 items and
comparisons between 2019 and 2018 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, 2019 (the
“2019 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

ITEM 7. MD&A

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 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.

During the year ended December 31, 2020,
market conditions changed rapidly due to the
impact of the novel coronavirus COVID-19
(“COVID-19”) pandemic. Measures taken to
combat the spread of COVID-19 led to economic
uncertainty and market volatility in the United
States and Canada that will continue to impact
our business for an uncertain period of time. To
date, this economic decline, partial recovery and
continued uncertainty have resulted in elevated
unemployment rates, lower household income,
sharp fluctuations in consumer spending, and
historic levels of government stimulus. In
addition, market volatility has led to large
fluctuations in the fair value of securities held in
our invested asset portfolio. The impact on our
operating results for the year ended

Primerica 2020 Annual Report

59

ITEM 7. MD&A

December 31, 2020 caused by the spread of
COVID-19 is discussed in more detail later in this
section, the Results of Operations section, and
the Financial Condition section.

Due to the evolving and uncertain nature of this
event, it currently is not possible to estimate the
impact the COVID-19 pandemic will have on our
business in future periods. However, we believe
COVID-19 will continue to create uncertainty in
the following business trends and conditions:

•

The ability of new recruits to obtain the
requisite licenses to sell our products has
been, and will likely continue to be limited,
by the availability of licensing jurisdictions
to administer exams and maintain licensing
operations.

• We have experienced and will continue to

experience an increase in mortality expense
due to premature deaths of our insureds
caused by COVID-19 infections. The
ultimate mortality expense due to
COVID-19 is unknown. Any increase in
mortality expense will be mitigated by
reinsurance as we have ceded a significant
majority of our mortality risk to reinsurers
we believe to be creditworthy.

•

To date, the impact of COVID-19 has led to
historically high levels of persistency
throughout all policy durations and
increased policy sales as a result of strong
public sentiment towards owning life
insurance products. It is unknown how long

New recruits

New life-licensed sales representatives

Life-licensed sales representatives, at period end

these trends will continue and to what
extent persistency levels and policy sales
will normalize as the current fear associated
with the COVID-19 pandemic subsides. Also,
the prolonged impact of elevated
unemployment and lower household
income may cause deterioration in
persistency of existing term life insurance
policies. Refer to the Factors Affecting Our
Results section for more information about
how persistency impacts our financial
results.

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.

Details on new recruits activity and life-licensed
sales representative activity were as follows:

Year ended December 31,

2020

2019

2018

400,345 282,207 290,886

48,106

44,739

48,041

134,907 130,522 130,736

New recruits increased in 2020 compared to
2019 due to positive recruiting momentum at
the onset of the COVID-19 pandemic combined
with the effect of offering discounted business
application fees for several months during the
year. After the discounted fee offerings expired
in July 2020, recruiting momentum remained
strong through December 2020. The number of

new life-licensed sales representatives increased
in 2020, but faced challenges presented by the
COVID-19 pandemic that included the
suspensions of in-person licensing preparation
classes and the closing of licensing examination
centers. In order to address these challenges, we
enhanced current incentive programs that
encourage recruits to complete the licensing

60

process, expanded the reach of online offerings
for licensing exam preparation and facilitated
the use of remote testing where offered. As
examination centers have reopened, we have
noted delays in available testing dates due to
the backlog that accumulated during COVID-19
related closures. In response to this backlog,
many states are issuing temporary licenses and
are offering remote testing options. In addition,
many states are extending renewal dates to
allow licensees adequate time to complete the
renewal process.

At December 31, 2020, the Company had
134,907 independent life-licensed
representatives compared to 130,522 at

ITEM 7. MD&A

December 31, 2019. The number of independent
life-licensed representatives at year end included
3,597 individuals with COVID-19 temporary
licenses and 2,508 licenses with extended
renewals dates. We estimate that approximately
4,200 of these individuals will either not pursue
the steps necessary to obtain a permanent
license or not renew an expiring license.

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

2020

2019
133,302 130,370 128,977
352,868 287,809 301,589

2018

0.22

0.18

0.19

New policies issued during 2020 increased
significantly compared to 2019 as a result of
continued favorable public sentiment for
protection products in response to the
COVID-19 pandemic. The ability of life-licensed
representatives to adopt virtual communication
tools, when combined with extensive
point-of-sales technologies and existing
products, allowed them to readily meet our

client’s needs. These factors drove productivity
in 2020 to the high end of our historical range.
While sales of new policies were strong in 2020,
the effect of continued weakness in household
income caused by the COVID-19 pandemic and
a change in public sentiment that is less
favorable to protection products following the
pandemic could adversely impact sales in future
periods.

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

Year ended December 31,

% of
beginning
balance

2019

% of
beginning
balance

2018

% of
beginning
balance

2020

Face amount in force, beginning of period $808,262
Net change in face amount:

(Dollars in millions)

$781,041

$763,831

Issued face amount
Terminations
Foreign currency

109,436
(60,848)
1,968

14%
93,994
(8)% (71,519)
4,746
*

12%
95,209
(9)% (70,291)
(7,708)
1%

Net change in face amount

50,556

6%

27,221

3%

17,210

12%
(9)%
(1)%

2%

Face amount in force, end of period $858,818

$808,262

$781,041

*

Less than 1%.

Primerica 2020 Annual Report

61

ITEM 7. MD&A

The face amount of term life policies in force
increased from 2019 to 2020 as the level of face
amount issued continued to exceed the face
amount terminated. As a percentage of the
beginning face amount in force, issued face
amount increased while terminated face amount
decreased, highlighting the strong demand for
both buying and maintaining protection
products in 2020. Our average issued face
amount per policy decreased in 2020 compared
to 2019 to approximately $240,600 from
$248,500 primarily due to the increased use of

TermNow, our rapid issue term life product that
provides for face amounts up to $300,000. A
lower percentage of applicants purchased our
traditionally-underwritten product in response
to challenges in satisfying paramedical
underwriting requirements due to the COVID-19
pandemic.

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

Product sales:

Retail mutual funds

Annuities and other

Year ended December 31,

2020 vs. 2019
change

2019 vs. 2018
change

2020

2019

2018

$

%

$

%

(Dollars in millions)

$ 4,391 $ 4,056 $ 3,964 $ 335

8% $

92

2%

2,210

2,397

2,096

(187)

(8)% 301 14%

Total sales-based revenue generating

product sales

Managed investments

Segregated funds and other

6,601

6,453

6,060

148

2% 393

6%

900

342

739

341

753

227

161 22%

(14)

(2)%

1

*

114 50%

Total product sales

$ 7,843 $ 7,533 $ 7,040 $ 310

4% $ 493

7%

Average client asset values:

Retail mutual funds

Annuities and other

Managed investments

Segregated funds

$42,570 $39,896 $38,108 $2,674

7% $1,788

20,524

19,176

18,315

1,348

7% 861

5%

5%

4,201

2,413

3,563

2,394

3,009

2,410

638 18% 554 18%

19

*

(16)

*

Total average client asset values

$69,708 $65,029 $61,842 $4,679

7% $3,187

5%

*

Less than 1%.

62

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

ITEM 7. MD&A

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

Inflows
Redemptions

Net flows

Change in fair value, net
Foreign currency, net

Net change in asset values

Year ended December 31,

% of
beginning
balance

2019

% of
beginning
balance

2018

% of
beginning
balance

2020

(Dollars in millions)

$70,537

$57,704

$61,167

7,843
(5,538)

2,305
8,521
170

10,996

11%
(8)%

3%
12%
*

16%

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)%

Asset values, end of period

$81,533

$70,537

$57,704

*

Less than 1%.

Average number of fee-generating positions was as follows:

Year ended December 31,

2020 vs. 2019
change

2019 vs. 2018
change

2020

2019

2018

Positions % Positions %

(Positions in thousands)

Average number of fee-generating positions (1):

Recordkeeping and custodial

Recordkeeping only

2,060 2,005 2,081

678

644

658

Total average number of fee- generating positions

2,738 2,649 2,739

55

34

89

3% (76)

5% (14)

3% (90)

(4)%

(2)%

(3)%

(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 2020 from 2019 was
due to a combination of strong demand for
mutual funds and, to a lesser degree, higher
sales of managed accounts as a result of
continued equity market recovery following the
negative market reaction to the COVID-19
pandemic in early 2020. This was partially offset
by lower sales of fixed and variable annuity
products, which experienced lower demand as
product providers offered less attractive benefits
due to the historically low interest rate
environment.

Average client asset values. Average client asset
values increased as of December 31, 2020 from
December 31, 2019 despite market volatility
caused by the COVID-19 pandemic. During the
first quarter of 2020, market volatility led to a
significant decline in client asset values primarily
due to market reaction and economic
uncertainty associated with the onset of the
COVID-19 pandemic. After the initial decline,
equity markets recovered and expanded, which
led to average client asset values being higher
than the prior year. Also contributing to the
increase were continued higher inflows and
lower redemption activity in 2020 compared to
2019.

Primerica 2020 Annual Report

63

ITEM 7. MD&A

Rollforward of client asset values. Ending client
asset values increased in 2020 from 2019, which
was largely attributable to overall market
appreciation experienced during 2020 as market
values recovered from lows in the first quarter of
2020 and proceeded to increase to levels higher
than the pre-COVID-19 pandemic levels. Also
contributing to the increases was lower
redemption activity in 2020 as clients opted to
hold investments in the face of market volatility,
and higher net sales of mutual funds and
managed accounts.

Average number of fee-generating
positions. The average number of
fee-generating positions increased in 2020 from
2019 primarily due to the cumulative effect of
retail mutual fund sales in recent periods that
led to an increase in the number of retail mutual
fund positions serviced on our transfer agent
recordkeeping platform.

Significant regulatory changes.

Standards of care. On June 5, 2019, the Securities
and Exchange Commission (“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”). Among
other things, the SEC Rulemaking: (i) creates a
new “best interest” standard of conduct for
broker-dealers (“Reg BI”), and (ii) imposes new
disclosure requirements through summary forms
intended to clarify relationships among brokers,
advisers, and their retail customers (“Form CRS”).
The SEC Rulemaking had a compliance date of
June 30, 2020 for Reg BI and Form CRS. We
made 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, the SEC Rulemaking has not caused
significant disruption to our business.

On December 15, 2020, the Department of Labor
(“DOL”) published an interpretation of, and class
exemption regarding, the rules governing
fiduciary investment advice with respect to
Individual Retirement Accounts (“IRAs”) and

64

other retirement accounts (the “DOL Rule”). The
effective date of the DOL Rule is February 16,
2021 and the DOL extended its
non-enforcement policy through December 20,
2021. The DOL Rule in its current form imposes a
higher standard of care and enhanced
obligations that increase regulatory and
litigation risk 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 such laws or
regulations could disrupt our brokerage or
advisory businesses 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.

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.

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

ITEM 7. MD&A

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

Primerica 2020 Annual Report

65

ITEM 7. MD&A

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
portfolio’s current reinvestment rate
gradually increasing over seven years to a
level consistent with our expectation of
future yield growth. 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

•

66

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
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.

• 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

ITEM 7. MD&A

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.

Primerica 2020 Annual Report

67

ITEM 7. MD&A

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 mortgage loan originations, prepaid
legal services, auto and homeowners’ insurance
referrals, 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

68

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
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 2% in 2020 from
2019. The average exchange rates used by the
Company in 2020 to translate our Canadian
dollar functional currency revenues and
expenses into U.S. dollars decreased 1%
compared to 2019.

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 may impact the measurement of our
deferred tax assets and liabilities and the
amount of income tax expense we incur.

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

ITEM 7. MD&A

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, we would recognize approximately
$26 million of additional amortization of DAC
expense as of December 31, 2020. Conversely, if
actual annual lapses are 10% lower than
anticipated, we would recognize approximately
$26 million of lower amortization of DAC
expense as of December 31, 2020 We believe
that a plus or minus 10% annual lapse rate is a
reasonably possible variation. In 2020, we
experienced extraordinarily lower lapse rates as
a result of policyholder sentiment associated
with the COVID-19 pandemic. The impact of the
lower lapse rates, which were approximately 20%
lower than 2019 (varying by duration), resulted
in approximately $53 million of lower DAC
amortization expense year-over-year.
Differences between actual and expected

Primerica 2020 Annual Report

69

ITEM 7. MD&A

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

70

10% higher, the additional future policy benefit
reserves that would be released is approximately
$26 million, partially offset by the release of the
corresponding recoverable from reinsurers asset
of approximately $10 million using balances as
of December 31, 2020. Conversely, the impact of
a 10% decrease to lapse rates would increase
future policy reserves approximately $26 million,
partially offset by the recognition of
approximately $10 million of reinsurance
recoverables. 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. Actual lapses in 2020 were
approximately 20% lower than 2019, and as
opposed to the example provided, the
reductions were somewhat weighted to early
durations. The earnings impact was
approximately $26 million of higher benefits and
claims expense net of reinsurance recoverables
year-over-year.

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.

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 are included as a
separate component of other comprehensive
income in our consolidated statements of
comprehensive income.

We also hold equity securities, including common
and non-redeemable preferred stock. These
equity securities are measured at fair value and
changes in unrealized gains and losses are
recognized in net income. 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.

ITEM 7. MD&A

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.

Credit Losses for Available-for-sale Fixed-maturity
Securities.
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 the impairment as a
credit loss in our consolidated statements of
income by writing down the amortized cost
basis to the fair value. 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, we recognize the portion of the
impairment that is due to a credit loss in our
consolidated statements of income through an
allowance. We reverse credit losses previously
recognized in the allowance in situations where
the estimate of credit losses on those securities
has declined. We do not consider the length of
time an available-for-sale security has been in an
unrealized loss position when estimating credit
losses.

