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PRIMERICA, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Edgar Online, Inc.
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" or the "Company") for the
period from December 31, 2011 to March 31, 2012. As a result, the following
discussion should be read in conjunction with MD&A and the consolidated and
combined financial statements and notes thereto that are included in our Annual
Report on Form 10-K for the year ended December 31, 2011 (the "2011 Annual
Report"). 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
under the heading "Risk Factors" in the 2011 Annual Report. Actual results may
differ materially from those contained in any forward-looking statements.
This MD&A is divided into the following sections:
• Business Overview


• Critical Accounting Estimates

• Factors Affecting Our Results


• Results of Operations


• Financial Condition

• Liquidity and Capital Resources

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Business Overview
We are a leading distributor of financial products to middle income households
in the United States and Canada. We assist our clients in meeting their needs
for term life insurance, which we underwrite, and mutual funds, annuities and
other financial products, which we distribute primarily on behalf of third
parties. We have two primary operating segments, Term Life Insurance and
Investment and Savings Products, and a third segment, Corporate and Other
Distributed Products.
Term Life Insurance. We distribute the term life insurance products that we
originate through our three life insurance company subsidiaries: Primerica Life
Insurance Company ("Primerica Life"); National Benefit Life Insurance Company
("NBLIC"); and Primerica Life Insurance Company of Canada ("Primerica Life
Canada"). Our in-force term insurance policies have level premiums for the
stated term period. As such, the policyholder pays the same amount each year.
Initial policy term periods are between 10 and 35 years. While premiums are
guaranteed to remain level during the initial term period (up to a maximum of 20
years in the United States), our claim obligations generally increase as our
policyholders age. In addition, we incur significant upfront costs in acquiring
new insurance business. Our deferral and amortization of policy acquisition
costs and reserving methodology are designed to match the recognition of premium
revenues with the timing of acquisition costs and the payment of claims
obligations, such that profits are realized ratably with the level premiums of
the underlying policies.
Our Term Life Insurance segment results are primarily driven by sales and
policies in force, accuracy of our pricing assumptions, terms and use of
reinsurance, investment income, and expenses. In connection with our corporate
reorganization in 2010, we entered into certain reinsurance transactions with
affiliates of Citigroup Inc. (the "Citi reinsurers") 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 (the "Citi reinsurance transactions"). We continue to
administer all policies subject to these coinsurance agreements. Subsequent to
the Citi reinsurance transactions, the revenues and earnings of our Term Life
Insurance segment initially declined in proportion to the amount of revenues and
earnings historically associated with the book of term life insurance policies
that we ceded to the Citi reinsurers. As we have added new in-force business,
our revenues and earnings have grown from these initial levels. With each
successive period, we expect revenue and earnings growth to decelerate as the
size of our in-force book grows and incremental sales have a reduced marginal
effect on the size of the then-existing in-force book.
Investment and Savings Products. We distribute mutual funds, managed accounts,
annuities and segregated funds. In the United States, we distribute mutual fund
and managed accounts products and variable and fixed annuity products of several
third-party companies. In Canada, we offer our own Primerica-branded mutual
funds, as well as mutual funds of other companies, and segregated funds, which
are underwritten by Primerica Life Canada. Revenues associated with these
products consist of commissions and fees earned at the time of sale, fees based
on the asset values of client accounts and recordkeeping and custodial fees
charged on a per-account basis.
Results in our Investment and Savings Products segment are driven by sales of
mutual funds and annuities, the value of assets in client accounts for which we
earn ongoing service, distribution and advisory fees and the number of fee
generating accounts for which we provide administration functions or retirement
plan custodial services. While our investment and savings products all have
similar long-term earnings characteristics, our results in a given fiscal period
are affected by changes in the overall mix of products within these broad
categories.
Corporate and Other Distributed Products. Our Corporate and Other Distributed
Products segment consists primarily of revenues and expenses related to other
distributed products, including various insurance products, prepaid legal
services and a credit information product. These products are distributed
pursuant to distribution arrangements with third parties, except for certain
life and disability insurance products underwritten by NBLIC, our New York life
insurance subsidiary, that are not distributed through our sales force. In
addition, our Corporate and Other Distributed Products segment includes
corporate income (including net investment income) and expenses not allocated to
other segments, interest expense on the Citi note and realized gains and losses
on our invested asset portfolio.
Accounting Policy Change. Effective January 1, 2012, we adopted ASU 2010-26,
Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts
("ASU 2010-26"), and will no longer defer certain indirect acquisition costs or
costs attributable to unsuccessful efforts of acquiring life insurance policies.
We adopted this accounting policy change retrospectively and, accordingly, our
historical results have been adjusted to reflect the adoption on a consistent
basis across all periods presented. As a result of this accounting change, we
reduced stockholders' equity as of December 31, 2011 by $96.0 million to $1.33
billion. This accounting change


