Good morning and welcome to the Primerica Incorporated Fourth Quarter 2012 Financial Results Conference Call and Webcast. Our 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, IRO and SVP of Investor Relations. Ms. Kieser, please go ahead.

Thanks, Amy. Good morning, everyone. Thank you for joining us as we discuss Primerica's results for the fourth quarter of 2012. Yesterday afternoon, we issued our press release reporting financial results for the quarter ended December 31, 2012. A copy of the press release is available on 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 to make 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 been 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 may 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 risk and uncertainties that could cause actual results to differ materially from these statements. For a discussion of these risks please see the risk factors contained in our Form 10-K for the year ended December 31, 2011. This morning's call is been recorded and webcast live on the internet. The webcast and corresponding slides will be available in the investor relation section of our website…

Thanks, Rick. Hi, everybody. It's great to talk to you from Primerica headquarters here. In 2012, we implicated incentives and innovation designed to build product distribution and drive long-term sales growth with sales force of [gravity]. Last year was our highest year in Investment and Savings Products sales since 2007. The enhancements made in 2012, our ISP business have positioned us to capitalize on the changing tide in investor confidence. In our Investment and Savings Products business, we continued the implementation of the new managed account product and expanded our product offerings with the addition of fixed indexed annuities. In 2012, we executed several initiatives to grow our ISP business. It's part of our ongoing product development process, we assembled a working group of top investment producers to help identify opportunities to enhance our ISP platform to generate incremental growth. We also systematically targeted top life insurance producers that were relatively small investment producers to explain this income opportunity of not fully integrating Investment and Savings products into their sales' [reputations]. We were also proud to earn the Primerica was one of a firms awarded DALBAR's Mutual Fund Service Award for leadership and customer service in 2012, marking the 10th year in a row we have received the sustained recognition. As we move into 2013, we will build on the new products success achieved in 2012 by expanding our annuity product offerings. We are currently working with Lincoln Financial on a new private label a fixed indexed annuity product that will be launched later this year. Beginning in July, we have the opportunity to expand our variable annuity product offerings when our exclusive sales agreement with MetLife expires. We are completing extensive research on the variable annuity marketplace. We will give you more information once we've worked through the details.…

Thank you, John, and good morning everyone. My remarks today will focus on our segment operating results followed by an overview of our insurance and operating expenses as well invested assets. Staring with eight, in the fourth quarter term life operating revenues increased 14% driven by 16% increase in net premium as our new term business continued to build over the prior year period. Accordingly, allocated net investment income increased with the growth in required statutory assets allocated to the Term Life segment year-over-year. A 19% increase in Term Life operating income before income before income taxes over the prior year period was driven by revenue growth and lower non deferred commissions. Term Life results also reflect growth in premium related and employee related expenses as well entire interest expense associated with the Redundant Reserve Financing completed in March of 2012. Total incurred claims were slightly lower versus the prior year period, largely due to a $3.9 million charge related to our search of public death records in the fourth quarter of 2011. Excluding this charge incurred claims increased over the prior year period due to higher experience and growth aging of the enforced block. Persistency experience in the fourth quarter improved modestly over the prior year period. On a sequentially quarter basis operating income before income taxes declined by 9% as growth in net premium was more than offset by higher DAC amortization linked to seasonally worse persistency in the fourth quarter. The previous quarter also reflected non-recurring favorable items including, annual true-up of employee benefit accruals and higher net investment income from called securities and previously defaulted investments. Turning to slide nine, new term fee tax operating income has moved from breakeven a year ago to a positive 11% of direct premium in 2012. The leveraging of our…

Thanks, Alison. Primerica is a strong company with significant competitive advantages. As the largest independent financial services marketing organization in North America, we are uniquely positioned to effectively assist Main Street families with approachable finances. There has never been a bigger need for what Primerica does to help under serve middle-income families become properly protected, financially independent through our product offers and our business opportunity. In 2012, we delivered over $1 billion of debt claims to our clients from Primerica Life Insurance Company. That is rated A+ by A.M. Best. A.M. Best also named Primerica top Industry Innovator in 2012 for our cutting edge use of technology in our Term Now life [edition] product. We also climbed the broad selection of investment products through our partnerships with Invesco, Legg Mason, American Fund MetLife and Lincoln Financial, and our mutual fund offerings 148 Morningstar four and five star rated mutual funds. We are proud of our sales force leaders and how we position Primerica for future growth. Rick and I continue to be confident in the strength of our business and our ability to execute a strategy that positions Primerica for future success. With that I'll turn it over to questions, operator.

Thank you. (Operator Instructions). Our first question is from Paul Sarran with Evercore Partners. Go ahead.