Analyses that we perform to determine whether
an impairment is due to a credit loss or other
factors involve the use of estimates,

Primerica 2020 Annual Report

71

ITEM 7. MD&A

assumptions, and subjectivity. We evaluate a
number of quantitative and qualitative factors
when determining the credit loss on individual
securities, including issuer-specific risks as well
as relevant macroeconomic risks. If these factors
or future events change, we could experience
material credit losses recognized in our
consolidated statements of income for
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
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.

72

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). Primarily
reflects the difference between amortized
cost and amounts realized on the sale of
available-for-sale securities, credit losses
recognized on available-for-sale securities,
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, 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

ITEM 7. MD&A

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 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 2020 Annual Report

73

ITEM 7. MD&A

Primerica, Inc. and Subsidiaries Results. Our results of operations for the years ended
December 31, 2020, 2019, and 2018 were as follows:

Year ended December 31,

2020 vs. 2019
change

2019 vs. 2018
change (1)

2020

2019

2018(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)
Other, net

$ 2,907,149 $ 2,753,866 $ 2,667,104 $153,283
11,037

(1,581,164)

(1,569,729)

(1,580,766)

6% $ 86,762
1% (11,435)

3%
(1)%

1,326,383
751,271

1,184,137
713,804

1,085,940
677,607

142,246
37,467

12% 98,197
5% 36,197

9%
5%

141,287

142,398

118,915

(1,111)

(1)% 23,483 20%

(57,473)

(48,325)

(37,485)

9,148

19% 10,840 29%

83,814

94,073

81,430

(10,259)

(11)% 12,643 16%

(4,996)
61,069

4,965
55,525

(2,121)
56,987

(9,961)
5,544

*

7,086
10% (1,462)

*
(3)%

Total revenues

2,217,541

2,052,504

1,899,843

165,037

8% 152,661

8%

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

615,569
224,321
376,636
188,117
32,134
28,839
245,195

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

121,749
(30,231)
19,438
9,300
7,083
28
8,051

25% 36,237
(12)% 14,822
5% 21,814
5% 10,661
561
2
7,537

28%
*
3%

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

1,710,811

1,575,393

1,483,759

135,418

9% 91,634

6%

506,730
120,566

477,111
110,720

416,084
91,990

29,619
9,846

6% 61,027 15%
9% 18,730 20%

Net income

$ 386,164 $ 366,391 $ 324,094 $ 19,773

5% $ 42,297 13%

(1)

*

Refer to the 2019 MD&A for discussions of 2018 items and comparisons between 2019 and 2018 financial results.
Less than 1% or not meaningful

Total revenues. Total revenues increased in
2020 from 2019 driven by the impact of strong
sales and significant positive trends in
persistency in recent periods on direct premiums
for term life insurance policies that are not
subject to the IPO coinsurance transactions.
Commissions and fees from our Investment and

Savings Products segment increased largely due
to growth in average client asset values.

Net investment income decreased in 2020 from
2019 largely due to the negative impact from a
lower total return on the deposit asset backing
the 10% coinsurance agreement that is subject

74

to deposit method accounting. The lower year-
over-year total return of $9.2 million on this
deposit asset was primarily due to a negative
mark-to-market adjustment as the prices of
fixed income securities held within the deposit
asset fell during 2020 compared to an increase
in 2019. Also contributing to a decrease in net
investment income were lower yields on our
invested asset portfolio of approximately
$9.0 million. The decrease in net investment
income was partially offset by the larger size of
the invested asset portfolio, which resulted in an
increase in net investment income of
approximately $7.5 million in 2020 compared to
2019. 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) was a loss in
2020 compared to a gain in 2019. This was
primarily due to a $2.5 million negative
mark-to-market adjustment on equity securities
held within our invested asset portfolio that
were in industries adversely affected by the
COVID-19 pandemic and which had not fully
recovered as of year-end. Also contributing to
the realized investment loss in 2020 is the
recognition of $3.8 million credit losses for
specific issuers that operate in distressed
industry sectors that were particularly affected

ITEM 7. MD&A

by deteriorating economic conditions during
2020.

Other net revenues increased in 2020 from 2019
largely due to a $9.5 million increase in fees
received for access to POL, our primary sales
force support tool. The increase in these fees is
consistent with subscriber growth, as the size of
the independent sales force and number of new
recruits continued to increase. Fees collected for
POL subscriptions are allocated between our
Term Life Insurance segment and our Investment
and Savings Products segment based on the
estimated number of sales representatives that
are licensed to sell products in each respective
segment. The increase in these fees was
accompanied by higher spending reflected in
insurance and other operating expenses to
support and enhance POL. These increases were
partially offset by a waiver of approximately
$3.0 million of certain policy administrative fees
paid by our representatives as we provided relief
in response to the COVID-19 pandemic.

Total benefits and expenses. Total benefits and
expenses increased significantly in 2020 from
2019 primarily due to the growth in benefits and
claims as a result of higher mortality experience
caused by the COVID-19 pandemic and growth
in our in-force book of business due to positive
persistency trends experienced in 2020. Positive
persistency also led to a decrease in the
amortization of DAC, which partially offset the
increases in benefits and claims. Also
contributing to the increase in benefits and
expenses in 2020 are higher insurance and other
operating expenses to support growth in the
business, enhanced technology-related
capabilities, as well as increased employee-
related expenses. These increases were partially
offset by a decrease in insurance and other
operating expenses as a result of business travel
restrictions and event cancellations in response
to the COVID-19 pandemic.

Income taxes. Our effective income tax rate for
2020 was 23.8%, relatively consistent with 23.2%
in 2019.

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

Primerica 2020 Annual Report

75

ITEM 7. MD&A

Term Life Insurance Segment. Our results for the Term Life Insurance segment for the years ended
December 31, 2020, 2019, and 2018 were as follows:

Year ended December 31,

2020 vs. 2019
change

2019 vs. 2018
change(1)

2020

2019

2018(1)

$

%

$

%

(Dollars in thousands)

Revenues:

Direct premiums
Ceded premiums

$ 2,883,583 $ 2,728,844 $ 2,640,830 $154,739
11,539

(1,573,751)

(1,562,383)

(1,573,922)

6% $ 88,014
1% (11,368)

3%
(1)%

Net Premiums

1,309,661

1,166,461

1,067,079

143,200

12% 99,382

9%

Allocated net investment

income
Other, net

27,030
46,079

19,922
40,848

13,747
42,374

7,108
5,231

36%
13% (1,526)

6,175 45%
(4)%

Total revenues

1,382,770

1,227,231

1,123,200

155,539

13% 104,031

9%

Benefits and expenses:
Benefits and claims
Amortization of DAC
Insurance expenses
Insurance commissions

Total benefits and

expenses

Income before income

taxes

593,948
216,208
182,471
17,592

475,330
248,711
172,316
10,781

441,775
228,613
160,645
10,263

118,618
(32,503)
10,155
6,811

25% 33,555
(13)% 20,098
6% 11,671
518

63%

8%
9%
7%
5%

1,010,219

907,138

841,296

103,081

11% 65,842

8%

$ 372,551 $ 320,093 $ 281,904

52,458

16% 38,189 14%

(1)

Refer to the 2019 MD&A for discussions of 2018 items and comparisons between 2019 and 2018 financial results.

Net premiums. Direct premiums increased in
2020 from 2019 due to high levels of persistency
experienced during the year ended December 31,
2020 as a result of favorable public sentiment for
protection products in response to the COVID-19
pandemic. Also contributing to the increase in
direct premiums were strong sales of new policies
throughout 2020 that contributed to growth in
the in-force book of business. Ceded premiums
included $62.2 million in higher non-level YRT
reinsurance ceded premiums as business not
subject to the IPO coinsurance transactions ages,
reduced by $50.6 million in lower coinsurance
ceded premiums due to the run-off of business
subject to the IPO coinsurance transactions.

Allocated net investment income. Allocated net
investment income increased in 2020 from 2019
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.

76

Benefits and claims. Benefits and claims
increased in 2020 from 2019 primarily due to
higher mortality experience as a result of the
COVID-19 pandemic as well as larger benefit
reserve increases due to favorable persistency
trends. Total claims increased for the year ended
December 31, 2020 by $33.0 million over
historical trends, which was primarily driven by
COVID-19 related claims. Benefit reserve
increases due to higher persistency were
approximately $26.0 million for the year ended
December 31, 2020. In addition, benefit reserves
increased by $5.5 million for the year ended
December 31, 2020 due to lower interest rates
applied to 2020 business.

Amortization of DAC. The amortization of DAC
decreased in 2020 from 2019 primarily due to
high levels of persistency experienced
throughout all policy durations as a result of
favorable public sentiment for protection
products in response to the COVID-19
pandemic. This reduced the amortization of DAC

ITEM 7. MD&A

by approximately $53.0 million for the year
ended December 31, 2020.

Insurance expenses

Insurance expenses.
increased in 2020 from 2019 primarily due to
increases in expenses of approximately
$17.2 million to support growth in the business,
enhance technology-related capabilities, as well
as higher employee-related expenses, partially
offset by a decrease in expenses of
approximately $6.0 million as a result of business

travel restrictions, event cancellations and
reduction in other business activities in response
to the COVID-19 pandemic.

Insurance commissions.
Insurance commissions
increased in 2020 from 2019 as a result of higher
non-deferrable sales force promotional activities.
Cost savings from COVID-19 pandemic
insurance expenses decreases discussed above
were used in part to fund these sales force
promotional activities.

Investment and Savings Products Segment. Our results of operations for the Investment and
Savings Products segment for the years ended December 31, 2020, 2019, and 2018 were as follows:

Year ended December 31,

2020 vs. 2019
change

2019 vs. 2018
change(1)

2020

2019

2018(1)

$

%

$

%

(Dollars in thousands)

Revenues:

Commissions and fees:
Sales-based revenues
Asset-based revenues
Account-based revenues

Other, net

1% $22,896
$284,651 $282,887 $259,991 $ 1,764
14,497
7%
21,755
(1,247)
2,486
3%
386
1,254 13%

303,652
81,802
9,631

318,149
80,555
10,017

339,904
83,041
11,271

9%
5%
(2)%
4%

Total revenues

718,867

691,608

655,076

27,259

4%

36,532

6%

Expenses:

Amortization of DAC
Insurance commissions
Sales commissions:

Sales-based
Asset-based

Other operating expenses

7,055
13,184

4,549
12,735

9,766
12,567

2,506 55%
4%

449

(5,217)
168

(53)%
1%

201,148
154,572
140,264

199,690
141,655
141,167

185,221
133,943
139,667

1,458
12,917
(903)

1%
9%
(1)%

14,469
7,712
1,500

8%
6%
1%

4%

Total expenses

516,223

499,796

481,164

16,427

3%

18,632

Income before income taxes

$202,644 $191,812 $173,912 $10,832

6% $17,900

10%

(1)

Refer to the 2019 MD&A for discussions of 2018 items and comparisons between 2019 and 2018 financial results.

Commissions and fees. Commissions and fees
increased in 2020 from 2019 primarily due to the
growth in asset-based revenues as average
client asset values increased due to market
appreciation, continued higher inflows, and
lower redemption activity during the year.
Account-based revenues also increased in 2020
due to the cumulative effect of retail mutual
fund sales in recent periods that led to an
increase in the number of retail mutual fund
positions serviced on our transfer agent
recordkeeping platform. Contributing modestly

to the increase in commissions and fees were
higher sales-based revenues, which increased
due to growth in mutual fund sales but were
offset by declining annuity sales.

Amortization of DAC. Amortization of DAC
increased in 2020 from 2019 largely due to
weaker market performance of the funds
underlying our Canadian segregated funds
product caused by market volatility and
economic uncertainty associated with the
COVID-19 pandemic in first quarter of 2020
compared with stronger market performance

Primerica 2020 Annual Report

77

ITEM 7. MD&A

throughout 2019. Both periods reflect lower
amortization of DAC as a result of favorable
redemption experience.

Sales commissions. The increase in sales-based
and asset-based commissions in 2020 from 2019
was generally consistent with the increase in
sales-based revenues. When considering that
asset-based expenses for our Canadian
segregated funds were reflected within
insurance commissions and amortization of DAC,
the increase in asset-based commissions in 2020
from 2019 was consistent with the increase in

asset-based revenues excluding the Canadian
segregated funds.

Other operating expenses. Other operating
expenses decreased in 2020 from 2019 due to
the phase-in of reduced fees paid to a service
provider for the Company’s transfer agent
recordkeeping platform and business travel
restrictions and event cancellations in response
to the COVID-19 pandemic. These decreases
were partially offset by increases in expenses
due to growth in the business and higher
employee-related expenses.