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also reduced net income for the three months ended March 31, 2011 by $5.2
million to $47.3 million. For additional information regarding this accounting
policy change, see Note 1 to our condensed consolidated financial statements and
the Critical Accounting Estimates section below.
Critical Accounting Estimates
We prepare our financial statements in accordance with U.S. generally accepted
accounting principles ("GAAP"). These principles are established primarily by
the Financial Accounting Standards Board ("FASB"). The preparation of financial
statements in conformity with 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 to our consolidated and combined financial statements included in our
2011 Annual Report. The most significant items on the balance sheet are based on
fair value determinations, accounting estimates and actuarial determinations
which are susceptible to changes in future periods and which 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 the valuation
of investments, reinsurance, deferred policy acquisition costs, future policy
benefit reserves, and income taxes. The preparation and evaluation of these
critical accounting estimates involve the use of various assumptions developed
from management's analyses and judgments. Subsequent experience or use of other
assumptions could produce significantly different results.
During the three months ended March 31, 2012, there have been no changes in the
items that we have identified as critical accounting estimates. However, on
January 1, 2012, we retrospectively adopted the guidance in ASU 2010-26. For
additional information regarding critical accounting estimates, see the Critical
Accounting Estimates section of MD&A included in our 2011 Annual Report.
Accounting for Deferred Policy Acquisition Costs. In accordance with ASU
2010-26, 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 mainly include commissions and policy issue expenses. The recovery
of such costs is dependent on the future profitability of the related policies,
which, in turn, is dependent principally upon mortality, persistency, the
expense of administering the business, and investment returns, as well as upon
certain economic variables, such as inflation. Our deferred policy acquisition
cost asset (DAC) is subject to recoverability testing annually and when
circumstances indicate that recoverability is uncertain. We make certain
assumptions regarding persistency, expenses, interest rates and claims. 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.
Deferrable term life insurance policy acquisition costs are amortized over the
premium-paying period of the related policies in proportion to premium income.
If actual lapses or withdrawals are different from pricing assumptions for a
particular period, DAC amortization will be affected. If the number of policies
that lapse are 1% higher than the number of policies that we expected to lapse
in our pricing assumptions, approximately 1% more of the existing DAC balance
will be amortized, which would have been equal to approximately $8.1 million as
of December 31, 2011 (assuming such lapses were distributed proportionately
among policies of all durations). We believe that a lapse rate in the number of
policies that is 1% higher than the rate assumed in our pricing assumptions is a
reasonably possible variation. Higher lapses in the early durations would have a
greater effect on DAC amortization since the DAC balances are higher at the
earlier durations. Differences in actual mortality rates compared to our pricing
assumptions will not have a material effect on DAC amortization. Due to the
inherent uncertainties in making assumptions about future events, materially
different experience from expected results in persistency or mortality could
result in a material increase or decrease of DAC amortization in a particular
period.
Deferrable acquisition costs for Canadian segregated funds are amortized over
the life of the policies in relation to historical and future estimated gross
profits before amortization. The gross profits and resulting DAC amortization
will vary with actual fund returns, redemptions and expenses.
As a result of the retrospective adoption of ASU 2010-26, DAC amortization and
expense deferrals were lower than had been previously reported.


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Factors Affecting Our Results
Economic Environment. 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
Primerica sales representative offers, which can drive or dampen recruiting.
Consumer spending and borrowing levels remain under pressure, as consumers take
a more conservative financial posture including reevaluating their savings and
debt management plans. As overall market and economic conditions have improved
in recent periods, sales and the value of consumer investment products across a
wide spectrum of asset classes have improved. The effects of these trends and
conditions are discussed in the Results of Operations section below.
Recruiting and Sales Representatives. Our ability to increase the size of our
sales force is largely based on the success of our recruiting efforts and our
ability to train and motivate recruits to obtain licenses to sell life
insurance. We believe that recruitment levels are an important advance indicator
of sales force trends, and growth in recruiting is usually indicative of future
growth in the overall size of the sales force. However, because new recruits may
obtain the requisite licenses at rates above or below historical levels,
recruiting results do not always result in commensurate changes in the size of
our licensed sales force.
Recruiting of new representatives increased by 11% to 58,551 in the first
quarter of 2012, compared with the same period a year ago. Recruiting strength
in the first quarter led to a sequential increase over the fourth quarter, which
is typically a slower recruiting quarter. New life licenses grew by 7% to 7,650,
compared with the first quarter of 2011 but decreased by 6% from the fourth
quarter of 2011 when licensing results benefited from the third quarter
post-convention recruiting surge. The size of our life-licensed insurance sales
force was 89,651 at March 31, 2012 down from 91,176 at December 31, 2011,
primarily due to recruiting levels in the fourth quarter of 2011.
Term Life Insurance Segment. Our Term Life Insurance segment results are
primarily driven by sales, accuracy of our pricing assumptions, terms and use of
reinsurance, investment income and expenses.
Sales and policies in force. Sales of new 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 acquisition expenses are generally deferred and amortized ratably
with the level premiums of the underlying policies. However, because we incur
significant cash outflows at or about the time policies are issued, including
the payment of sales commissions and underwriting costs, changes in life
insurance sales volume will have a more immediate effect on our cash flows.
Historically, we have found that while sales volume of term life insurance
products between fiscal periods may vary based on a variety of factors, the
productivity of our individual sales representatives remains within a relatively
narrow range and, consequently, our sales volume over the longer term generally
correlates to the size of our sales 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, were as follows:
                                                     Three months ended 

March 31,

Free Report: How to Earn $2k a Week

                                                        2012              

2011

Average number of life-licensed sales
representatives                                           90,027            

93,001

Number of new policies issued                             56,145            

51,281

Average monthly rate of new policies issued per
life-licensed sales representative                          .21x            

.18x



During the three months ended March 31, 2012, the increased productivity of our
sales representatives was largely driven by strong sales of our new TermNow
product.
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 utilize unisex rates for our term


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life insurance policies. The pricing assumptions that underlie our rates are
based upon our best estimates of mortality, persistency and investment yields at
the time of issuance, sales force commission rates, issue and underwriting
expenses, operating expenses and the characteristics of the insureds, including
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. We use historical experience to estimate pricing assumptions

for persistency rates. 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 persistency is lower than our
       pricing assumptions, we must accelerate the amortization of 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 reserves associated with any

       given policy will change over the term of such policy. As a general
       matter, reserves are lowest at the inception of a policy term and rise
       steadily to a peak before declining to zero at the expiration of the

policy term. Accordingly, depending on when the lapse occurs in relation

to the overall policy term, the reduction in benefits and claims expense

may be greater or less than the increase in amortization expense and,

consequently, the effects on earnings for a given period could be positive

or negative. Persistency levels are meaningful to our results to the

extent actual experience deviates from the persistency assumptions used to

price our products.

