Good day and welcome to the Primerica, Inc. first quarter 2012 financial results conference call and webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Kathryn Kieser. Ms. Kieser the floor is yours, ma'am.

Thank you, Mike. Good morning everyone. Thank you for joining us today as we discuss Primerica’s results for the first quarter 2012. Yesterday afternoon, we issued our press release reporting financial results for the quarter ended March 31, 2012. A copy of the press release is available on the Investor Relations section of our website at investors.primerica.com. With us on the call this morning are Rick Williams, our Chairman and Co-CEO, John Addison, Chairman of Primerica Distribution and Co-CEO and Alison Rand, our CFO. We referenced certain non-GAAP financial measures in our press release and on this call. These non-GAAP measures are provided because management uses them in making financial, operating and planning decisions and in evaluating the company's performance. We believe these measures will assist you in assessing the company’s underlying performance for the periods being reported. These non-GAAP measures have limitations and reconciliations between non-GAAP and GAAP financial measures are attached to our press release. You can see our GAAP results on page three of the presentation. On today’s call we will make forward-looking statements in accordance with the Safe Harbor provision of the Securities Litigation reform act of 1995. Forward-looking statements include any statements that may project indicate or imply future results, events, performance or achievements and make contain words such as expect, intend, plan, anticipate, estimate and believe or similar words derived from those words. They are not guarantees and such statements involve risks and uncertainties that could cause actual results to differ materially from these statements. For a discussion of these risks, please see risk factors contained in our Form 10-K for the year ended December 31, 2011. This morning's call is being recorded and webcast live on the internet. The webcast and corresponding slides will be available on the Investor Relation section of our website for at least 30 days after the presentation. After the prepared remarks we will open the call to questions from our dial-in participants. Now, I’ll turn the call over to Rick.

Thank you, Kathryn and good morning everyone. Welcome to Primerica's first quarter 2012 earnings call. During the first quarter, we were pleased to announce that our regulators approved a Triple X financing transaction as well as the payment of a $150 million extraordinary dividend from Primerica Life to our holding company. This dividend facilitated a simple and efficient way for us to return value to shareholders by executing a $150 million share repurchase in April. In support of our capital strategy, Warburg Pincus provided an opportunity for us to repurchase 5.7 million shares with certainty of price without impacting their limited flow. Warburg is a great long-term strategic partner and continues to own 23% of Primerica shares including warrants. Primerica Life's payment of the $150 million extraordinary dividend completes our plans with regulators to extract a total of $350 million of excess capital from the Life company on the completion of the redundant reserve financing. At this point Primerica Life cannot declare additional dividends without prior regulatory approval. As Alison will describe in more detail, we believe Primerica Life will be able to declare ordinary dividends without regulatory approval in 2013. Now turning to first quarter results on Slide 4, you can see our operating revenues increased by 6% to $284.5 million and our net operating income declined 2% to $42.4 million while net operating income per diluted share increased 10% to $0.62. The quarter's results reflect the continued growth in our Term Life business, the emergence of a normalized expense base over the last several quarters and lower invested assets following our $200 million share repurchase in the fourth quarter of 2011, that was accretive to operating earnings per share. Net operating income return on adjusted shareholder equity was 13.5%. The over 200 basis point increase in return on…

Thanks, Rick, and good morning everybody. We kicked off 2012 by engaging in activities and launching initiatives that generated energy and production in our sales force. As I told you in February, we held a series of Regional Vice President meetings in January where we talked about improving the business opportunity for our sales force including incentive programs designed to generate current momentum while building long-term distribution growth. In the first quarter, we ran a contest focused on recruiting and life production that provided a longer term benefit of having more representatives able to use our web-based sales tools. We also raised the value of the regional Vice President position through messaging, recognition and broader opportunities for business ownership. During the quarter, we tried to balance an emphasis on recruiting and licensing activities and we feel good about the results. As you can see on Slide 5, in the first quarter recruiting increased to 11% over the prior year and was up 34% from the seasonally adjusted slower recruiting in the fourth quarter. The number of new representatives obtaining a life license grew 7% from a year ago and declined 6% from the fourth quarter with licensing results continuing to benefit from the third quarter post conventional recruiting surge. During the first quarter, non-renewals and terminations were lower by 6% than the first quarter last year. With our positive year-over-year results, you may be trying to figure out why the size of the sales force declined 2% from December 31, 2011. Well the reality is that although the first quarter recruiting and licensing were up, we had fewer life license reps to lead the sales force in the first quarter a year ago. We still had 1,500 more reps who had not renewed their license than we had reps obtain…