Corporate and Other Distributed Products Segment. Our results of operations for the Corporate
and Other Distributed Products segment for the years ended December 31, 2020, 2019, and 2018 were
as follows:

Revenues:

Direct premiums

Ceded premiums

Net Premiums

Commissions and fees

Allocated investment income net of

Year ended December 31,

2020 vs. 2019
change

2019 vs. 2018
change(1)

2020

2019

2018(1)

$

%

$

%

(Dollars in thousands)

$ 23,566 $ 25,022 $ 26,274 $ (1,456)

(6)% $ (1,252)

(6,844)

(7,346)

(7,413)

(502)

(7)%

(67)

(5)%

(1)%

16,722

43,675

17,676

32,213

18,861

32,162

(954)

(5)% (1,185)

(6)%

11,462

36%

51

*

investment expenses

114,257

122,476

105,168

(8,219)

(7)% 17,308

Interest expense on surplus note

(57,473)

(48,325)

(37,485)

9,148

19% 10,840

16%

29%

Allocated net investment income

56,784

74,151

67,683

(17,367) (23)% 6,468

10%

Realized investment gains (losses)

Other, net

Total revenues

Benefits and expenses:
Benefits and claims

Amortization of DAC

Insurance expenses

Insurance commissions

Sales commissions

Interest expense

Other operating expenses

(4,996)

3,719

4,965

4,660

(2,121)

(9,961)

*

7,086

*

4,982

(941) (20)%

(322)

(6)%

115,904

133,665

121,567

(17,761) (13)% 12,098

10%

21,621

18,490

15,808

3,131

17%

2,682

17%

1,058

5,646

1,358

20,916

28,839

104,931

1,292

6,501

1,535

15,853

28,811

95,977

1,351

7,511

1,660

16,220

28,809

89,940

(234) (18)%

(59)

(4)%

(855) (13)% (1,010) (13)%

(177) (12)%

5,063

32%

(125)

(367)

(8)%

(2)%

28

8,954

*

9%

9%

2

6,037

7,160

*

7%

4%

Total benefits and expenses

184,369

168,459

161,299

15,910

Loss before income taxes

$ (68,465) $ (34,794) $ (39,732) $ 33,671

97% $ (4,938) (12)%

Refer the 2019 MD&A for discussions of 2018 items and comparisons between 2019 and 2018 financial results.
Less than 1% or not meaningful

(1)

*

78

Total revenues. Total revenues decreased in
2020 from 2019 largely due to the decrease in
net investment income and realized gains
(losses) as discussed in the Primerica, Inc. and
Subsidiaries Results of Operations section above
combined with an increase in the allocation of
net investment income accreted to our Term life
Insurance segment as our in-force business
continued to grow. Partially offsetting this
decrease was commission revenues from the
expansion of our U.S. mortgage distribution
business. Closed mortgage loan volume of
approximately $442.5 million generated
mortgage commission revenues of
approximately $8.7 million during the year
ended December 31, 2020 compared to closed
mortgage loan volume of $31.1 million and
mortgage commission revenues of
approximately $0.7 million during the year
ended December 31, 2019.

Total Benefits and Expenses. Total benefits and
expenses increased in 2020 from 2019 as a result
of higher operating expenses primarily due to
employee and technology-related expenses and
higher sales commissions driven by increased
sales in our mortgage distribution business. Also
contributing to the increase were elevated
claims in closed blocks of life insurance business
and $0.9 million of higher losses for write-offs of
reinsurance recoverables on closed blocks of
business.

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.

ITEM 7. MD&A

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, 2020, 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

Primerica 2020 Annual Report

79

ITEM 7. MD&A

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. For
example, from December 31, 2019 to March 31,
2020, market volatility and economic uncertainty
associated with the COVID-19 pandemic caused
a sharp increase in credit spreads, which
translated to a reduction in the net unrealized
gain on our available-for-sale securities portfolio
from $82.2 million to a net unrealized loss of
$1.3 million. From March 31, 2020 to
December 31, 2020, credit spreads tightened
sharply and bond markets recovered, resulting in
growth of the net unrealized gain on our
available-for-sale securities portfolio to
$163.3 million. Additionally, with respect to
some of our investments, we are subject to
prepayment and, therefore, reinvestment risk.

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

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Mortgage- and asset-backed securities

Equity securities

Trading securities

Cash and cash equivalents

Total

*

Less than 1%.

December 31, 2020 December 31, 2019

Fair
value

Cost or
amortized
cost

Fair
value

Cost or
amortized
cost

*

6%

6%

53%

15%

1%

1%

*

6%

6%

52%

16%

1%

1%

*

6%

5%

56%

21%

1%

1%

*

6%

5%

55%

21%

1%

2%

18%

18%

10%

10%

100%

100%

100%

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, 2020 December 31, 2019

A

A

4.7 years

3.6 years

Average book yield of our fixed-maturity portfolio

3.44%

3.54%

80

ITEM 7. MD&A

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

December 31, 2020 December 31, 2019

Amortized
cost (1)

%

Amortized
cost (1)

%

AAA

AA

A

BBB

Below investment grade

Not rated

Total

(Dollars in thousands)

$ 433,763

19% $ 555,640

294,429

13% 271,936

515,752

22% 543,351

979,867

42% 885,497

90,947

2,780

4%

*

59,190

2,389

*

$2,317,538 100% $2,318,003 100%

24%

12%

23%

38%

3%

(1)

*

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

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

$

Issuer

Government of Canada

Province of Ontario Canada

Province of Quebec Canada

Province of Alberta Canada

Province of New Brunswick Canada

Enbridge Inc.

Province of British Columbia Canada

Province of Newfoundland and Labrador

Wells Fargo & Co.

General Motors Co.

December 31, 2020

Fair value

Amortized
cost (1)

Unrealized
gain (loss)

Credit
rating

21,814 $

(Dollars in thousands)
21,008

$ 806

20,179

16,713

13,198

12,534

12,430

11,063

10,385

10,337

10,199

19,222

15,106

12,236

11,644

11,630

10,604

957

1,607

962

890

800

459

9,213

1,172

10,041

9,263

296

936

AAA

A+

AA-

A+

A+

BBB+

AAA

A

A-

BBB

Total – ten largest holdings

$ 138,852 $ 129,967

$8,885

Total – fixed-maturity securities

$2,480,911 $2,317,538

Percent of total fixed-maturity securities

6%

6%

(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.

Primerica 2020 Annual Report

81

ITEM 7. MD&A

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

Assets:

Reinsurance recoverables

December 31,

2020

2019

Change

$

%

(Dollars in thousands)

$4,273,904 $4,169,823 $104,081

2%

Deferred policy acquisition costs, net

2,629,644

2,325,750

303,894 13%

Liabilities:

Future policy benefits

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, 2020 increased
compared with December 31, 2019 primarily due
to higher mortality experience as well as larger
ceded reserves due to favorable persistency
trends, both driven by the effects of the
COVID-19 pandemic.

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 2020 not subject to the IPO
coinsurance agreements and significant
improvements in persistency as a result of
favorable public sentiment for protection
products in response to the COVID-19
pandemic.

Future policy benefits. The increase in future
policy benefits was a result of the growth in our
in-force book of business due to strong sales of
new policies and persistency improvements.

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

82

$6,790,557 $6,446,569 $343,988

5%

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 2020, our life
insurance underwriting companies declared and
paid ordinary dividends of $192.5 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 2020 our non-life
insurance subsidiaries declared and paid
dividends of $185.5 million to the Parent
Company. At December 31, 2020, the Parent
Company had cash and invested assets of
$350.2 million.

The Parent Company’s subsidiaries generate
operating cash flows primarily from term life
insurance premiums (net of premiums ceded to
reinsurers), income from invested assets,
commissions and fees collected from the
distribution of investment and savings products
as well as other financial products. The
subsidiaries’ principal operating cash outflows
include the payment of insurance claims and
benefits (net of ceded claims recovered from
reinsurers), commissions to 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 have maintained strong cash flows despite
the COVID-19 pandemic due to strong
persistency and our use of reinsurance. Although

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

ITEM 7. MD&A

our future cash flow could be adversely affected
by further deterioration of economic conditions
caused by the COVID-19 pandemic, we
anticipate that cash flows from our businesses
will continue to provide sufficient operating
liquidity over the next 12 months.

If necessary, we could seek to enhance our
liquidity position or capital structure through
sales of our available-for-sale investment
portfolio, changes in the timing or amount of
share repurchases, borrowings against our
revolving credit facility, 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.

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

Year ended December 31,

2020

2019

2018 (1)

(In thousands)
$ 643,417 $ 485,513 $ 478,067

(53,529)

(201,884)

(232,801)

(301,790)

(290,134)

(260,997)

2,595

1,243

(2,093)

Change in cash and cash equivalents

$ 290,693 $

(5,262) $ (17,824)

(1)

Refer to the 2019 MD&A for discussions of 2018 items and comparisons between 2019 and 2018 financial results.

Operating Activities. Cash provided by
operating activities increased in 2020 from 2019
largely due to growth in direct premiums from
higher sales of new policies and positive
persistency trends in recent periods. 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. Higher benefits
and claims recognized during 2020 did not
significantly impact cash flows due to an
increase in claims payable at December 31, 2020
and a corresponding increase in ceded claims
owed from reinsurers. Also contributing to the
increase in cash from operating activities was the
timing of investments in trading securities at our
broker-dealer subsidiary. Partially offsetting the
increase in cash from operating activities in 2020

versus 2019 were higher cash expenditures for
policy acquisition costs due to the growth in
new policy sales.

Investing Activities. Cash flows used in investing
activities decreased in 2020 from 2019 as a
result of lower purchases of investment
securities due to limited reinvestment
opportunities and higher sales and maturities of
available-for-sale securities in our invested asset
portfolio.

Financing Activities. Cash used in financing
activities increased in 2020 from 2019 as
expected due to higher dividends paid to
stockholders as the Company increased its per
share dividend in 2020. Also contributing to the
increase in cash used in financing activities were
higher share repurchases in 2020.

Primerica 2020 Annual Report

83

ITEM 7. MD&A

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, 2020, 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, 2020, 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

84

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 single prescriptive reserving
formula. Primerica Life adopted PBR as of
January 1, 2018. PBR significantly reduced the
redundant statutory policy benefit reserve
requirements while still ensuring adequate
liabilities are held. The regulation only applies
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, 2020. No events of
default occurred on the Senior Notes during the
year ended December 31, 2020.

Financial Ratings. As of December 31, 2020,
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, 2020, 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.

Short-Term Borrowings. We had no short-
term borrowings as of or during the year ended
December 31, 2020.

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.

ITEM 7. MD&A

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,
2020.

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 the London Interbank Offered Rate
(“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. 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,
2020, 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 2020.

Primerica 2020 Annual Report

85

ITEM 7. MD&A

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

December 31, 2020

Total
Liability

Total
Payments

Less
than
1 year

1-3
years

3-5
years

More
than
5 years

(In millions)

Future policy benefits

$6,791

$25,444

$1,645 $3,147 $2,914 $17,738

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

520

448

375

8

39

29

54

21

520

448

375

90

39

45

63

21

520

448

—

28

38

27

8

21

493

454

420

—

—

375

35

1

15

16

—

34

—

—

—

13

—

3

16

—

—

—

—

—

14

—

—

23

—

—

Total contractual obligations

$8,778

$27,499

$3,155 $3,623 $2,946 $17,775

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

86

assumptions used, the amounts presented could
materially differ from actual results.

Policy claims and other benefits payable
represents claims and benefits that have been
incurred but not paid 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
IPO coinsurance agreements as of December 31,
2020. We did not include the principal or interest
on the Surplus Note in the table above as the
payments due for these items are contractually
offset by the principal and interest on the LLC
Note as long as we hold the LLC Note. The
Company asserts its positive intent and ability to
hold the LLC Note until maturity.

Commissions represent commissions that have
been earned by the sales force but have not
been paid as of December 31, 2020. 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.

ITEM 7. MD&A

Our lease obligations primarily represent
payments for leases related to office space. 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 2020 Annual Report

87

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, 2020 and 2019 was $2.5 billion and
$2.4 billion, respectively. One of the primary

88

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 $105.6 million, or 4%, based on our
actual securities positions as of December 31,
2020. For comparative purposes, the same increase
in rates would have caused 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.

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, 2020, 14% of our revenues
from operations, excluding realized investment
gains, and 19% of income before income taxes were
generated by our Canadian operations. 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.

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, 2020. 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, 2020 by $9.5 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 $36.6 million based on net assets as of
December 31, 2020. 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 $32.4 million based on net assets as of
December 31, 2019. 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 2020 Annual Report

89

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, 2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 2020, 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, 2020, 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 March 1, 2021 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
consolidated financial statements that was communicated or required to be communicated to the audit
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial
statements; and (2) involved our especially challenging, subjective, or complex judgment. The communication

90

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

ITEM 8. FINANCIAL STATEMENTS

Estimateofthefuturepolicybenefitsfortermlifeinsurancecontracts

As described in Note 1 to the consolidated financial statements, 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 remains active, and disability rates – 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 not modified during the
policy term unless a premium deficiency is identified. The liability for future policy benefits for term
life insurance contracts was $6,791 million as of December 31, 2020.

We identified the evaluation of mortality, persistency, and disability rate assumptions (assumptions)
used to estimate future policy benefits as a critical audit matter. The evaluation of these assumptions
required complex auditor judgment due to a high degree of measurement uncertainty. Additionally,
specialized actuarial skills and knowledge were needed to evaluate the Company’s assumptions due
to the judgmental nature and level of disaggregation used in determining the assumptions.

The following are the primary procedures we performed to address this critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls related to the
Company’s process for developing the estimate of future policy benefits for term life insurance
contracts. This included controls related to the Company’s development, review, and approval of the
assumptions used to estimate the future policy benefits at the time of contract issuance. We also
involved actuarial professionals with specialized skills and knowledge, who assisted in:

•

•

•

comparing the methods the Company used to determine the assumptions used to estimate the
future policy benefits to generally accepted actuarial standards

evaluating the Company’s assumptions used 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 the 2020 term life insurance contract pricing assumptions; 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 used in determining 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

• 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
March 1, 2021

Primerica 2020 Annual Report

91

ITEM 8. FINANCIAL STATEMENTS

Assets:

Investments:

PRIMERICA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

December 31,
2020

December 31,
2019

(In thousands)

Fixed-maturity securities available-for-sale, at fair value (amortized cost: $2,301,238 in 2020 and $2,274,770 in 2019)
Fixed-maturity security held-to-maturity, at amortized cost (fair value: $1,606,208 in 2020 and $1,299,102 in 2019)
Equity securities, at fair value (historical cost: $32,031 in 2020 and $32,671 in 2019)
Trading securities, at fair value (cost: $16,359 in 2020 and $43,257 in 2019)
Policy loans

$ 2,464,611
1,346,350
38,023
16,300
30,199

$ 2,356,996
1,184,370
40,684
43,233
32,927

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 2020 and 2019; issued and outstanding 39,306 shares

in 2020 and 41,207 shares in 2019)

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

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements.