• Mortality. We use historical experience to estimate pricing assumptions

       for mortality. Our profitability is affected to the extent actual
       mortality rates differ from those used in our pricing assumptions. We
       mitigate a significant portion of our mortality exposure through
       reinsurance. Variances between actual mortality experience and the
       assumptions and estimates used by our reinsurers affect the cost and
       potentially the availability of reinsurance.

• Investment Yields. We generally use a level investment yield rate which

reflects yields currently available. For 2012 and 2011 new issues, we are

using an increasing interest rate assumption to reflect the historically

low interest rate environment. Both DAC and the reserve liability increase

       with the assumed investment yield rate. Since DAC is higher than the
       reserve liability in the early years of a policy, a lower assumed
       investment yield generally will result in lower profits. In the later

years, when the reserve liability is higher than DAC, a lower assumed

       investment yield generally will result in higher profits. Actual
       investment yields will impact the net investment income allocated to the
       Term Life Insurance segment, but will not impact DAC or the reserve
       liability.


Reinsurance. We use reinsurance extensively, which has a significant effect on
our results of operations. Since the mid-1990s, we have reinsured between 60%
and 90% of the mortality risk on our U.S. term life insurance policies on a
quota share YRT basis. Since 2003, we have reinsured Canadian policy face
amounts above $500,000 per life on an excess loss YRT basis. However, in the
first quarter of 2012, we entered into a YRT reinsurance arrangement in Canada
similar to our U.S. program that reinsures 80% of the face amount for every
policy sold. YRT reinsurance permits us to fix future mortality exposure at
contractual rates by policy class. To the extent actual mortality experience is
more or less favorable than the contractual rate, the reinsurer will earn
incremental profits or bear the incremental cost, as applicable. In contrast to
coinsurance, which is intended to eliminate all risks (other than counterparty
risk of the reinsurer) and rewards associated with a specified percentage of the
block of policies subject to the reinsurance arrangement, the YRT reinsurance
arrangements we enter into are intended only to reduce volatility associated
with variances between estimated and actual mortality rates.
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.




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•      Amortization of DAC. Amortization of DAC is reduced on a pro-rata basis
       for the coinsured business, including the business reinsured with Citi.
       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, including the business reinsured with Citi.



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. mortality risk on new business and approximately 80% of our
Canadian mortality risk on new business.
Net investment income. Term Life Insurance segment net investment income is
composed of two elements: allocated net investment income and the market return
associated with the deposit asset underlying the 10% reinsurance agreement we
executed in connection with our corporate reorganization. Invested assets are
allocated to the Term Life segment based on the book value of the invested
assets necessary to meet statutory reserve requirements and our targeted capital
objectives. Net investment income is also impacted by the performance of our
invested asset portfolio and the market return on the deposit asset which can be
affected by interest rates, credit spreads and the mix of invested assets.
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, service and distribution fees and
the number of fee generating accounts we administer.
Sales. We earn commissions and fees, such as dealer re-allowances, and marketing
and support fees, based on sales of mutual fund and managed account products and
annuities. Sales of investment and savings products are influenced by the
overall demand for investment products in the United States and Canada, as well
as by the size and productivity of our sales force. We generally experience
seasonality in our Investment and Savings Products segment results due to our
high concentration of sales of retirement account products. These accounts are
typically funded in February through April, coincident with our clients' tax
return preparation season. While we believe the size of our sales force is a
factor in driving sales volume in this segment, there are a number of other
variables, such as economic and market conditions, that 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 fees on assets in the managed accounts program. In
Canada we earn management fees on certain mutual fund assets and on the
segregated funds for which we serve as investment manager. Asset values are
influenced by new product sales, ongoing contributions to existing accounts,
redemptions and the change in market values in existing accounts. While we offer
a wide variety of asset classes and investment styles, our clients' accounts are
primarily invested in equity funds.
Accounts. We earn recordkeeping fees for administrative functions we perform on
behalf of several of our mutual fund providers and custodial fees for services
as a non-bank custodian for certain of our mutual fund clients' retirement plan
accounts.
Sales Mix. While our investment and savings products all have similar long-term
earnings characteristics, our results in a given fiscal period will be affected
by changes in the overall mix of products within these broad categories.
Examples of changes in the sales mix that influence our results include the
following:
•      sales of a higher proportion of mutual fund products of the several mutual

fund families for which we act as recordkeeper will generally increase our

earnings because we are entitled to recordkeeping fees on these accounts;

• sales of variable 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 segregated funds, no upfront revenues;




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• sales and administration of a higher proportion of mutual funds that

enable us to earn marketing and support fees will increase our revenues

and profitability;

• sales of a higher proportion of retirement products of several mutual fund

       families will tend to result in higher revenue generation due to our
       ability to earn custodial fees on these accounts; and

• sales of a higher proportion of managed accounts products will generally

extend the time over which revenues can be earned because we are entitled

to revenues based on assets under management for these accounts.