Thank you, John, and good morning everyone. I will start today with a brief discussion of the GAAP accounting restatement and our recent financing and capital transactions followed by review of aggregate operating expenses and invested assets. I will conclude today with a discussion of operating results by segment. Effective January 1, we adopted ASU 2010-26 and no longer defer certain indirect cost of acquiring life policies or costs attributable to unsuccessful efforts to acquire life policies. We adopted this change retrospectively and all periods shown in the earning release and in our financial supplement have been restated on a consistent basis. As you can see on Slide 6, the estimates I gave you in our fourth quarter call for the anticipated impact on full-year 2011 results were consistent with the actual impact of the adoption. For 2011 pre-tax earnings are $32 million lower and reported under the prior accounting standard. This reduction translates into a $21 million reduction in net income for the full year 2011 or $5.2 million for the first quarter of 2011. On our last call, we also anticipated that 2012 pre-tax earnings would be roughly $15 million to $19 million lower or $10 million to $12 million after tax. While we are not presenting any current or future results under the old accounting standard, we do believe the previous estimate to remain accurate. The largest change in deferral from the adoption of this accounting change comes from unsuccessful effort and certain indirect insurance expenses. These components are relatively stable and are not anticipated to create variability in earnings between years. However, we do see some variability between periods related to certain agent compensation programs that have evolved with our business needs. As an example, for much of 2011 we ran the Fast Start Bonus program…

Thanks, Alison. Primerica is a unique distribution company with a conservative balance sheet and a solid source of recurring income. We are proud of the efficient capital actions we have been able to execute during that short time as an independent public company. Our continued focus is on enhancing shareholder value to capital deployment as well as strategic sales force initiatives focused on long-term growth. With that, I’ll open it up for questions.

[Operator Instructions] And the first question we have comes from Steven Schwartz of Raymond James.

I've got a few, first, just Alison you were going a little fast here, the LOC fees that you were talking about in 2012, was that pre-tax or after-tax.

That was pre-tax.

Those were pre-tax numbers. And then one more number question for you. The Canadian Seg Fund adjustment that you had, how much did that take away from earnings?

It wasn’t that significant. It was less than a $1 million. It just was positive in one period and negative in the other. Not outside of normal ranges.

Okay and then if I may I am wondering a couple of things here. First it was leap year, we had an extra day, I am trying to figure out how that may affect numbers like productivity and maybe the loss ratio?

On productivity it really has very little impact. I mean during the course of a quarter-to-quarter we often have one additional day or one less day and not significant from a production standpoint. Alison from a loss perspective?

No we have not seen anything.

Pardon me.

We have not seen anything consequential.

Okay, that wouldn't have been consequential and then just on maybe John you could talk about any new changes you might have in incentives plans for the sales force and Alison maybe you can chime in if there are any with regards to the DAC-able nature of those.

Steven, one thing I want to do is give you an award, already started the first leap year question we've ever got, so you went specially ...

And as far as the leap year the public ...

You haven't been public during a leap year.