92

3,895,483
547,569
17,618
4,273,904
2,629,644
259,448
45,275
4,035
69,255
46,567
456,967
2,659,520

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

$14,905,285

$13,688,531

6,790,557
17,136
519,711
447,765
374,415
1,345,772
21,048
202,448
52,806
566,068
72,154
2,659,520

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

13,069,400

12,036,040

393
—

412
—

1,705,786

1,593,281

1,578
128,128

(5,765)
64,563

1,835,885

1,652,491

$14,905,285

$13,688,531

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)

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,

2020

2019

2018

(In thousands, except per-share amounts)

$ 2,907,149

$ 2,753,866

$ 2,667,104

(1,580,766)

(1,569,729)

(1,581,164)

1,326,383

1,184,137

1,085,940

751,271

141,287

713,804

142,398

677,607

118,915

(57,473)

(48,325)

(37,485)

83,814

(4,996)

61,069

94,073

4,965

55,525

81,430

(2,121)

56,987

2,217,541

2,052,504

1,899,843

615,569

224,321

376,636

188,117

32,134

28,839

493,820

254,552

357,198

178,817

25,051

28,811

457,583

239,730

335,384

168,156

24,490

28,809

245,195

237,144

229,607

1,710,811

1,575,393

1,483,759

506,730

120,566

477,111

110,720

416,084

91,990

$ 386,164

$ 366,391

$ 324,094

$

$

9.60

9.57

$

$

8.65

8.62

$

$

7.35

7.33

40,065

42,181

43,854

40,185

42,314

43,985

$

(4,254) $

(1,333) $

(152)

—

(4,254)

1,693

(2,435)

—

(1,333)

1,091

5,207

—

(152)

487

(2,456)

Net realized investment gains (losses)

$

(4,996) $

4,965

$

(2,121)

See accompanying notes to consolidated financial statements.

Primerica 2020 Annual Report

93

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,

2020

2019

2018

(In thousands)
$386,164 $366,391 $324,094

78,533

91,160

(59,661)

2,614

253

(45)

Change in unrealized foreign currency translation gains (losses)

7,343

15,299

(25,059)

Total other comprehensive income (loss) before income taxes

88,490

106,712

(84,765)

Income tax expense (benefit) related to items of other

comprehensive income (loss)

17,582

19,480

(12,690)

Other comprehensive income (loss), net of income taxes

70,908

87,232

(72,075)

Total comprehensive income

$457,072 $453,623 $252,019

See accompanying notes to consolidated financial statements.

94

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:
Balance, end of period

Total stockholders’ equity

Dividends declared per share

Year ended December 31,

2020

2019

2018

(In thousands)

$

412 $
(22)
3

393

427 $
(19)
4

412

443
(21)
5

427

—
29,079
(3)
(29,076)

—
27,208
(4)
(27,204)

—
26,707
(5)
(26,702)

—

—

—

1,593,281

1,489,520

1,375,090

(1,240)
386,164
(64,346)
(208,073)

—
366,391
(57,630)
(205,000)

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

1,705,786

1,593,281

1,489,520

58,798

(28,434)

43,568

—

—

73

7,343

15,299

(25,059)

63,565
129,706

71,933
58,798

(47,016)
(28,434)

$1,835,885 $1,652,491 $1,461,513

$

1.60 $

1.36 $

1.00

See accompanying notes to consolidated financial statements.

Primerica 2020 Annual Report

95

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
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,

2020

2019

2018

(In thousands)

$ 386,164

$ 366,391

$ 324,094

574,060
(512,634)
224,321
266
(5,008)
4,996
751
17,697
(100,185)
(32,348)
26,694
19,027
39,616

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

Net cash provided by (used in) operating activities

643,417

485,513

478,067

Cash flows from investing activities:

Available-for-sale investments sold, matured or called:

Fixed-maturity securities — sold
Fixed-maturity securities — matured or called
Short-term investments — matured or called

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

Fixed-maturity 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

67,760
429,147

—
2,581

42,202
403,969
8,250
3,136

(522,123)

(633,106)

—
(3,272)
(27,622)
43,431
(43,431)

—
(898)
(25,437)
(23,839)
23,839

51,726
362,413

—
2,093

(626,826)
(8,169)
(521)
(13,517)
(37,224)
37,224

Net cash provided by (used in) investing activities

(53,529)

(201,884)

(232,801)

Cash flows from financing activities:

Dividends paid
Common stock repurchased
Tax withholdings on share-based compensation
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

(64,346)
(231,431)
(5,739)
(274)

(57,630)
(225,037)
(7,186)
(281)

(44,140)
(210,146)
(6,711)
—

(301,790)
2,595

(290,134)
1,243

(260,997)
(2,093)

290,693
256,876

(5,262)
262,138

(17,824)
279,962

$ 547,569

$ 256,876

$ 262,138

$ 123,305
27,853

$ 115,051
28,053

$ 88,348
27,899

See accompanying notes to consolidated financial statements.

96

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 2020 Annual Report

97

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.

• 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 credit
loss impairment discussed below, in the
accompanying consolidated statements of
comprehensive income.

For an AFS security with an amortized cost that
exceeds its fair value, we first determine if we
intend to sell or will more-likely-than-not be
required to sell the security before the expected
recovery of its amortized cost. If we intend to
sell or will more-likely-than-not be required to
sell the security, then we recognize the
impairment as a credit loss in our consolidated
statements of income by writing down the

98

security’s amortized cost to its fair value. If we do
not intend to sell or it is not more-likely-than-not
that we will be required to sell the security before
the expected recovery of its amortized cost, we
recognize the portion of the impairment that is
due to a credit loss, if any, in our consolidated
statement of income through an allowance. The
portion of the impairment that is due to factors
other than a credit loss is recognized in other
comprehensive income in the consolidated
statement of comprehensive income as an
unrealized loss. Credit losses recognized in the
allowance for credit losses are reversed in
situations where the estimate of credit losses on
those securities has declined. When determining
whether an impairment is due to a credit loss or
other factors, we determine the extent to which
we do not expect to recover the security’s
amortized cost and record such amount, if any, as
a credit loss. Factors we consider in determining
whether the security’s decline in fair value is
below amortized cost due to a credit loss include
the magnitude of the security’s decline in fair
value below its amortized cost, the financial
condition, long and near-term prospects for the
issuer, industry conditions and trends, rating
agency actions, the payment structure of the
security, likelihood of the recoverability of
principal and interest, and our ability and intent
to hold the security for a period of time sufficient
to allow for the anticipated recovery of its
amortized cost. In assessing our ability and intent
to hold the security for a period of time to allow
for the anticipated recovery of its amortized cost,
we also consider our anticipated sources of cash
to fund operating activities and share
repurchases. If we do not anticipate recovering a
security’s amortized cost basis, we estimate the
present value of the security’s expected cash
flows and recognize the difference from
amortized cost (using fair value as a floor) as a
credit loss.

Interest income on fixed-maturity securities is
recorded when earned by determining the
effective yield, which gives consideration to
amortization of premiums, accretion of discounts,
and any previous credit losses. 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, 2020 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

FINANCIAL STATEMENTS — NOTE 1

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
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.

We estimate and recognize lifetime expected
credit losses for reinsurance recoverables. In
estimating the allowance for expected credit
losses for reinsurance recoverables, we factor in
the underlying collateral for reinsurance
agreements where available. Specifically, for
reinsurers with underlying trust assets, we
compare the reinsurance recoverables balance
to the underlying trust assets that mitigate the
potential exposure to credit losses. We also
analyze the financial condition of the reinsurers,
as determined by third-party rating agencies, to
determine the probability of default for the
reinsurers. We then utilize a third-party credit
default study to calculate an expected credit loss
given default rate or recovery rate. The
probability of default and loss given default
rates are then applied to the reinsurers’
recoverable balance, while also factoring in any
third-party letters of credit that support the
reinsurance agreement, in order to calculate our
current expected credit loss allowance.

Primerica 2020 Annual Report

99

FINANCIAL STATEMENTS — NOTE 1

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
revenue. 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.

The components of intangible assets were as
follows:

December 31,

2020

2019

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

Gross carrying
amount

Accumulated
amortization

Net carrying
amount

(In thousands)

Indefinite-lived intangible

asset

$45,275

n/a

$45,275

$45,275

n/a

$45,275

Amortizing intangible

asset

—

Total intangible assets

$45,275

—

$—

—

—

$45,275

$45,275

—

$—

—

$45,275

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, 2020 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
and $3.4 million in 2018.

100

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:

FINANCIAL STATEMENTS — NOTE 1

Data processing equipment and software

Leasehold improvements

Furniture and other equipment

Depreciation expense is included in other
operating expenses in the accompanying
consolidated statements of income. Depreciation
expense was $18.0 million, $15.7 million, and
$9.0 million for the years ended December 31,
2020, 2019, and 2018, respectively.

Property and equipment balances were as
follows:

Data processing

equipment and
software

December 31,

2020

2019

(In thousands)

$ 104,364 $ 86,794

Leasehold improvements

18,764

19,079

Other, principally
furniture and
equipment

Accumulated

depreciation

Net property and
equipment

35,099

31,391

158,227

137,264

(100,500)

(91,148)

$ 57,727 $ 46,116

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

Estimated Useful Life

3 to 7 years

Lesser of 15 years or remaining life of lease

5 to 15 years

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.

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,

Primerica 2020 Annual Report

101

FINANCIAL STATEMENTS — NOTE 1

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, 2020 and
2019 ranged from 3.0% 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
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

102

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.

FINANCIAL STATEMENTS — NOTE 1

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 June 2016, the

New Accounting Principles.
FASB issued Accounting Standards Update No.
2016-13, Financial Instruments – Credit Losses
(Topic 326) – Measurement of Credit Losses on
Financial Instruments (“ASC 326”). ASC 326
introduced new guidance for accounting for
credit losses on financial instruments within its
scope, including reinsurance recoverables, by
replacing the previous approach that delayed
recognition until it was probable a loss had been
incurred with a current approach that estimates
an allowance for anticipated credit losses on the
basis of an entity’s own expectations. The
objective of the current 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
expected loss estimate under ASC 326. The
incurred probable loss approach for measuring
losses on AFS securities in the consolidated
statements of income remains under ASC 326,
however, an entity is 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

Primerica 2020 Annual Report

103

FINANCIAL STATEMENTS — NOTE 1

the balance sheet date. We adopted the
amendments in ASC 326 as of the January 1,
2020 application date through a cumulative-
effect adjustment to beginning retained
earnings of $1.2 million, net of taxes.
Furthermore, the adoption of ASC 326 did not
result in any material changes to impairment
losses recognized in our consolidated
statements of income for AFS securities. Refer to
Note 4 (Investments) and Note 6 (Reinsurance)
for more information on credit losses.

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, disability,
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 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. On
November 5, 2020, the FASB issued ASU
2020-11, Financial Services – Insurance (Topic
944): Effective Date and Early Application, which
deferred the effective date of ASU 2018-12 by
an additional year, moving the effective date
from January 1, 2022 to January 1, 2023. The
adoption of ASU 2018-12 will have an 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, modify 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 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. The impact of ASU
2019-12 will not 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.

104

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,

2020

2019

2018

(In thousands)

Foreign currency translation adjustments:

Change in unrealized foreign currency translation gains

(losses) before income taxes

$ 7,343

$15,299

$(25,059)

Income tax expense (benefit) on unrealized foreign

currency translation gains (losses)

—

—

—

Change in unrealized foreign currency translation gains

(losses), net of income taxes

$ 7,343

$15,299

$(25,059)

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

period before income taxes

$78,533

$91,160

$(59,661)

Income tax expense (benefit) on unrealized holding gains

(losses) arising during period

17,033

19,427

(12,681)

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

61,500

71,733

(46,980)

2,614

549

253

53

(45)

(9)

2,065

200

(36)

$63,565

$71,933

$(47,016)

(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

Primerica 2020 Annual Report

105

FINANCIAL STATEMENTS — NOTE 3

non-bank custodial services that we provide for
certain mutual funds products we distribute. In
Canada, we offer a Primerica-branded
fund-of-funds mutual fund product, as well as
mutual funds of well-known mutual fund
companies. These two operating segments are
managed separately because their products
serve different needs — term life insurance
income protection versus wealth-building
savings products.