Corporate and Other Distributed Products Segment. We earn revenues and pay
commissions and referral fees for various other insurance products, prepaid
legal services and other financial products, all of which are originated by
third parties. NBLIC also underwrites a mail-order student life policy and a
short-term disability benefit policy, neither of which is distributed by our
sales force, and has in-force policies from several discontinued lines of
insurance.
The Corporate and Other Distributed Products segment is affected by corporate
income and expenses not allocated to our other segments, net investment income
(other than net investment income allocated to our Term Life Insurance segment),
general and administrative expenses (other than expenses that are allocated to
our Term Life Insurance or Investment and Savings Products segments), equity
awards granted to management and our sales force leaders at the time of our
initial public offering, interest expense on the Citi note and realized gains
and losses on our invested asset portfolio.

Results of Operations
Primerica, Inc. and Subsidiaries Results. Our results of operations were as
follows:
                                     Three months ended March 31,                   Change
                                       2012                 2011               $               %
                                                        (Dollars in thousands)
Revenues:
Direct premiums                  $      561,037       $      552,069     $     8,968              2  %
Ceded premiums                         (418,163 )           (422,238 )         4,075              *
Net premiums                            142,874              129,831          13,043             10  %
Commissions and fees                    103,905              106,116          (2,211 )           (2 )%
Net investment income                    26,097               28,626          (2,529 )           (9 )%
Realized investment gains,
including OTTI losses                     2,131                  327           1,804              *
Other, net                               11,594               11,452             142              1  %
Total revenues                          286,601              276,352          10,249              4  %
Benefits and expenses:
Benefits and claims                      67,933               57,635          10,298             18  %
Amortization of DAC                      26,531               23,229           3,302             14  %
Sales commissions                        49,717               50,438            (721 )           (1 )%
Insurance expenses                       22,444               15,798           6,646             42  %
Insurance commissions                     8,496                8,998            (502 )           (6 )%
Interest expense                          6,910                6,997             (87 )           (1 )%
Other operating expenses                 41,105               40,001           1,104              3  %
Total benefits and expenses             223,136              203,096          20,040             10  %
Income before income taxes               63,465               73,256          (9,791 )          (13 )%
Income taxes                             21,709               25,985          (4,276 )          (16 )%
Net income                       $       41,756       $       47,271     $    (5,515 )          (12 )%


____________________
* Less than 1% or not meaningful
Total revenues. Total revenues were primarily driven by growth in net premiums,
partially offset by declines in net investment income and commissions and fees.
The growth in net premiums largely reflects incremental premiums on New Term
policies issued subsequent to the Citi reinsurance transactions ("New Term").
Net investment income


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was lower in the first quarter of 2012 primarily reflecting a lower level of
invested assets following our $200.0 million stock repurchase in the fourth
quarter of 2011. The decrease in commissions and fees was largely driven by
lower average client asset values as well as a recordkeeping fee structure
change that had no net effect on income before income taxes, partially offset by
higher sales of variable annuities in our Investment and Savings Product
segment. The decline in commissions and fees also reflects the ongoing decline
in and discontinuation of our lending business.
Total benefits and expenses. Total benefits and expenses were higher primarily
as a result of the growth in our Term Life business and higher overall operating
expenses. Benefits and claims and amortization of DAC increased as a result of
the continued growth in New Term. The decline in sales commissions was in line
with the decline in revenues. Insurance expenses increased primarily as a result
of higher, premium-related expenses and prior-year favorable expense items
including the release of management incentive compensation accruals for 2010 and
lower expense allowances due to the continued run-off in the block of business
ceded to the Citi reinsurers.
Income taxes. Our effective income tax rate was 34.2% for the three months ended
March 31, 2012, compared with 35.5% for the same period a year ago reflecting a
lower statutory income tax rate in Canada and lower tax reserves on Canadian
earnings.
For additional information, see the Segment Results discussions below.
Segment Results
Term Life Insurance Segment Results. Our results for the Term Life Insurance
segment were as follows:
                                    Three months ended March 31,              Change
                                      2012                 2011             $          %
                                                  (Dollars in thousands)
Revenues:
Direct premiums                 $      542,157       $      532,167     $  9,990       2  %
Ceded premiums                        (414,559 )           (418,653 )      4,094       *
Net premiums                           127,598              113,514       14,084      12  %
Allocated net investment income         16,660               15,794          866       5  %
Other, net                               7,546                7,654         (108 )    (1 )%
Total revenues                         151,804              136,962       14,842      11  %
Benefits and expenses:
Benefits and claims                     57,509               47,351       10,158      21  %
Amortization of DAC                     23,933               20,127        3,806      19  %
Insurance commissions                    3,577                4,063         (486 )   (12 )%
Insurance expenses                      19,717               12,833        6,884      54  %
Interest expense                         2,785                2,872          (87 )    (3 )%
Total benefits and expenses            107,521               87,246       20,275      23  %
Income before income taxes      $       44,283       $       49,716     $ (5,433 )   (11 )%