From a standpoint of new incentives and stuff. One of the things that as we look to the sales force in the first quarter, we were pleased with recruiting, coming off of the fourth quarter where after the kind of convention surge we had an unusually slow fourth quarter. Fourth quarter is always slow and we are pleased with the trends that we see in licensing and as we are looking at new incentives and stuff right now, Steven, one of the things that when we had the surge after the convention and the big recruiting out of that, you and I have had conversations a number of times where this is an aim and adjust business. Your comps definitely trying to turn the battleship and look at things. That recruiting, we saw a lot of things in that where there was not enough focus on licensing. That there was a focus on recruiting and kind of immediate production out of that and then we needed to make some adjustments. In reality, our adjustments right now is we are not doing nearly the amount of month-to-month kind of let's reduce recruiting, let's do a big recruiting surge or whatever. We are very much trying to focus on long-term distribution growth which means very focused on licensing. So we are looking at a lot of things as we head toward later this year to improve the business and stuff. But we are very focused right now on the kind of making sure the long-term incentives are right. For the sales force to be very focused on building distribution, building leadership and growing their business and are running a lot less of crazy John, went insane. With you know month to month kind of things and we are more focused on the long term. So I tell you right now anything we are looking at, we’re looking at with an eye toward DAC-ability and it's focused on productive agents and producing life insurance and growing the business and growing the sales force. So not because of DAC are we focused on that. We’re focused on that for the long term of the business, but I can assure you the direction of things are in a fully DAC-able manner. So I hope that kind of answers your question.

And the next question we have comes from Sean Dargan of Macquarie.

I have got a question relating to just the trend in the size of the sales force. I appreciate you have an increased effort in getting new Life license reps out there, but it seems the non-renewal and terminated rep count kind of is a higher number and so year over year we’ve seen the sales force contract, is there any emphasis on trying to reduced the number of non-renewals and terminated reps.

I'll let Rich kind of talk about, but you know actually a positive trend in the first quarter was that terminations were down year over year from the previous year, but I’ll let Rich kind of talk first and then I’ll talk more about things we are focused on.

Sean, the way that we look at and just talk about terminations. The way that we look at terminations is the terminations in the quarter as a percentage of the balance of agents at the beginning of the quarter. In the first quarter of 2012, 10.1% terminated versus last year, a 10.3% terminated. So it was a slight improvement in terminations. The dynamic relative to the size of the sales force and what really happened, yet both improved licensing and improved terminations, although the sales force still declined. The real dynamic behind that relates to seasonality of the business. In the fourth quarter, as John mentioned there is typically lower recruiting as a result of the December holidays and what that does is, that impacts licensing in the first quarter. You usually have lower number of licenses in the first quarter than you do for all the other quarters of the year and therefore the sales force has a bigger challenge in the first quarter than it does other quarters. The last year, the sales force declined 2,600 agents in the first quarter. This year it was 1,500. That improvement happened because we did better at licensing and better at terminations.

And kind of follow up on the question of your, you ask about are there things we are looking at. I can promise you we are looking at everything. We are looking at terminations, we are looking at recruiting, we are looking at licensing but the thing I will tell you, as you guys get to know more and more and more, we have our long-term relationship of you following our company and stuff. The reality is, most of our terminations which I even and a lot of you, I hate the word terminations because it sounds like we are firing people but are really non-renewals of licenses. And by the time, to some states or to most states it’s a year, a lot of states it’s 2 years and by the time the person gets to that point they are having to pay to renew to that license. And it’s the people that have done a few things and then they are not really productive or doing the business anymore. One of the positive, and who knows I am trying to predict the economy and stuff that one of the positive things we saw as Rick said was that was better this quarter than the same quarter a year ago, because we have had pressure there from a standpoint of just people, when our market, I got to write our $300 check to such and such state, do I pay that or just I know I’ll let it expire. As I look at our incentives and look at our sales force and series and what we are focused on, the big focus has to be on new licenses and grow into new licenses; which again as we said as we felt good trends in for a couple of quarters in enrolling on licensing and our approach right now is to stay very focused on that.

And I think it’s a related question, in terms of face amount, I realize there is some foreign currency impact, but that contracted from the fourth quarter of '11. Is there a seasonality in the issued term life face amount; should we expect that to improve over the course of the year?

Yes, we actually had a business of consistent trend. The first quarter is generally a lower issued quarter and actually that ties back into what I was discussing on the ceded premium trends. There could be annual anniversaries of the policies. So very consistent, not unexpected and we would expect to see our normal seasonality which would indicate higher levels in the next quarter.