We also have a Corporate and Other Distributed
Products segment, which consists primarily of
revenues and expenses related to several
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,

2020

2019

2018

(In thousands)

$1,382,770 $1,227,231 $1,123,200

718,867

115,904

691,608

133,665

655,076

121,567

Total revenues

$2,217,541 $2,052,504 $1,899,843

Net investment income:

Term life insurance segment

$

27,030 $

19,922 $

13,747

Investment and savings products segment

—

—

—

Corporate and other distributed products segment

56,784

74,151

67,683

Total net investment income

$

83,814 $

94,073 $

81,430

Amortization of DAC:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

$ 216,208 $ 248,711 $ 228,613

7,055

1,058

4,549

1,292

9,766

1,351

Total amortization of DAC

$ 224,321 $ 254,552 $ 239,730

106

Non-cash share-based compensation expense:

Term life insurance segment

Investment and savings products segment

Corporate and other distributed products segment

FINANCIAL STATEMENTS — NOTE 3

Year ended December 31,

2020

2019

2018

(In thousands)

$

3,612 $

3,605 $

3,045

12,370

3,440

10,475

4,135

2,695

10,421

Total non-cash share-based compensation expense

$

19,027 $

17,520 $

17,251

Income (loss) before income taxes:

Term life insurance segment

$ 372,551 $ 320,093 $ 281,904

Investment and savings products segment

202,644

191,812

173,912

Corporate and other distributed products segment

(68,465)

(34,794)

(39,732)

Total income before income taxes

$ 506,730 $ 477,111 $ 416,084

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 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
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,
2020

December 31,
2019

December 31,
2018

(In thousands)

$ 6,985,086 $ 6,546,129 $ 6,322,555

Investment and savings products segment (1)

2,769,445

2,598,493

2,298,238

Corporate and other distributed products segment

5,150,754

4,543,909

3,974,255

Total assets

$14,905,285 $13,688,531 $12,595,048

(1)

The Investment and Savings Products segment includes assets held in separate accounts. Excluding separate accounts, the
Investment and Savings Products segment assets were $110.0 million, $112.8 million, and $102.8 million as of December 31,
2020, 2019, and 2018, 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

Primerica 2020 Annual Report

107

FINANCIAL STATEMENTS — NOTE 3

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.

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,

2020

2019

2018

(In thousands)

$1,895,708 $1,747,609 $1,607,140

321,833

304,895

292,703

$2,217,541 $2,052,504 $1,899,843

$ 411,751 $ 390,431 $ 337,914

94,979

86,680

78,170

Total income before income taxes

$ 506,730 $ 477,111 $ 416,084

Long-lived assets by country:

United States

Canada

December 31,
2020

December 31,
2019

December 31,
2018

(In thousands)

$53,281

$41,200

$30,999

4,446

4,916

4,997

Total long-lived assets

$57,727

$46,116

$35,996

108

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, 2020

Gross
unrealized
gains

Gross
unrealized
losses

(In thousands)

Fair value

$

9,747 $

400

$

(3) $

10,144

169,967

161,058

13,324

9,632

(39)

(1)

183,252

170,689

1,506,549

124,164

(2,545)

1,628,168

261,376

107,020

85,521

11,419

5,901

1,816

(54)

(56)

(585)

272,741

112,865

86,752

Total fixed-maturity securities

$2,301,238 $166,656

$(3,283) $2,464,611

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

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.

Primerica 2020 Annual Report

109

FINANCIAL STATEMENTS — NOTE 4

The scheduled maturity distribution of the AFS fixed-maturity securities portfolio as of December 31,
2020 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)

$ 178,278

$ 180,954

831,986

546,330

290,727

894,191

598,767

318,341

1,847,321

1,992,253

453,917

472,358

$2,301,238

$2,464,611

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.

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

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

110

December 31, 2020

December 31, 2019

Cost

Fair
value

Cost

Fair
value

(In thousands)
$16,359 $16,300 $43,257 $43,233

enhancement feature in exchange for a fee,
which is reflected in interest expense on our
consolidated statements of income.

The LLC is a VIE as its owner does not have an
equity investment at risk that is sufficient to
permit the LLC to finance its activities without
Vidalia Re or Hannover Re. The Parent Company,
Primerica Life, and Vidalia Re share the power to
direct the activities of the LLC with Hannover Re,
but do not have the obligation to absorb losses
or the right to receive any residual returns
related to the LLC’s primary risks or sources of
variability. Through the credit enhancement
feature, Hannover Re is the ultimate risk taker in
this transaction and bears the obligation to
absorb the LLC’s losses in the event of a Surplus
Note default in exchange for the fee.
Accordingly, the Company is not the primary
beneficiary of the LLC and does not consolidate
the LLC within its consolidated financial
statements.

The LLC Note is classified as a held-to-maturity
debt security in the Company’s invested asset
portfolio as we have the positive intent and
ability to hold the security until maturity. As of
December 31, 2020, the LLC Note had an
estimated unrealized holding gain of
$259.9 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.

As of December 31, 2020, no credit losses have
been recognized on the LLC Note
held-to-maturity security.

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 $7.7 million and $7.5 million as of
December 31, 2020 and 2019, respectively.

FINANCIAL STATEMENTS — NOTE 4

Securities Lending Transactions. We
participate in securities lending transactions with
broker-dealers and other financial institutions to
increase investment income with minimal risk.
We require minimum collateral on securities
loaned equal to 102% of the fair value of the
loaned securities. We accept collateral in the
form of securities, which we are not able to sell
or encumber, and to the extent the collateral
declines in value below 100%, we require
additional collateral from the borrower. Any
securities collateral received is not reflected on
our consolidated balance sheets. We also accept
collateral in the form of cash, all of which we
reinvest. For loans involving unrestricted cash
collateral, the collateral is reported as an asset
with a corresponding liability representing our
obligation to return the collateral. We continue
to carry the loaned securities as invested assets
on our consolidated balance sheets during the
terms of the loans, and we do not report them
as sales. Cash collateral received and reinvested
was $72.2 million and $28.7 million as of
December 31, 2020 and 2019, respectively.

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

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)

Gross investment income

Investment expenses

Investment income net of investment expenses

Interest expense on surplus note

Net investment income

Year ended December 31,

2020

2019

2018

(In thousands)
$ 82,805 $ 81,828 $ 79,356

57,473

48,325

37,485

1,751

1,244

1,202

1,845

1,069

4,758

1,955

1,159

3,433

4,253

13,429

3,643

148,728

151,254

127,031

(7,441)

(8,856)

(8,116)

141,287

142,398

118,915

(57,473)

(48,325)

(37,485)

$ 83,814 $ 94,073 $ 81,430

(1)

Includes $2.0 million, $5.4 million, and $(1.7) million of net gains (losses) recognized for the change in fair value of the
deposit asset underlying the 10% coinsurance agreement for the year ended December 31, 2020, 2019, and 2018,
respectively.

Primerica 2020 Annual Report

111

FINANCIAL STATEMENTS — NOTE 4

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

Credit losses impairment 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)

Year ended December 31,

2020

2019

2018

(In thousands)

$ 2,595 $ 1,373 $ 1,162

(955)

(293)

(4,254)

(1,333)

(965)

(152)

(2,435)

5,207

(2,456)

57

(4)

—

11

290

—

$(4,996) $ 4,965 $(2,121)

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

Proceeds from sales or other redemptions

Year ended December 31,

2020

2019

2018

(In thousands)
$496,907 $454,421 $414,139

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,

2020

2019

2018

(In thousands)
$(2,435) $5,207 $(2,456)

(281)

(254)

(48)

$(2,154) $5,461 $(2,408)

Accrued Interest. Accrued interest is recorded in accordance with the original interest schedule of
the underlying security. In the event of default, the Company’s policy is to no longer accrue interest on
these securities and to write off any remaining accrued interest. As a result, the Company has made the
policy election to not record an allowance for credit losses on accrued interest.

112

FINANCIAL STATEMENTS — NOTE 4

Credit Losses for Available-for-sale Fixed-maturity Securities. The following tables summarizes all
AFS securities in an unrealized loss position for which an allowance for credit losses has not been
recorded as of December 31, 2020, aggregated by major security type and by length of time such
securities have continuously been in an unrealized loss position:

Fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

December 31, 2020

Less than 12 months

12 months or longer

Fair value

Unrealized
losses

Fair value

Unrealized
losses

(Dollars in thousands)

$ 1,619

$

(3)

$ —

$ —

4,034

449

68,057

1,672

10,200

11,988

(39)

(1)

—

—

—

—

(1,628)

11,964

(917)

(35)

(50)

(536)

862

2,168

3,150

(19)

(6)

(49)

Total fixed-maturity securities

$98,019

$(2,292)

$18,144

$(991)

The amortized cost of AFS securities with a cost
basis in excess of their fair values were
$119.4 million as of December 31, 2020.

As of December 31, 2020, we did not recognize
credit losses in the consolidated statements of
income on available-for-sale securities with
unrealized losses that were due to interest rate
sensitivity and changes in credit spreads. We
believe that fluctuations caused by movement in
interest rates and credit spreads generally have
little bearing on the recoverability of our
investments. For those investments that remain
in an unrealized loss position 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.

For the year ended December 31, 2020, we
recorded approximately $4.3 million for credit
losses in the consolidated statements of income
on available-for-sale securities, and

approximately $3.8 million of the credit losses
were recorded as an adjustment to the
amortized cost basis due to our intent to sell
securities of specific issuers that operate in
distressed industry sectors. We recognize credit
losses on securities 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; and analyses of
rating agency information for issuances with
severe ratings downgrades that indicated a
significant increase in the possibility of default.
The remaining portion of credit losses was
recognized in the allowance for credit losses.

Primerica 2020 Annual Report

113

FINANCIAL STATEMENTS — NOTE 4

The rollforward of the allowance for credit losses on available-for-sale securities for the year ended
December 31, 2020 was as follows:

Allowance for credit losses, beginning of period
Additions to the allowance for credit losses on securities for which credit

losses were not previously recorded

Additional increases (or decreases) to the allowance for credit losses on

securities that had an allowance recorded in a previous period

Year ended December 31, 2020

(In thousands)
$ —

525

(51)
(474)

$ —

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.

Write-offs charged against the allowance, if any

Allowance for credit losses, end of period

For the years ended December 31,

Other-than-temporary impairment
(“OTTI”).
2019 and 2018, which preceded the adoption of
ASC 326, we conducted a review each quarter to
identify and evaluate impaired investments that
had indications of possible OTTI. An investment
in a debt security was impaired if its fair value
fell below its cost. Factors considered in
determining whether an impairment was
temporary included the length of time and
extent to which fair value was 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
have been maturity.

Our review for OTTI generally entailed:

• Analysis of individual investments that had

fair values less than a pre-defined
percentage of amortized cost, including
consideration of the length of time the
investment had been in an unrealized loss
position;

• Analysis of corporate fixed-maturity

securities by reviewing the issuer’s most

114

The following table summarizes all AFS securities as of December 31, 2019 (prior to adoption of ASC
326), 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:

FINANCIAL STATEMENTS — NOTE 4

Fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

December 31, 2019

Less than 12 months

12 months or longer

Fair value

Unrealized
losses

Fair value

Unrealized
losses

(Dollars in thousands)

$ — $ — $ —

$ —

11,824

39,379

52,474

40,690

11,526

22,501

(144)

(690)

(453)

(207)

8,578

4,000

21,739

2,071

(28)

12,835

(190)

4,613

(91)

(5)

(665)

(15)

(71)

(53)

Total fixed-maturity securities

$178,394

$(1,712)

$53,836

$(900)

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

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 believed

that fluctuations caused by movement in interest
rates and credit spreads have little bearing on
the recoverability of our investments. We did not
consider these investments to be other-than-
temporarily impaired because we had the ability
to hold these investments until maturity or a
market price recovery, and we had no present
intention to dispose of them.

OTTI recognized in earnings on AFS securities were as follows:

OTTI on fixed-maturity securities not in default

OTTI on fixed-maturity securities in default

Total OTTI recognized in earnings

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

Year ended December 31,

2019

2018

(In thousands)

$1,330

3

$152

—

$1,333

$152

indicated a significant increase in the possibility
of default. We also recognized OTTI related to
invested assets held at the Parent Company that
we intended to sell to fund share repurchases
where we did not expect to recover its cost
basis.

Primerica 2020 Annual Report

115

FINANCIAL STATEMENTS — NOTE 5

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

(In thousands)

$

3

$152

—

—

3

152

1,330

—

$1,333

$152

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

Year ended December 31, 2019

(In thousands)

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

$2,511

1,126

207

(543)

—

$3,301

As of December 31, 2019, no OTTI had 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, 2020 and

116

2019. 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
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 cash and cash
equivalents, 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

FINANCIAL STATEMENTS — NOTE 5

•

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
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 2020 Annual Report

117

FINANCIAL STATEMENTS — NOTE 5

The estimated fair value and hierarchy classifications for assets and liabilities that are measured at fair
value on a recurring basis were as follows:

Fair value assets:

Available-for-sale fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Mortgage-and asset-backed securities:

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

December 31, 2020

Level 1

Level 2

Level 3

Total

(In thousands)

$ — $

10,144 $ — $

10,144

—

—

183,252

170,689

6,074

1,622,094

—

—

—

272,714

112,865

86,752

—

—

—

27

—

—

183,252

170,689

1,628,168

272,741

112,865

86,752

Total available-for-sale securities

6,074

2,458,510

27

2,464,611

Equity securities

Trading securities

Separate accounts

34,910

1,093

2,020

—

—

16,300

2,659,520

—

—

38,023

16,300

2,659,520

Total fair value assets

$40,984 $5,135,423 $2,047 $5,178,454

Fair value liabilities:
Separate accounts

$ — $2,659,520 $ — $2,659,520

Total fair value liabilities

$ — $2,659,520 $ — $2,659,520

118

Fair value assets:

Available-for-sale fixed-maturity securities:

U.S. government and agencies

Foreign government

States and political subdivisions

Corporates

Mortgage-and asset-backed securities:

Residential mortgage-backed securities

Commercial mortgage-backed securities

Other asset-backed securities

Total available-for-sale securities

Equity securities

Trading securities

Separate accounts

FINANCIAL STATEMENTS — NOTE 5

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

26

132,005 —

118,244

424

450

135

5,865

2,350,681

39,499

1,050

—

—

—

—

—

312,523

132,005

118,668

2,356,996

40,684

43,233

43,233 —

2,485,745 —

2,485,745

Total fair value assets

$45,364 $4,880,709

$585

$4,926,658

Fair value liabilities:
Separate accounts

$ — $2,485,745

$ — $2,485,745

Total fair value liabilities

$ — $2,485,745

$ — $2,485,745

In estimating fair value of our investments, we use
a third-party pricing service for approximately
94% 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 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-

Primerica 2020 Annual Report

119

FINANCIAL STATEMENTS — NOTE 5

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

Purchases

Settlements

Transfers into Level 3

Transfers out of Level 3

Level 3 assets, end of period

Year ended
December 31,

2020

2019

(In thousands)
$ 585 $ 921

3

39

(18)

(52)

2,975 —

(1,555)

(197)

—

—

424

(493)

$ 2,047 $ 585

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
were no material transfers between Level 1 and

120

Level 3 during the years ended December 31,
2020 and 2019.