____________________
* Less than 1%
Net premiums. Direct premiums grew largely as a result of growth in New Term
business and premium increases for policies reaching the end of their initial
level premium period. In the first quarter of 2011, ceded premiums included $8.7
million of ceded premium recoveries for post-issue underwriting class upgrades.
Excluding the $8.7 million of ceded premium recoveries, net premiums grew by
22%, primarily as a result of incremental New Term business. Persistency was
consistent with the prior-year period.
Benefits and claims. The increase in benefits and claims was consistent with net
premium growth excluding the ceded premium recoveries noted above. Mortality,
which was consistent with prior year, was slightly unfavorable in both periods.
Amortization of DAC. The increase in amortization of DAC was also consistent
with net premium growth excluding the ceded premium recoveries noted above. In
the first quarter of 2012, amortization of DAC included a reduction of
approximately $2 million for commission payments previously incurred but not
billed on in-force business ceded to the Citi reinsurers. In the first quarter
of 2011, amortization of DAC included a one-time DAC adjustment of approximately
$2.2 million largely related to in-force business ceded to the Citi reinsurers.


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Insurance expenses. The growth in insurance expenses primarily reflects the
impact of premium-related increases in taxes, licenses and fees and the run-off
of expense allowances received under the terms of the Citi reinsurance
agreements as well as prior-year favorable expense items including the release
of management incentive compensation accruals for 2010.
Product Sales and Face Amount In Force. We issued 56,145 new policies during the
three months ended March 31, 2012, compared with 51,281 new policies for the
same period in 2011. The increased sales of our term life insurance products
primarily reflect an increase in the number of applications received and a
higher rate of converting applications to issued policies largely as a result of
TermNow, our new rapid-issue term life insurance product. The average face
amount of policies issued during the first quarter of 2012 was approximately
$244,100, compared with approximately $260,000 in the first quarter of 2011.
The changes in the face amount of our in-force book of term life insurance
policies were as follows:
                                     Three months ended March 31,                   Change
                                       2012                 2011               $               %
                                                         (Dollars in millions)
Face amount in force, beginning
of period                        $      664,955       $      656,791     $     8,164              1  %
Issued face amount                       16,983               16,735             248              1  %
Terminations                            (16,307 )            (17,247 )           940             (5 )%
Foreign currency                         (1,208 )              2,244          (3,452 )            *
Face amount in force, end of
period (1)                       $      664,423       $      658,523     $     5,900              *


____________________
* Less than 1% or not meaningful
(1) Totals may not add due to rounding.


Issued face amount was relatively flat during the first quarter of 2012
reflecting the offsetting effects of higher policy sales as discussed above and
lower average size of policies issued primarily due to a higher proportion of
TermNow policy sales, which are issued at lower face amounts. The decrease in
terminations resulted from aggregate persistency that, while remaining below
historical norms, has continued to improve modestly.
Investment and Savings Product Segment Results. Investment and Savings Products
segment results were as follows:
                                 Three months ended March 31,                Change
                                       2012                  2011          $          %
                                               (Dollars in thousands)
Revenues:
Commissions and fees:
Sales-based revenues       $        44,467                 $ 43,128    $  1,339       3  %
Asset-based revenues                43,722                   44,825      (1,103 )    (2 )%
Account-based revenues               9,373                   10,432      (1,059 )   (10 )%
Other, net                           2,572                    2,461         111       5  %
Total revenues                     100,134                  100,846        (712 )     *
Expenses:
Amortization of DAC                  3,223                    2,785         438      16  %
Insurance commissions                2,149                    2,140           9       *
Sales commissions:
Sales-based                         31,600                   30,553       1,047       3  %
Asset-based                         14,745                   15,451        (706 )    (5 )%
Other operating expenses            19,547                   18,878         669       4  %
Total expenses                      71,264                   69,807       1,457       2  %
Income before income taxes $        28,870                 $ 31,039    $ (2,169 )    (7 )%


____________________
* Less than 1%


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Supplemental information on the underlying metrics that drove results follows.
                                            Three months ended March 31,                         Change
                                                2012                      2011              $               %
                                                  (Dollars in millions and accounts in thousands)
Product sales:
Retail mutual funds              $           612                      $       646     $       (34 )           (5 )%
Annuities and other                          429                              345              84             24  %
Total sales-based revenue
generating product sales (1)               1,041                              991              50              5  %
Segregated funds and other                   124                              123               1              *
Managed accounts                              23                                -              23              *
Total product sales (1)          $         1,188                      $     1,114     $        74              7  %
Average client asset values:
Retail mutual funds              $        23,694                      $    24,882     $    (1,188 )           (5 )%
Annuities and other                        8,717                            8,242             475              6  %
Segregated funds                           2,499                            2,477              22              1  %
Managed accounts                             212                                -             212              *
Total average asset values in
client accounts (1)              $        35,122                      $    35,602     $      (480 )           (1 )%
Average number of fee-generating
accounts:
Recordkeeping accounts                     2,584                            2,662             (78 )           (3 )%
Custodial accounts                         1,945                            1,966             (21 )           (1 )%