The next question we have comes from Paul Sarran of Evercore Partners.

I was wondering if you could give us any insight on to how recruiting and licensing trends are shaping up so far in the second quarter?

I’ll always give my caveat, we don't give guidance. Licensing trends which is our main focus, I think we still very good about, or feel actually good. We feel good about our licensing trends. And on the recruiting front, as I look at this, it is really way too early to tail as we look at things. I’ll just say this to you guys that one of the things I think that it again not, I think I've used, I am sure I have used, because I always use the same analogies, you know the whack-a-mole analogy here of you focus on one thing and something else pops up. We are incredibly focused right now on long term licensing growth and our sales force. And as I said to I think Stevens question, we are not doing for example, we are finishing a contest right now, to broaden more. In contest, the last few years I was constantly doing things of like triple credit recruitment and double credit recruitment and stuff like that. We are not doing that right now, because one of the things I reached to conclusion of after the convention and after the surge was that our focus had to be for our deal force, a very laser-beam focus on licensing and building distribution. So it's one of these things have allowed us to always kind of being get hurt. If there is a thing I am following and looking at right now, as I go, what’s going to happen with recruiting with that focus; it’s really too early to tell. The licensing trends continue to positive, but our long-term of thing not matter as we got to have strong recruiting too. And it’s kind of the walking and chewing gum at the same time sort of thing that makes life tough, but I will say that right now the trends of licensing continue in the manner with what we saw for the first quarter.

Another question on life sales; are you able to quantify the contribution if there was any contributions of investor application processing with the term now product that had on 8% sales growth year-over-year.

Yes, we are, and in rough terms 9% year-over-year is about 1/2 production volume and about 1/2 acceleration of issuance this year versus last year, as a result of term now.

And then one last question, on motility when you use terms like slightly unfavorable this quarter and favorable last quarter, can you help us understand a little bit more specifically maybe put in terms of actual versus pricing as a ratio or some other metric?

Yes, I am trying to think I don’t think we’ve actually given you those metrics on an assumed basis. So generally, when I speak in the terms of slightly, I am talking in the range of $1 million, less than $2 million of variance which may or may not mean all happening in this period; it’s really looking at the change the delta year-over-year. So you are talking about, generally speaking of $1 million to $2 million range of exposure. When I use those terms, it’s really because I don’t see anything that’s an outlier or indicative of an ongoing change; anything that we have concerns about. Obviously, there is variability within the business. We made a mind that as much as possible to our extension reinsurance program, but we do have especially like I mentioned, with Canada, we do have several issued years where we had no reinsurance outstanding. And so, slight change in experience can cause some volatility. Again, so I would reiterate that, anywhere from $1 million to $2 million impact and nothing that I would say is indicative of an ongoing trend.

And when you say unfavorable, what are you using as a benchmark? So I think the block is a whole still favorable for original pricing assumptions?

As to the way, when we say unfavorable, it’s vis-à-vis all of our constabulary assumptions, when you look at all the issue years. So you have to tag your assumptions versus what we would have assumed as we deal or lean towards economics, obviously with changes very much every time. So if you look at perhaps what we are using for our current pricing assumption that might be a decent proxy versus what we may have used as a pricing assumption back in 1992. So vis-à-vis our current view towards pricing or mortality pricing. Those are the favorable versus unfavorable were generally I alluded to.

And the next question we have comes from Jeff Schuman of KBW.

A few questions about the letter of credit, the $5 million cost this year, can you give us any kind of ballpark for next year, assuming it goes high and can you remind us what years of letter of credit and the cost are expected to be please?

I am sorry, I missed the very last part of your question, but I’ll try to answer at least what I heard of your first part. The letter of credit will rise to just about $500 million right over a $500 million and it peaks at the end of 2014, beginning 2015 and then we will start to come down. So what I've quoted you is the rate for 2012. You can expect to see some increases between 2012 and say 2014 and then those fees will start coming down. On the average I think what we said in our earlier press release was that we think it's about $3 million a year, but so in the near term you will see some increases but they will come back down starting 2015.