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

FINANCIAL STATEMENTS — NOTE 5

December 31, 2020

December 31, 2019

Carrying
value

Estimated
fair value

Carrying
value

Estimated
fair value

(In thousands)

Assets:

Fixed-maturity securities (available-for-sale)

$2,464,611 $2,464,611 $2,356,996 $2,356,996

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

1,346,350

1,606,208

1,184,370

1,299,102

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

38,023

16,300

30,199

38,023

16,300

30,199

40,684

43,233

32,927

40,684

43,233

32,927

236,865

236,865

233,499

233,499

2,659,520

2,659,520

2,485,745

2,485,745

374,415

399,377

374,037

395,522

1,345,772

1,596,599

1,183,728

1,296,972

2,659,520

2,659,520

2,485,745

2,485,745

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 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

Primerica 2020 Annual Report

121

FINANCIAL STATEMENTS — NOTE 6

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.

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 $24.3 million
as of December 31, 2020 and 2019, respectively.
Benefits and claims ceded to reinsurers for 2020,
2019, and 2018 were $1,653.6 million,
$1,311.3 million, and $1,279.0 million,
respectively.

In connection with our corporate reorganization
that included an initial public offering (“IPO”) of our
common stock by Citigroup, Inc. (“Citigroup”),
Primerica Life, Primerica Life Canada and NBLIC
entered into significant coinsurance transactions
(the “IPO coinsurance agreements”) on March 30,
2010 with three insurance companies then affiliated
with Citigroup (collectively, the “IPO coinsurers”).
Under the IPO coinsurance agreements, we ceded
between 80% and 90% of the risks and rewards of
our term life insurance policies in force at year-end
2009. Because these agreements were part of a
business reorganization among entities under
common control, they did not generate any
deferred gain or loss upon their execution.
Concurrent with signing these agreements, we
transferred the corresponding account balances in
respect of the coinsured policies along with the
assets to support the statutory liabilities assumed by
the IPO coinsurers. Each of the account balances
transferred were at book value with no gain or loss
recorded in net income. 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.

122

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 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 $236.9 million and $233.5 million at
December 31, 2020 and 2019, respectively. We
make contributions to the deposit asset during the
life of the agreement to fulfill our responsibility of
funding the economic reserve. The market return on
the deposit asset is reflected in net investment
income during the life of the agreement. Prime Re is
responsible for ensuring that there are sufficient
assets to meet all statutory requirements. 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, 2020 and
2019:

FINANCIAL STATEMENTS — NOTE 6

Direct life insurance in-force

Amounts ceded to other companies

Net life insurance in-force

December 31, 2020 December 31, 2019

(Dollars in thousands)

$ 861,392,223

$ 810,995,295

(742,356,917)

(702,727,956)

$ 119,035,306

$ 108,267,339

Percentage of reinsured life insurance in-force

86%

87%

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

Pecan Re Inc.(1)(2)

SCOR Global Life Reinsurance Companies(3)

Munich Re of Malta(2)(5)

Swiss Re Life & Health America Inc.(4)

December 31, 2020

December 31, 2019

Reinsurance
recoverables

A.M. Best
rating

Reinsurance
recoverables

A.M. Best
rating

$2,654,698

395,804

285,350

251,409

(In thousands)
NR

$2,696,924

A+

NR

A+

352,049

286,433

233,572

NR

A+

NR

A+

American Health and Life Insurance Company(2)

163,082

B++

167,471

B++

Munich American Reassurance Company

Korean Reinsurance Company

RGA Reinsurance Company

Hannover Life Reassurance Company

TOA Reinsurance Company

All other reinsurers

Allowance for credit losses

137,312

123,568

125,492

41,201

34,212

68,920

(7,144)

A+

A

A+

A+

A

—

118,372

108,410

100,328

33,772

26,160

48,679

(2,347)

A+

A

A+

A+

A

—

Reinsurance recoverables

$4,273,904

$4,169,823

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. Reinsurance agreements are collateralized by underlying trust assets at least equal to the
value of reserves ceded.
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.

(3)

(4)
(5) Entity is rated AA- by S&P.

Primerica 2020 Annual Report

123

FINANCIAL STATEMENTS — NOTE 7

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
coinsurers 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.

The rollforward of the allowance for credit losses
on reinsurance recoverables for the year ended
December 31, 2020 was as follows:

Balance, beginning of period(1)

Current period provision for expected credit losses

Less: Recoveries of expected credit losses previously recorded

Balance, at the end of period

Year ended December 31, 2020

(In thousands)
$3,917

3,235

(8)

$7,144

(1) The beginning balance for the year ended December 31, 2020 reflects the adjustment made to the

allowance for credit losses balance for the adoption of ASC 326 on January 1, 2020.

Prior to the adoption of ASC 326, credit losses on
reinsurance recoverables were recognized based on
an incurred loss model that recognized credit losses
if probable and reasonably estimable. 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.

(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.

124

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.

DAC balance, beginning of period

Capitalization

Amortization

Foreign exchange translation and other

FINANCIAL STATEMENTS — NOTE 8

The balances and activity in DAC were as follows:

Year ended December 31,

2020

2019

2018

(In thousands)
$2,325,750 $2,133,920 $1,951,892

522,705

433,769

441,874

(224,321)

(254,552)

(239,730)

5,510

12,613

(20,116)

DAC balance, end of period

$2,629,644 $2,325,750 $2,133,920

(8) Separate Accounts

The Funds primarily consist of a series of branded
investment funds known as the Asset Builder Funds,
a registered retirement fund known as the Strategic
Retirement Income Fund (“SRIF”), and a money
market fund known as the Cash Management Fund.
The principal investment objective of the Asset
Builder Funds is to achieve long-term growth while
preserving capital. The principal objective of the
SRIF is to provide a stream of investment income
during retirement plus the opportunity for modest
capital appreciation. The Asset Builder Funds and
the SRIF use diversified portfolios of publicly-traded
Canadian stocks, investment-grade corporate
bonds, Government of Canada bonds, and foreign
equity investments to achieve their objectives. The
Cash Management Fund invests in government
guaranteed short-term bonds and short-term
commercial and bank papers, with the principal
investment objective being the provision of interest
income while maintaining liquidity and preserving
capital.

Under these contract offerings, benefit payments to
contract holders or their designated beneficiaries
are only due upon death of the annuitant or upon
reaching a specific maturity date. Benefit payments
are based on the value of the contract holder’s units
in the portfolio at the payment date, but are
guaranteed to be no less than 75% of the contract
holder’s contribution, adjusted for withdrawals.
Account values are not guaranteed for withdrawn
units if contract holders make withdrawals prior to

the maturity dates. Maturity dates for contracts
investing in the Asset Builder Funds and Cash
Management Fund vary by contract and range from
10 years from the contract issuance date to
December 31, 2070. Contracts investing in the SRIF
mature when the policyholder reaches age 100,
which is a minimum of 20 years after issue. The SRIF
is designed to provide periodic retirement income
payments and as such, regular withdrawals, subject
to legislated minimums, are anticipated. The
cumulative effects of the periodic withdrawals are
expected to substantially reduce both account and
minimum guaranteed values prior to maturity.

Both the asset and the liability for the separate
accounts reflect the net value of the underlying
assets in the portfolio as of the reporting date.
Primerica Life Canada’s exposure to losses under
the guarantee at the time of account maturity is
limited to contract holder accounts that have
declined in value more than 25%, adjusted for
withdrawals, since the contribution date prior to
maturity. Because maturity dates are of a long-
term nature, the likelihood guarantee payments
are required at any given point is very small.
Additionally, the portfolios consist of a very large
number of individual contracts, further
spreading the risk related to the guarantee
being exercised upon death. The length of the
contract terms provides significant opportunity
for the underlying portfolios to recover any
short-term losses prior to maturities or deaths of
the contract holders. Furthermore, the Funds’
investment allocations are aligned with the
maturity risks of the related contracts and

Primerica 2020 Annual Report

125

FINANCIAL STATEMENTS — NOTE 9

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, 2020 and 2019, an additional
liability for these contracts was deemed to be
unnecessary.

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,

2020

2019

(In thousands)
$1,212,275 $ 970,098

1,362,399

1,318,351

87,046

199,723

(2,251)

(2,489 )

51

62

$2,659,520 $2,485,745

(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,

2020

2019

2018

(In thousands)
$ 339,954 $ 313,862 $ 307,401

Less reinsured policy claims and other benefits payable

388,797

318,653

322,137

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

(48,843)

(4,791)

(14,736)

236,157

186,857

176,854

(4,033)

(869)

(1,355)

232,124

185,988

175,499

(268,914)

(244,997)

(187,453)

60,144

14,614

22,426

(208,770)

(230,383)

(165,027)

170

343

(527)

(25,319)

(48,843)

(4,791)

Add reinsured policy claims and other benefits payable

545,030

388,797

318,653

Balance, end of period

$ 519,711 $ 339,954 $ 313,862

(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.

126

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, 2020, 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,
2020, 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, 2020.

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, 2020, the
principal amount outstanding on the Surplus
Note issued by Vidalia Re was $1.3 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,
2030 and bear interest at an annual interest rate

December 31, 2020 December 31, 2019

(In thousands)

$375,000

$375,000

(107)

(174)

$374,893

$374,826

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. 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

Primerica 2020 Annual Report

127

FINANCIAL STATEMENTS — NOTE 11

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,
2020, 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, 2020.

(11) Income Taxes

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

Current

Deferred

Total

(In thousands)

$ 88,837 $

853 $ 89,690

26,749

4,714

(547)

26,202

(40)

4,674

$120,300 $

266 $120,566

$ 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

Year ended December 31, 2020

Federal

Foreign

State and local

Total tax expense

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

128

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, 2020 and 2019 and 2018. The reconciliation for such difference follows:

Year ended December 31,

2020

2019

2018

Amount

Percentage

Amount

Percentage

Amount

Percentage

(Dollars in thousands)

Computed tax expense

$106,413

21.0% $100,193

21.0% $87,378

21.0%

Difference between foreign

statutory rate and U.S. statutory
rate

Recognition of foreign tax credits

Change in valuation allowance on

foreign tax credits

Other

5,075

—

—

9,078

1.0%

—%

—%

1.8%

4,898

—

—

5,629

1.0%

—%

—%

1.2%

4,474

1.1%

(6,069)

(1.5)%

6,069

138

1.5%

—%

Total tax expense / effective rate

$120,566

23.8% $110,720

23.2% $91,990

22.1%

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

December 31,

2020

2019

(In thousands)

Deferred tax assets:

Future policy benefit reserves and unpaid policy claims

$ 285,926 $ 245,247

Future deductible liabilities

Foreign tax credits

Other

Total deferred tax assets before valuation allowance

Valuation allowance on foreign tax credits

18,933

46,455

35,320

17,920

46,455

41,615

386,634

351,237

(46,455)

(46,455)

Total deferred tax assets after valuation allowance

$ 340,179 $ 304,782

Deferred tax liabilities:

Deferred policy acquisition costs

Investments

Reinsurance deposit asset

Other

Total deferred tax liabilities

Net deferred tax liabilities

(352,312)

(314,969)

(32,316)

(17,630)

(49,742)

(49,035)

(39,002)

(42,675)

(473,372)

(424,309)

$(133,193) $(119,527)

Primerica 2020 Annual Report

129

Therefore, there were no other deferred tax
asset valuation allowances as of December 31,
2020 or 2019.

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
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
$16.0 million and $14.7 million as of
December 31, 2020 and 2019, 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 $2.8 million and $2.3 million
as of December 31, 2020 and 2019, 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, 2020, 2019 and 2018.

FINANCIAL STATEMENTS — NOTE 11

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.

The Company has state net operating losses
resulting in a deferred tax asset of approximately
$10.3 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, 2020,
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 Cuts and Jobs Act of 2017 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.

130

A reconciliation of the change in the unrecognized income tax benefit for the years ended
December 31, 2020 and 2019 is as follows:

FINANCIAL STATEMENTS — NOTE 12

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,

2020

2019

(In thousands)
$15,805 $15,173

40

(583)

3,296

3,036

(2,037)

(1,821)

$17,104 $15,805

We have an immaterial amount of 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.

December 31, 2017 and thereafter for federal
income tax purposes. We are currently open to
audit in Canada for tax years ended
December 31, 2016 and thereafter for federal
and provincial income tax purposes.

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

(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, 2020, we had a total of 289,371 RSUs
and 81,796 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 10, 2020 our Board of Directors
authorized a share repurchase program for up to

Year ended December 31,

2020

2019

2018

(In thousands)
41,207 42,694 44,251

—

335

4

438

33

528

(2,236)

(1,929)

(2,118)

39,306 41,207 42,694

$300.0 million of our outstanding common stock for
purchases through June 30, 2021 (the “share
repurchase program”). Under the share repurchase
program, we repurchased 2,184,259 shares of our
common stock in the open market for an aggregate
purchase price of $231.4 million through
December 31, 2020. Of this $68.6 million remains
available for repurchases of our outstanding
common stock under the share repurchase program
as of December 31, 2020. On February 9, 2021, our
Board of Directors authorized a new share
repurchase program for up to $300.0 million of our
outstanding common stock (including $68.6 million
from the prior repurchase program) for purchases
through June 30, 2022.