_____________________
* Not meaningful or less than 1%
(1) Totals may not add due to rounding.
Commissions and fees. Commissions and fees declined primarily as a result of
lower average client asset values in the first quarter of 2012 and a
recordkeeping fee structure change beginning in the third quarter of 2011, which
had no net effect on income before income taxes. Growth in sales-based revenues
partially offset these declines and primarily reflect the impact of internal
exchanges for the variable annuity products we offer as well as sales of a newly
introduced fixed indexed annuity product.
Amortization of DAC. The increase in DAC amortization was primarily driven by
the impact on amortization rates of higher than assumed redemption rates on our
Canadian Segregated Funds products.
Sales commissions. The increase in sales-based commissions was primarily driven
by the increases in sales noted above.
Other operating expenses. Other operating expenses grew largely as a result of
higher new product offering expenses as well as the 2011 release of management
incentive compensation accruals, partially offset by lower 2012 expenses due to
the impact of the recordkeeping fee structure change noted above.
Product sales. Investment and savings products sales were higher in the three
months ended March 31, 2012 largely reflecting the impact of internal exchanges
of variable annuities and our managed accounts and fixed indexed annuities
product introductions.
Asset Values in Client Accounts. Changes in asset values in client accounts were
as follows:
                                         Three months ended March 31,                  Change
                                            2012               2011               $               %
                                                             (Dollars in millions)
Asset values, beginning of period     $      33,664       $      34,869     $    (1,205 )           (3 )%
Inflows                                       1,188               1,114              74              7  %
Redemptions                                  (1,233 )            (1,083 )          (150 )           14  %
Change in market value, net and other         2,660               1,288           1,372            107  %
Asset values, end of period           $      36,279       $      36,188     $        91              *


____________________
* Less than 1%


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The growth in inflows, which reflect the internal exchanges for variable
annuities, was in line with the increase in sales volume. However, internal
exchanges for variable annuities are also included in redemptions. As a result,
redemptions as a percent of average assets were slightly higher in the first
quarter of 2012.
Corporate and Other Distributed Products Segment Results. Corporate and Other
Distributed Products segment results were as follows:
                                    Three months ended March 31,                  Change
                                       2012               2011               $               %
                                                       (Dollars in thousands)
Revenues:
Direct premiums                  $      18,880       $      19,902     $    (1,022 )           (5 )%
Ceded premiums                          (3,604 )            (3,585 )           (19 )            *
Net premiums                            15,276              16,317          (1,041 )           (6 )%
Commissions and fees                     6,343               7,731          (1,388 )          (18 )%
Allocated net investment income          9,437              12,831          (3,394 )          (26 )%
Realized investment gains,
including OTTI losses                    2,131                 327           1,804              *
Other, net                               1,476               1,338             138             10  %
Total revenues                          34,663              38,544          (3,881 )          (10 )%
Benefits and expenses:
Benefits and claims                     10,424              10,284             140              1  %
Amortization of DAC                       (625 )               317            (942 )            *
Insurance commissions                    2,770               2,794             (24 )            *
Insurance expenses                       2,727               2,965            (238 )           (8 )%
Sales commissions                        3,372               4,434          (1,062 )          (24 )%
Interest expense                         4,125               4,125               -              -  %
Other operating expenses                21,558              21,124             434              2  %
Total benefits and expenses             44,351              46,043          (1,692 )           (4 )%
Loss before income taxes         $      (9,688 )     $      (7,499 )   $    (2,189 )           29  %


 ____________________
* Less than 1% or not meaningful
Total revenues. Total revenues were lower during the first quarter of 2012 due
in large part to a decline in net investment income as a result of a lower
invested asset base and a higher allocation to the Term Life Insurance segment,
a decline in commissions and fees in connection with the termination of our loan
business as well as lower production across other product lines, and a decline
in net premiums on our short-term disability line primarily due to an increase
in terminations concurrent with a premium rate increase. An increase in realized
investment gains partially offset the decline in total revenues.
Benefits and expenses. Benefits and claims were relatively flat primarily due to
the offsetting effects of improvements in morbidity experienced by the
short-term disability line and adverse claims in various run-off blocks of
insurance products, all of which were underwritten by NBLIC. In 2011, NBLIC
completed an administrative conversion on its block of student life insurance
products which, in the fourth quarter of 2011, resulted in insignificant changes
to DAC and policy reserves of approximately equal and offsetting amounts.
However, in the first quarter of 2012, additional conversion-related adjustments
were recognized which resulted in the negative DAC amortization disclosed in the
table above. Sales commissions declined primarily as a result of the decline in
production noted in total revenues above.


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Financial Condition
Investments. 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. 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,
sector limits, credit quality limits, portfolio duration, limits on the amount
of investments in approved countries and permissible security types.
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.
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.
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 average rating and average approximate duration of
our fixed-maturity portfolio were as follows:
                                                     March 31, 2012

December 31, 2011


Average rating of our fixed-maturity portfolio             A                

A

Average duration of our fixed-maturity portfolio 3.7 years 3.5 years Average book yield of our fixed-maturity portfolio 5.46%

5.52%



The distribution of our investments in fixed-maturity securities by rating
follows.
                            March 31, 2012           December 31, 2011
                        Amortized cost      %      Amortized cost     %
                                     (Dollars in thousands)
AAA                    $        413,624    23%    $       428,748    24%
AA                              151,508     8%            150,894     8%
A                               416,351    23%            431,175    24%
BBB                             695,257    39%            683,818    38%
Below investment grade          112,727     6%            125,594     7%
Not rated                         1,236     *                 770     *
Total (1)              $      1,790,703    100%   $     1,820,999    100%