Okay that was helpful and then the geography by segment how much of it is new versus legacy?

That's a really good question. It's going to be a mix, it will be a largely, largely the legacy piece. I have to get back to a thought for a second. It's going to be hard for you to see because we are going to have those fees embedded in our interest expense line. Our investment income line is going to be shifting the allocation with between Term Life and corporate and other just based on the statutory requirement. So from the net perspective I am not sure you are going to see much of a change, but you will see it coming through interest expense and I would think that since the business that we put in this program covers through 2010, you are going to see most of it going towards legacy.

Okay and then you ballparked the potential, the extraordinary dividend next year $130 million to $160 million, can you give us just a reminder on the more comprehensive picture. The other sources would be primarily what ISP earnings and then what are the major uses against that?

Sure, the other sources, obviously you look at the 2 segments just to be clear on cash flow perspective or free cash flow, our segment presentation does differ from our legal vehicle presentation or true legal vehicle financial statements. But we do think that we would have on an ongoing basis somewhere in the range of $30 million plus of free cash flow, potentially even higher depending on what we do ultimately with dividends, shareholders dividends, but at our current dividends pace it would be in excess of that. An excess was generated out of those non-Life businesses. We also have accumulated some level of excess capital within those businesses as well. I think it will be fairly transparent as we move forward as we are trying to move all of those funds to the holding company level on an ongoing basis. So I will be able to disclose to you what we've in fact moved to the holding company to ready ourselves for anything, future capital actions.

And so the non-insurance company sources are about $30 million, is that what you said?

At today's dividend capacity - at shareholders' dividend rates, I would say it's actually higher than that but with that said I don't know per se we've mentioned in the past that our goal would be to gradually raise our ongoing shareholder dividends to something that's more in line with our peer group, so we do have to wait how much we would like to use that free capital for a true ongoing shareholder dividend payment versus some kind of other form of capital action.

Okay, so the $30 million is a net number that's all inclusive of sources and uses outside of the insurance dividend?

That is correct and again it does assume potentially some increase over time in our shareholder dividend payment.

The next question we have comes from Mark Hughes of SunTrust.

I don't know if you touched on this earlier, but the mutual fund sales, was there any trend through the quarter that they get better or worse perhaps? And then just any observations you might have about your ability to sell those products with the economy where it is now, where the markets are at now, just curious to get your thoughts?

Yes, our mutual fund business is related to the retirement business and IRA business. So what you have is I guess just because of the way the IRA and RSBCs works you get stronger months, February and March and then you have in January. If you are referring to what was happening actually in the marketplace itself, we did not see it strengthen or decrease as it related to what was going on the marketplace. But again, we do lag the marketplace itself. So 3 to 6 months whatever is happening in the marketplace this month impacts our sales through the 6 months later on. But there was no discernible trends there.

And I think one of the things that is on the kind of more macro level, we are spending a lot of effort here to improve and shine a light more our investment savings business. As we've told you all before launching the new annuity with Lincoln, which our sales force really likes and has gone well as we've gone out and launched it. One of the things that we believe as I was mentioning about our event in Washington, D.C. is that focusing and growing and making our business better for our independent representatives to do the investment savings business long-term is an incredibly important piece of our plan and is in our view as we want to make that a more and more important piece of our business. And as we talked in D.C. having the ability to sit down with families in the true mainstream market and deliver mutual funds, deliver annuities and build our platform which makes that business better and better for our regional Vice President is very important. We talk a lot about recruiting, we talk a lot about life licensing, we talk about all of those things you know so much of these things, building that business and making a better for our people is an incredibly important piece of what we’re working on.

I did want to say I always thought there was a lot of danger on that February 29.

Other questions?

And then I am afraid that we have no further questions, we’ll go ahead and conclude our Q&A session. I’ll go ahead and turn the conference back over to management for any closing remarks.

Okay. Thank you very much. We appreciate your following us and we’ll talk to you next quarter.

And we thank you all for you time. The conference call is now concluded. We thank you all for attending today’s presentation. At this time you may disconnect your lines. Thank you.