Primerica 2020 Annual Report

131

FINANCIAL STATEMENTS — NOTE 13

(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
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.

132

The calculation of basic and diluted EPS was as follows:

FINANCIAL STATEMENTS — NOTE 14

Year ended December 31,
2019

2018

2020

Basic EPS:

Numerator:

Net income

(In thousands, except
per-share amounts)

$386,164 $366,391 $324,094

Income attributable to unvested participating securities

(1,671)

(1,654)

(1,893)

Net income used in calculating basic EPS

$384,493 $364,737 $322,201

Denominator:

Weighted-average vested shares

Basic EPS

Diluted EPS:
Numerator:

Net income

40,065

42,181

43,854

$

9.60 $

8.65 $

7.35

$386,164 $366,391 $324,094

Income attributable to unvested participating securities

(1,667)

(1,650)

(1,888)

Net income used in calculating diluted EPS

$384,497 $364,741 $322,206

Denominator:

Weighted-average vested shares

40,065

42,181

43,854

Dilutive effect of incremental shares to be issued for
contingently-issuable shares

120

133

131

Weighted-average shares used in calculating diluted EPS

40,185

42,314

43,985

Diluted EPS

$

9.57 $

8.62 $

7.33

(14) Share-Based Transactions

The Company has outstanding equity awards under
the Primerica, Inc. Second Amended and Restated
2010 Omnibus Incentive Plan (“2010 OIP”), which
expired in 2020 in accordance with its terms and
under which no future awards will be made, and the
Primerica, Inc. 2020 Omnibus Incentive Plan (the
“2020 OIP”, and together with the 2010 OIP, the
“OIP”), which was approved by the Company’s
stockholders on May 13, 2020. 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 may also be subject to specified
performance criteria. Under the OIP, the Company
issues equity awards to our management (officers
and other key employees), non-employees who
served on our Board of Directors, and sales force
leaders. As of December 31, 2020, we had
1.9 million shares available for future grants under
the 2020 OIP.

Employee and Director Share-Based
Compensation. As of December 31, 2020, 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.

Primerica 2020 Annual Report

133

FINANCIAL STATEMENTS — NOTE 14

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.

•

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,

2020

2019

2018

(In thousands)
$11,218 $10,557 $10,684

1,455

1,434

1,495

The following table summarizes employee and director RSU activity during the years ended
December 31, 2020, 2019, and 2018.

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

Granted

Forfeited

Vested

Unvested employee and director RSUs, December 31, 2020

(1) Less than 1,000 shares

134

Weighted-average
measurement-date fair
value per share

Shares

(Shares in thousands)

312

106

—(1)

(186)

232

93

—(1)

(145)

180

94

—(1)

(108)

166

$ 59.10

100.00

82.20

58.51

78.22

123.04

104.38

70.53

107.59

119.03

121.42

101.75

117.87

As of December 31, 2020, 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 $4.3 million,
and the weighted-average period over which
cost will be recognized was 0.8 years.

PSUs.

The Company issued 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”) and EPS growth
(starting with the 2020 award) for the Company
over a three-year performance period, as well as a
threshold ROAE and EPS growth below which no
shares would be earned and an ROAE and EPS
growth metric at which the maximum number of

FINANCIAL STATEMENTS — NOTE 14

shares can be earned. Awards are earned two
months after the performance period ends.
Depending on the ROAE and EPS growth, if
applicable, 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 performance metrics
for the entire 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,

2020

2019

2018

(In thousands)
$4,179 $3,516 $3,240

—

—

191

Primerica 2020 Annual Report

135

FINANCIAL STATEMENTS — NOTE 14

The following table summarizes PSU activity during the years ended December 31, 2020, 2019, and
2018.

Unvested employee PSUs, December 31, 2017

Granted

Forfeited

Vested

Unvested employee PSUs, December 31, 2018

Granted

Forfeited

Performance Adjustment

Vested

Unvested employee PSUs, December 31, 2019

Granted

Forfeited

Performance Adjustment

Vested

Unvested employee PSUs, December 31, 2020(1)

Weighted-average
measurement-date fair
value per share

Shares

(Shares in thousands)

54

31

—

—

85

25

—

4

(23)

92

26

—

5

(41)

82

$ 67.42

100.55

—

—

79.34

122.62

—

41.88

41.88

98.79

121.42

—

80.45

80.45

113.99

(1) The 2018 PSU awards outstanding are based on target. Based on the actual performance achieved during the three-year

performance period ended December 31, 2020, recipients will receive an aggregate of 33,605 shares of common stock on
the vesting date of March 1, 2021. The 2019 PSU awards outstanding are based on target. Depending upon the performance
achieved during the performance period, recipients may receive between 0 and 38,225 shares of common stock. The 2020
PSU awards outstanding are based on target. Depending upon the performance achieved during the performance period,
recipients may receive between 0 and 38,601 shares of common stock.

As of December 31, 2020 total unrecognized
compensation related PSU awards was
$0.7 million, and the weighted-average period
over which cost was 0.8 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 2020, 2019 or 2018.

136

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

FINANCIAL STATEMENTS — NOTE 14

Expense recognized for stock option awards

Tax benefit recognized for stock option awards

Year ended December 31,

2020

2019

2018

(In thousands)

$— $ 6

$39

—

—

8

The following table summarizes activity related to stock options outstanding and exercisable during the
years ended December 31, 2020, 2019, and 2018:

Outstanding

Exercisable

Number
of
shares

Weighted
average
exercise
price

Number
of
shares

Weighted
average
exercise
price

(Shares in thousands)
$45.15

32

$47.26

Outstanding at December 31, 2017

Granted

Exercised

Outstanding at December 31, 2018

Granted

Exercised

Outstanding at December 31, 2019

Granted

Exercised

107

—

(33)

74

—

(4)

70

—

—

—

47.59

44.07

—

41.20

44.23

—

—

Outstanding at December 31, 2020

70

44.23

Range of granted option exercise prices outstanding at December 31, 2020

$41.20 (average term remaining — 3.1 years)

$53.50 (average term remaining — 4.2 years)

$41.88 (average term remaining — 5.2 years)

3

14

52

$41.20

53.50

41.88

44

45.55

70

44.23

70

3

14

52

44.23

$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.

The aggregate intrinsic value of exercisable stock options was $6.3 million as of December 31, 2020, which
represents the aggregate intrinsic value of stock options outstanding. The intrinsic value, tax benefit realized
and value of shares withheld related to option exercise activity are summarized as follows:

Intrinsic value of options exercised

Tax benefit realized from the options exercised

Value of issued shares withheld to satisfy option exercise price

Year ended December 31,

2020

2019

2018

(In thousands)
$— $369 $1,953

—

—

—

—

161

1,562

Primerica 2020 Annual Report

137

FINANCIAL STATEMENTS — NOTE 14

As of December 31, 2020, 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, 2020, 2019, and 2018.

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

Granted

Vested

Unvested non-employee RSUs, December 31, 2020

Weighted-average
measurement-date fair
value per share

Shares

(Shares in thousands)

32

124

(122)

34

105

(115)

24

128

(126)

26

$ 91.88

102.43

101.01

97.71

124.51

115.01

132.68

106.65

105.71

134.75

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.

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:

Quarterly incentive awards expense recognized currently

Quarterly incentive awards expense deferred

Tax benefit associated with incentive awards

Year ended December 31,

2020

2019

2018

(Dollars in thousands, except
per-share amounts)
$ 3,630 $3,441 $3,288

10,071

2,692

9,663

2,465

9,484

2,437

As of December 31, 2020, all agent equity awards were fully vested with the exception of approximately
26 thousand shares that will vest on January 1, 2021.

138

(15) Statutory Accounting and
Dividend Restrictions

U.S. Insurance Subsidiaries. Our two
underwriting U.S. insurance subsidiaries are
Primerica Life and NBLIC. Primerica Life wholly
owns Peach Re and Vidalia Re, and ceded to
each in separate coinsurance arrangements
certain level-premium term life insurance
policies.

Our U.S. insurance subsidiaries are required to
report their results of operations and financial
position to state authorities on the basis of
statutory accounting practices prescribed or
permitted by such authorities and the National
Association of Insurance Commissioners
(“NAIC”), which is a comprehensive basis of
accounting other than U.S. GAAP. Prescribed
statutory accounting practices include a variety
of publications of the NAIC, as well as state laws,
regulations and general administrative rules.
Permitted statutory accounting practices
encompass all accounting practices not so
prescribed. The Company’s principal life
insurance company, Primerica Life, prepares its
statutory financial statements on the basis of
accounting practices prescribed or permitted by
the NAIC and the 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

FINANCIAL STATEMENTS — NOTE 15

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.

Primerica Life’s statutory capital and surplus as
of December 31, 2020 and 2019 were as follows:

December 31,
2020

December 31,
2019

(In thousands)

Statutory capital and

surplus

$650,114

$666,055

Primerica Life’s statutory net gain from
operations was $395.4 million, $508.6 million,
and $547.9 million for 2020, 2019 and 2018,
respectively. Primerica Life made no pro rata
distributions of any class of its own securities
during 2020. During 2020, Primerica Life paid
ordinary dividends of $170.0 million to the
Parent Company. As of January 1, 2021, the
amount of dividends Primerica Life could pay
from statutory unassigned surplus without prior
approval of the commissioner of the Tennessee
DOCI was $152.4 million, which is prescribed by
the amount of statutory unassigned surplus on
that date.

Primerica 2020 Annual Report

139

FINANCIAL STATEMENTS — NOTE 16

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, 2020 was
$206.1 million on Peach Re’s statutory capital and
surplus. As of December 31, 2020, 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.

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, 2020 and 2019, Primerica Life
Canada’s statutory capital and surplus satisfied

140

regulatory requirements and was $506.1 million
and $454.6 million, respectively.

In Canada, dividends can typically 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. However, in response to the
COVID-19 pandemic, OSFI set the expectation
that payment of dividends above amounts paid
prior to March 2020 would be halted, unless
otherwise approved by OSFI. Primerica Life
Canada’s dividend capacity at January 1, 2021
was estimated to be $113.6 million, which was
calculated based on satisfying the Company’s
internal capital targets. However, Primerica Life
Canada would currently be limited to annualized
dividends of $23.6 million as a result of the
dividend halt unless otherwise permitted by
OSFI.

(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.

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, 2020, the amount
outstanding under the LOC was $206.1 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, 2020, 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.

(17) Benefit Plans

We sponsor a defined contribution plan for the
benefit of our employees. The expense
associated with this plan was approximately
$10.0 million, $8.9 million, and $8.4 million in
2020, 2019, and 2018, respectively.

FINANCIAL STATEMENTS — NOTE 17

(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
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 program.

• 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 2020 Annual Report

141

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,

2020

2019

2018

(In thousands)

$

46,079 $

40,848 $

42,374

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

46,079
1,336,691

40,848
1,186,383

42,374
1,080,826

Total Term Life Insurance segment revenues

$1,382,770 $1,227,231 $1,123,200

Investment and Savings Products segment revenues:

Commissions and fees:

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

Other, net

$ 284,651 $ 282,887 $ 259,991
245,295
81,802
9,631

260,451
80,555
10,017

282,080
83,041
11,271

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

(segregated funds)

661,043

633,910

596,719

57,824

57,698

58,357

Total Investment and Savings Products segment

revenues

$ 718,867 $ 691,608 $ 655,076

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

$

43,675 $

32,213 $

32,162

3,719

47,394
68,510

4,660

36,873
96,792

4,982

37,144
84,423

Total Corporate and Other Distributed Products segment

revenues

$ 115,904 $ 133,665 $ 121,567

(1) Commissions and fees for the year ended December 31, 2020 and 2019 include $5.5 million and

$5.5 million, respectively, 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
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

142

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 program 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 the managed investments
program, 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 average life of a
subscription or referred policy, which we establish
based on historical information. We recognize

Primerica 2020 Annual Report

143

FINANCIAL STATEMENTS — NOTE 18

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, 2020 December 31, 2019

(In thousands)

$51,701

3,144

$54,845

$50,119

1,582

$51,701

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, 2020 and 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 10 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 3 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, 2020 and
December 31, 2019, finance lease right-of-use
assets of $0.9 million and $0.7 million,
respectively, and finance lease liabilities of
$0.9 million and $0.7 million, respectively, were
recorded within Other assets and Other liabilities
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.

144

The components of lease expense were as follows:

FINANCIAL STATEMENTS — NOTE 19

Operating lease cost
Operating lease cost

Year ended
December 31,

2020

2019

(In thousands)

$7,638 $7,650

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

725

675

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

280

56

277

46

$8,699 $8,648

December 31,
2020

December 31,
2019

(In thousands)

$7,737

$7,656

56

274

46

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,
2020

December 31,
2019

(In thousands)

8 years

4 years

9 years

3 years

4.5%

7.1%

4.6%

6.8%

Primerica 2020 Annual Report

145

FINANCIAL STATEMENTS — NOTE 19

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

Year Ended December 31,

2021

2022

2023

2024

2025

Thereafter

Total minimum rental commitments for operating leases

Less imputed interest

Total lease liabilities

Operating Leases

Finance Leases

(In thousands)

$ 7,937

$ 320

7,938

7,916

7,905

7,839

23,167

62,702

9,896

267

194

161

83

—

1,025

123

$52,806

$ 902

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, 2020 and 2019.

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 2020 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, 2020.

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 2020 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, 2020, 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,
2020, 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, 2020 and
2019, 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, 2020, and the related notes and
financial statement schedules I, II, III, and IV (collectively, the consolidated financial statements), and our
report dated March 1, 2021 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
March 1, 2021

148

ITEM 9B. OTHER INFORMATION.