____________________
* Less than 1%
(1) Totals may not add due to rounding.




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The ten largest holdings within our invested asset portfolio were as follows:
                                                              March 31, 2012
                                      Cost or amortized        Fair          Unrealized       Credit
Issuer                                      cost               value            gain          rating
                                                          (Dollars in thousands)
Government of Canada                 $          35,481     $    39,134     $      3,653        AAA
Verizon Communications Inc                      11,496          13,086            1,590         A-
General Electric Co                             11,449          12,985            1,536        AA+
ProLogis Inc                                    11,746          12,627              881        BBB-
Bank of America Corp                            11,674          12,559              885         A-
Time Warner Cable Inc                           11,914          12,276              362        BBB
ConocoPhillips                                   9,132          10,854            1,722         A
Province of Ontario Canada                       8,670          10,759            2,089        AA-
National Rural Utilities Cooperative             7,184          10,379            3,195         A+
Iberdrola SA                                     8,468           9,526            1,058        BBB+
Total - ten largest holdings         $         127,214     $   144,185     $     16,971
Total - fixed-maturity and equity
securities                           $       1,815,393     $ 1,986,011
Percent of total fixed-maturity and
equity securities                                    7 %             7 %


Our April 2012 repurchase of $150.0 million of our common stock did not result
in meaningful changes to asset mix, duration or overall credit quality of our
invested asset portfolio. However, with the reduction in our consolidated cash
and invested assets as a result of the repurchase transaction, we expect net
investment income to decline. We also expect our average book yield to increase
modestly, as the investments sold to fund the dividend generally had yields that
were lower than the average book yield on the pre-dividend invested assets
portfolio.
For additional information on our invested asset portfolio, see Note 3 to our
condensed consolidated financial statements.
Liquidity and Capital Resources
Dividends and other payments to us from our subsidiaries are our principal
sources of cash. Our primary uses of funds by the Parent Company include the
payment of general operating expenses, the payment of dividends and the payment
of interest to Citi under the Citi note.
The liquidity requirements of our subsidiaries principally relate to the
liabilities associated with their distribution and underwriting of insurance
products (including the payment of claims), distribution of investment and
savings products, operating expenses, income taxes and the payment of dividends.
Historically, our insurance subsidiaries have used cash flow from operations
associated with our in-force book of term life insurance to fund their liquidity
requirements. Our insurance subsidiaries' principal cash inflows from operating
activities are derived from policyholder premiums and investment income earned
on invested assets that support our statutory capital and reserves. We also
derive cash inflows from the distribution of investment and savings products and
other products. Our principal outflows relate to payments for ceded premiums and
benefits and claims. The principal cash inflows from investment activities
result from repayments of principal and investment income, while the principal
outflows relate to purchases of fixed-maturity securities. We typically hold
cash sufficient to fund operating flows, and invest any excess cash.
Our distribution and underwriting of term life insurance place significant
demands on our liquidity, particularly when we experience growth. We pay a
substantial majority of the sales commission during the first year following the
sale of a policy. Our underwriting activities also require significant cash
outflows at the inception of a policy's term. However, we anticipate that cash
flows from our businesses, including our existing block of policies and our
investment and savings products, will continue to provide us with sufficient
liquidity to meet our operating requirements.
We may seek to enhance our liquidity position or capital structure through
borrowings from third-party sources, sales of debt or equity securities, reserve
financings or some combination of these sources. The Model Regulation entitled
Valuation of Life Insurance Policies, commonly known as Regulation XXX, requires
insurers to carry


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statutory reserves for term life insurance policies with long-term premium
guarantees which are often significantly in excess of the reserves that insurers
deem necessary to satisfy claim obligations. Accordingly, many insurance
companies have sought ways to reduce their capital needs by financing these
excess reserves through bank financing, reinsurance arrangements and other
financing transactions.
Effective March 31, 2012, we completed a Regulation XXX reserve financing
transaction. As part of this transaction, Peach Re, Inc. ("Peach Re"), a special
purpose financial captive insurance company and wholly owned subsidiary of
Primerica Life, entered into a credit facility agreement with Deutsche Bank (the
"Credit Facility Agreement"). Under the Credit Facility Agreement, Deutsche Bank
issued a letter of credit with a term of approximately 14 years in an initial
amount of $450 million for the benefit of Primerica Life (the "LOC"). Subject to
certain conditions, the amount of the LOC will be periodically increased up to a
maximum amount of $510 million in 2014. The LOC will be available to support
certain obligations of Peach Re for a portion of reserves (commonly referred to
as Regulation XXX reserves) related to level premium term life insurance
policies ceded to Peach Re from Primerica Life under a coinsurance agreement. In
connection with this transaction, Primerica Life obtained regulatory approval
for the payment of an extraordinary dividend of $150.0 million to the Parent
Company.
In April 2012, we completed the repurchase of approximately 5.7 million shares
of our common stock beneficially owned by private equity funds managed by
Warburg Pincus LLC ("Warburg Pincus") for a total purchase price of
approximately $150.0 million. For additional information, see Note 11 to our
condensed consolidated financial statements.
Cash Flows. Cash flows from operating activities are affected primarily by the
timing of premiums received, commissions and fees received, benefits paid,
commissions paid to sales representatives, administrative and selling expenses,
investment income, and cash taxes. Our principal source of cash historically has
been premiums received on term life insurance policies in force.
We typically generate positive cash flows from operating activities, as
premiums, net investment income, commissions and fees collected from our
insurance and investment and savings products exceed benefits, commissions and
operating expenses paid, and we invest the excess.
The components of the change in cash and cash equivalents were as follows:
                                                 Three months ended March 31,           Change
                                                   2012                 2011               $
                                                                (In thousands)
Net cash (used in) provided by operating
activities                                   $      (16,124 )     $        3,208     $   (19,332 )
Net cash provided by (used in) investing
activities                                           31,958              (12,423 )        44,381
Net cash used in financing activities                (2,013 )               (757 )        (1,256 )
Effect of foreign exchange rate changes on
cash                                                  5,637                 