Not applicable.

ITEM 9B. OTHER INFORMATION

Primerica 2020 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 2021
Annual Meeting of Stockholders (the “Proxy
Statement”), which will be filed with the SEC
within 120 days of December 31, 2020, 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.

150

We have adopted a written Code of Conduct
that applies to all directors, officers and
employees, including a separate code that
applies to only our principal executive officers
and senior financial officers in accordance with
Section 406 of the Sarbanes-Oxley Act of 2002
and the rules of the SEC promulgated
thereunder. Our Code of Conduct is available in
the corporate governance subsection of the
investor relations section of our website,
www.primerica.com, and is available in print
upon written request to the Corporate Secretary,
Primerica, Inc., 1 Primerica Parkway, Duluth, GA
30099. In the event that we make changes in, or
provide waivers from, the provisions of the Code
of Conduct that the SEC requires us to disclose,
we will disclose these events in the corporate
governance section of our website.

Except for the information above and the
information set forth in Part I, Item X.
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;

•

•

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. 2020 Omnibus Incentive Plan was approved by our stockholders in May 2020. 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, 2020.

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 2020 Omnibus Incentive Plan

344,089(1)

$44.23(2)

1,870,633(3)

Primerica, Inc. Stock Purchase Plan for

Agents and Employees

Total

Equity compensation plans not
approved by stockholders

—

344,089

—

$44.23

1,847,874(4)

3,718,507

n/a

n/a

n/a

(1) Consists of 192,371 and 69,922 shares to be issued in connection with unvested restricted stock units and outstanding stock
options, respectively. Also includes 81,796 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, 2020, recipients of the 2018 performance-based stock units will receive 33,605 shares of common stock on
the vesting date, March 1, 2021 versus the targeted 30,579 shares. 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 2,442,102 (represents 2,000,000 shares available
under the 2020 OIP and 442,102 shares outstanding that were granted under the 2010 OIP and made available for issuance
pursuant to the terms of 2020 OIP) 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 2020 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.

Certain Relationships and

Item 13.
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 3:

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, 2020 and 2019

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

December 31, 2020

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

period ended December 31, 2020

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

ended December 31, 2020

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

December 31, 2020

Notes to Consolidated Financial Statements

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, 2020

Schedule II — Condensed Financial Information of Registrant as of December 31, 2020 and

2019, and for each of the years in the three-year period ended December 31,
2020

Schedule III — Supplementary Insurance Information as of December 31, 2020 and 2019, and

for each of the years in the three-year period ended December 31, 2020

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

2020

3. EXHIBIT INDEX –

90

92

93

94

95

96

97

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
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;

Primerica 2020 Annual Report

153

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

• 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

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).

Incorporated by reference to Exhibit 3.2 to
Primerica’s Annual Report on Form 10-K for
the year ended December 31, 2019 filed
February 26, 2020 (Commission File
No. 001-34680) .

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).

3.2

Second Amended and Restated Bylaws of
the Registrant.

4.1

4.2

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

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 2020 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.

Reinsurance Trust Agreement dated
November 23, 2020 among National Benefit
Life Insurance Company, American Health
and Life Insurance Company, and JP Morgan
Chase Bank, N.A.

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).

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

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).

Incorporated by reference to Exhibit 10.19 to
Primerica’s Annual Report on Form 10-K for
the year ended December 31, 2019
(Commission File No. 001-34680).

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.

Incorporated by reference to Exhibit 10.20
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2019
(Commission File No. 001-34680).

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. 2020 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 10.1 to
Primerica’s Registration Statement on Form
S-8 filed (Commission File No. 333-238268)

10.25*

10.26*

10.27*

10.28*

10.29*

10.30*

10.31*

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).

Incorporated by reference to Exhibit 10.26
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2019
(Commission File No. 001-34680). .

Form of Primerica, Inc. Performance Stock
Unit Award Agreement under the Primerica,
Inc. 2010 Omnibus Incentive Plan (2020
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
(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).

Incorporated by reference to Exhibit 10.29
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2019
(Commission File No. 001-34680).

Form of U.S. Employee Restricted Stock Unit
Restated Award Agreement under the
Primerica, Inc. 2010 Omnibus Incentive Plan
(2020 awards).

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

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

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

Primerica 2020 Annual Report

157

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit
Number

10.32*

10.33*

10.34

Description

Reference

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.
2020 Omnibus Incentive Plan (2020 awards).

Incorporated by reference to Exhibit 10.22
to Primerica’s Annual Report on Form 10-K
for the year ended December 31, 2015
(Commission File No. 001-34680).

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.

10.35*

Form of Indemnification Agreement for
Directors and Officers.

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 10.48
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).

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).

10.36*

10.37*

10.38*

10.39*

10.40*

10.41*

10.42*

158

Exhibit
Number

10.43

21.1

23.1

31.1

31.2

32.1

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Description

Reference

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).

Subsidiaries of the Registrant.

Consent of KPMG LLP.

Rule 13a-14(a)/15d-14(a) Certification,
executed by Glenn J. Williams, Chief
Executive Officer.

Rule 13a-14(a)/15d-14(a) Certification,
executed by Alison S. Rand, Executive Vice
President and Chief Financial Officer.

Certifications required by Rule 13a-14(b) or
Rule 15d-14(b) and Section 1350 of
Chapter 63 of Title 18 of the United States
Code (18 U.S.C. 1350), executed by Glenn J.
Williams, Chief Executive Officer, and Alison
S. Rand, Executive Vice President and Chief
Financial Officer.

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

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

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

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

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

101.INS

Inline XBRL Instance Document

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 2020 Annual Report

159

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(c) Financial Statement Schedules.

Schedule I
Consolidated Summary of Investments — Other Than Investments in
Related Parties

PRIMERICA, INC.

Type of Investment

Fixed maturities:

Bonds(1):

December 31, 2020

Cost

Fair value

Amount at which
shown in the
balance sheet

(In thousands)

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(1)

Certificates of deposit

Redeemable preferred stocks

$ 195,732 $ 206,208

$ 206,208

161,058

169,967

170,689

183,252

170,689

183,252

—

—

—

—

—

—

3,131,508

3,520,720

3,260,862

176

5,447

176

6,074

176

6,074

Total fixed maturities

3,663,888

4,087,119

3,827,261

Equity securities:

Common stocks:

States, municipalities and political subdivision

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

1,974

6,469

1,974

9,769

16,686

17,699

5,063

1,839

7,489

1,092

32,031

38,023

—

—

—

—

1,974

9,769

17,699

7,489

1,092

38,023

—

—

30,199

30,199

30,199

—

—

—

—

—

—

Total investments

$3,726,118 $4,155,341

$3,895,483

(1)

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:

$116,441 in 2020 and $206,550 in 2019)

Equity securities, at fair value (historical cost: $1,980 in 2020 and $2,090

in 2019)

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 2020 and 2019;
issued and outstanding 39,306 shares in 2020 and 41,207 shares in
2019)

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,

2020

2019

(In thousands)

$ 119,614 $ 208,526

2,294

2,250

121,908
228,303
3,847
693
2,633
10,251
1,861,411
440

210,776
59,150
1,267
1,383
1,026
12,151
1,756,845
608

$2,229,486 $2,043,206

374,415
—
8,345
8,214
2,627

374,037
—
7,441
8,214
1,023

393,601

390,715

393
—
1,705,786
129,706

412
—
1,593,281
58,798

1,835,885

1,652,491

$2,229,486 $2,043,206

Primerica 2020 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 credit 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,

2020

2019

2018

(In thousands)

$378,063 $398,129 $302,932

3,670

175

4,973

256

2,306

(128)

381,908

403,358

305,110

18,673

13,903

18,669

18,695

9,898

7,478

32,576

28,567

26,173

349,332

374,791

278,937

(3,540)

(2,940)

(5,578)

352,872

377,731

284,515

33,292

(11,340)

39,579

$386,164 $366,391 $324,094

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,

2020

2019

2018

(In thousands)
$386,164 $366,391 $324,094

securities held by subsidiaries

62,618

70,998

(46,382)

Change in unrealized holding gains (losses) on investment

securities

Reclassification adjustment for realized investment (gains) losses

included in net income

Foreign currency translation adjustments:

1,372

1,440

(931)

(175)

(256)

128

Equity in unrealized foreign currency translation gains (losses) of

subsidiaries

7,343

15,299

(25,059)

Total other comprehensive income (loss) before income taxes

71,158

87,481

(72,244)

Income tax expense (benefit) related to items of other

comprehensive income (loss)

250

249

(169)

Other comprehensive income (loss), net of income taxes

70,908

87,232

(72,075)

Total comprehensive income

$457,072 $453,623 $252,019

See the accompanying notes to condensed financial statements.
See the report of independent registered public accounting firm.

Primerica 2020 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
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,

2020

2019

2018

(In thousands)

$ 386,164

$ 366,391

$ 324,094

(42,030)
2,553
(1,607)
(175)
1,777
1,447
(2,580)
(6)
3,030

(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)

Net cash provided by (used in) operating activities

348,573

279,622

274,121

Cash flows from investing activities:

Available-for-sale investments sold, matured or called:

Fixed maturity securities — sold
Fixed-maturity securities — matured or called
Short-term investments — matured or called

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

Fixed-maturity securities(1)
Short-term investments
Equity securities acquired

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Dividends paid
Common stock repurchased
Tax withholdings on share-based compensation

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

26,256
131,894

—
212

6,481
179,950
8,250
76

1,603
104,836

—
150

(36,190)
—
(76)

(157,510)

—
(611)

(144,760)
(8,169)
(265)

122,096

36,636

(46,605)

(64,346)
(231,431)
(5,739)

(57,630)
(225,037)
(7,186)

(44,140)
(210,146)
(6,711)

(301,516)

(289,853)

(260,997)

169,153
59,150

26,405
32,745

(33,481)
66,226

$ 228,303

$ 59,150

$ 32,745

$ 18,118

$ 18,117

$ 18,146

Eliminated in consolidation.

*
(1) Does not include $33.6 million, $127.2 million, and $27.6 million of fixed-maturity securities transferred from subsidiaries in

the form of noncash dividends for the years ended December 31, 2020, 2019 and 2018, respectively.

See the accompanying notes to condensed financial statements.

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.

(B) Basis of Presentation

These condensed financial statements reflect the
results of operations, financial position and cash
flows for the Company. We prepare our financial
statements in accordance with U.S. generally
accepted accounting principles (“U.S. GAAP”).
These principles are established primarily by the
Financial Accounting Standards Board. 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.

(C) Note Payable

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.

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
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

Primerica 2020 Annual Report

165

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

secured by a lien on the capital stock of certain
of our subsidiaries, and merge, consolidate or
sell all or substantially all of our properties and
assets.

We were in compliance with the covenants of
the Senior Notes as of December 31, 2020. No
events of default occurred on the Senior Notes
during the year ended December 31, 2020.

(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. 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, 2020, 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, 2020.

(E) Dividends

For the years ended December 31, 2020, 2019,
and 2018, the Company received dividends from
our non-life insurance subsidiaries of
$185.5 million, $105.6 million, and $80.1 million,

166

respectively. For the years ended December 31,
2020, 2019, and 2018, the Company received
dividends from our life insurance subsidiaries of
$192.5 million, $292.5 million, and
$222.8 million, respectively.

(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, 2020
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)

$2,543,795

$6,579,600

$16,633

$508,425

$

—

62,876

—

22,973

210,957

—

503

—

2,659,469

11,286

51

Total

$2,629,644

$6,790,557

$17,136

$519,711

$2,659,520

December 31, 2019
Term Life Insurance

Investment and Savings

Products

Corporate and Other

Distributed Products

$2,239,515

$6,244,193

$14,933

$330,660

$

—

62,196

—

24,039

202,376

—

537

—

2,485,683

9,294

62

Total

$2,325,750

$6,446,569

$15,470

$339,954

$2,485,745

Primerica 2020 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, 2020
Term Life Insurance

$1,309,661 $27,030

$593,948

$216,208

$200,063

$ —

Investment and Savings Products

—

—

—

7,055

509,167 —

Corporate and Other Distributed

Products

Total

16,722

56,784

21,621

1,058

161,691

701

$1,326,383 $83,814

$615,569

$224,321

$870,921

$701

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

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, 2020

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

$861,392,223 $742,356,917

$—

$119,035,306

— %

Premiums:
Life insurance

$

2,906,083 $

1,580,427

Accident and health insurance

1,066

339

Total premiums

$

2,907,149 $

1,580,766

$—

—

$—

$

1,325,656

727

$

1,326,383

— %

— %

— %

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

— %

— %

— %

See the report of independent registered public accounting firm.

Primerica 2020 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

March 1, 2021

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

March 1, 2021

Chief Executive Officer (Principal
Executive Officer) and Director

March 1, 2021

Executive Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)

Director

Director

Director

Director

Director

Director

Director

Director

Director

March 1, 2021

March 1, 2021

March 1, 2021

March 1, 2021

March 1, 2021

March 1, 2021

March 1, 2021

March 1, 2021

March 1, 2021

March 1, 2021

Stockholder Information

Annual Meeting
The annual meeting of
stockholders of Primerica, Inc.
will be held on Wednesday,
May 12, 2021 at 8:30 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, 2020, 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, 
Sustainability and Strategic 
Partnerships Officer for 
The Coca-Cola Company

D. Richard Williams
Chairman of the Board

Glenn J. Williams
CEO, Primerica, Inc.

Barbara A. Yastine
Former Chairman, President 
and CEO, Ally Bank 

© 2021 Primerica / 58885 / 3.21 / 1549020