(789 ) 6,426 Change in cash and cash equivalents $ 19,458 $ (10,761 ) $ 30,219



Operating Activities. The change in operating cash flows compared with the
prior-year period was primarily the result of the timing of payments due to
reinsurers in our Term Life business.
Investing Activities. The increase in investing cash flows was largely due to
fewer investment purchases and higher investment sales, partially offset by
fewer investment maturities, during the first quarter of 2012 versus the prior
year period as we accumulated cash to fund the capitalization of Peach Re.
Financing Activities. The increase in net cash used in financing activities was
due to the quarterly cash dividend being $0.03 per share in the first quarter of
2012 versus $0.01 per share in the first quarter of 2011.
Citi Note. In April 2010, we issued a $300.0 million note to Citi as part of our
corporate reorganization. We were in compliance with the covenants of the Citi
note at March 31, 2012. No events of default or defaults occurred during the
three months ended March 31, 2012. See Note 6 to our condensed consolidated
financial statements for additional information.
We calculate our debt-to-capital ratio by dividing total long-term debt by the
sum of stockholders' equity and total long-term debt. As of March 31, 2012, our
debt-to-capital ratio was 17.8%.


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Rating Agencies. There have been no changes to Primerica, Inc.'s senior debt
ratings or Primerica Life's financial strength ratings since December 31, 2011.
Risk-Based Capital. The NAIC has established risk-based capital ("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 reserve items. The formula is an early
warning tool to identify possible weakly capitalized companies for purposes of
initiating further regulatory action.
As of March 31, 2012, our U.S. life insurance subsidiaries had statutory capital
substantially in excess of the applicable statutory requirements to support
existing operations and to fund future growth. Following the Regulation XXX
reserve financing transaction and the $150.0 million dividend from Primerica
Life to the Parent Company, Primerica Life's RBC ratio is 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 Canada ("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. Primerica Life Canada is
in compliance with Canada's minimum capital requirements as of March 31, 2012,
as determined by OSFI.
Short-term Borrowings. We had no short-term borrowings as of or during the three
months ended March 31, 2012.
Off-balance Sheet Arrangements. Effective March 31, 2012, Peach Re entered into
the Credit Facility Agreement with Deutsche Bank. Under the Credit Facility
Agreement, the LOC was issued to support certain obligations of Peach Re for a
portion of reserves related to level premium term life insurance policies ceded
to Peach Re from Primerica Life under a coinsurance agreement, effective as of
March 31, 2012. The LOC has a term of approximately 14 years and was issued in
an initial amount of $450 million. Subject to certain conditions, the amount of
the LOC will be periodically increased to a maximum amount of $510 million in
2014. The annual pretax expense of the LOC is expected to range from
approximately $5.0 million to $7.0 million in 2012 through 2018, $2.0 million to
$4.0 million in 2019 through 2023, and to be less than $1.0 million in 2024 and
2025.
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
draw and interest thereon. The Credit Facility Agreement is non-recourse to the
Parent Company and Primerica Life, meaning that neither is liable for repaying
Deutsche Bank for any draws or interest thereon. Pursuant to the terms of a
letter agreement with Deutsche Bank, the Parent Company has agreed to guarantee
the payment of fees to Deutsche Bank under the Credit Facility Agreement.
Pursuant to the Credit Facility Agreement, 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.
Contractual Obligations Update. There have been no material changes in
contractual obligations from those disclosed in the 2011 Annual Report other
than the Credit Facility Agreement discussed above in the Off-balance Sheet
Arrangements section.
           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.


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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 and license new recruits, retain sales

representatives, or license or maintain the licensing of our sales

representatives;

• changes to the independent contractor status of our sales representatives;


•      our or our sales representatives' violation of, or non-compliance with,
       laws and regulations;

• our or our sales representatives' failure to protect the confidentiality

of client information;

• differences between our actual experience and our expectations regarding

mortality, persistency, expenses and investment yields as reflected in the

       pricing for our insurance policies;


•      the occurrence of a catastrophic event that causes a large number of
       premature deaths of our insureds;

• changes in federal and state legislation and regulation, including other

legislation or regulation that affects our insurance, investment product

businesses;

• our failure to meet risk-based capital standards or other minimum capital

       or surplus requirements;


•      a downgrade or potential downgrade in our insurance subsidiaries'
       financial strength ratings or in our investment grade credit ratings for
       the senior unsecured debt that we may elect to offer pursuant to our
       existing shelf registration statement at some time in the future;

• the effects of credit deterioration and interest rate fluctuations on our

invested asset portfolio;

• incorrectly valuing our investments;

• inadequate or unaffordable reinsurance or the failure of our reinsurers to

perform their obligations;

• the failure of, or legal challenges to, the support tools we provide to

our sales force;

• heightened standards of conduct or more stringent licensing requirements

for our sales representatives;

• inadequate policies and procedures regarding suitability review of client

transactions;

• the inability of our subsidiaries to pay dividends or make distributions;

• our ability to generate and maintain a sufficient amount of working capital;

• our non-compliance with the covenants of the Citi note;

• legal and regulatory investigations and actions concerning us or our sales

representatives;

• the loss of key personnel;


•      the failure of our information technology systems, breach of our
       information security or failure of our business continuity plan; and

• fluctuations in Canadian currency exchange rates.




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 document 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.
Wordcount: 9440



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