I was wondering first if we could get an update on capital plans for 2013 that you are still expecting $130 million to $160 million ordinary dividend from the [let go]. And any other sources or uses of capital kind of the major buckets?

At this point, we are looking at, as we said $130 million to $160 million. That will become available in the second quarter, and at this point our plan is to go ahead and utilize that for stock repurchases and that is the extent of the capital plans in 2013.

And then on the recruiting results for the quarter, I guess in the past you have talked about running the sales forces kind of compared to steering a battle ship, did you over steer in your focus on license reimburses recruiting?

Let me just, kind of give you the answer. I mean, I'll walk you through some dynamics of how I really look at that. As I have said many times, Primerica is a, you have to steer things and you have to charter chores and you have to see where results take you in that. I think as I look at the company right now, and just looking at the fourth quarter, I mean, really December was a low recruiting month, and the other months were not as much as December, but as I look at the thing, I would say right now, we are on a run rate of kind of a 14,000 recruit a month company. As I said in getting the thing back to the second and third quarter of year ago, that means we need to get it to a 16,000 recruit. January was better, okay? As I look at those important thing where we are at is we had significantly increased licensing, significantly and we will to grow recruiting not gush recruiting. If we wanted to come up with something where I just gushed up recruiting, so you guys would go wow, great recruiting, we could do that. We don't want to do that. We want to grow recruiting and keep our licensing ratio strong so that we are growing the sales force. So, as I am looking at this quarter, this is we kind of talk, I am not comparing it to the first quarter of the year ago. I am comparing it to our run rate coming off of last year and getting toward that rate I am talking about of kind of at the second and third quarter of last year and having our licensing rate pull through. So, as I look at things, right now we have clearly with the messaging, with what we did at our conventions and stuff, what we did at Boca, I believe we have put a healthy focus back on recruiting, but keeping strong emphasis on licensing and I think as we hit towards the convention and get towards the dome in Atlanta, I think I'll have a very much clear picture of kind of where exactly we steered it to, but I think at this point clearly we've made a major improvement in the licensing, we got that message through. We didn't want to just recruit a ton of people and have them turned into sales leads and I think we got to really observe kind of how this quarter compares to last quarter and what we are driving toward at the dome in our recruiting, so that's a best way I could give you the kind of compare.

Right. Good. Thanks.

Our next question is from Jeff Schuman with KBW. Go ahead please.

I absolutely appreciate that you don't want to speculate any outcomes in the arbitration, but I was wondering if I could just ask a few sort of factual questions about the process. I assume these arbitrations are just all sort of individual customer by individual customer, is that how it works?

Yes. Actually, let me provide a little bit more detail on that. We have 22 pending arbitrations, five state court cases and one federal court case. those proceedings represent 94 individual clients, so there are some arbitrations where there's just one or two clients. There's others where there is a groups of five and seven clients, so it's not one-on-one. They have puts on together. If you look at those cases, 15 of the arbitrations are scheduled for 2013, and let me just give you a little bit more detail. Two in the first quarter, seven in the second quarter, four in the third quarter and two in the fourth quarter to give you a little bit of the timing dynamic as to how we see things. The other thing to know is the law firm that has solicited or advertised for these clients has told us that they have 150 additional clients where no cases have been brought at this point in time, but it's unclear how many will be brought.

Not typically, I am going to take the usual non-John, usually, I am the liberal arts and Rick is specific. When he is saying client, these are the attorney's clients, not Primerica's clients, okay? -Most of these are people that never had anything with Primerica. There were people that saw one of our representatives, so when you make sure you understand what he means when he say clients. It's an attorney's client, not a Primerica client.

Okay. That's helpful. I am not familiar with thinner arbitration generally, or do you think, so you sit down, you have a hearing and then there is a decision of fairly short order and there's no re-question there? How does that work?

Yes. You have a hearing. There are typically three arbitrators that listen to the hearing and they go ahead and make the ruling and that ruling pretty much stands.

Okay. Thank you. Then I think, Alison was providing a lot of good figure that didn't keep up with all of my. Alison, I understand, did you give us an estimate of what the legal expenses were going to be in the first quarter?

What I said was that we felt we would be about $1 million higher than we were in the fourth quarter, so simple math there. I think the answer would be yes.

Our next question is from Dan Bergman with UBS.

I just want to see if there is any color you could provide on how you expect variable annuity sales to trend after the exclusive deal with Met expires in July. I know a number of the providers and then going back in this area, I think Met was projecting a 40% drop in 2013, so just want to see if you got some color on what you see that going.

Sure. Just a couple of comments on that, one, we have continuing discussions with Met about our production plans and what we are expecting to do, and although they've announced sort of the 40% cutback, we have not had any sort of allocation or cutback relative to our expected volumes. Our exclusive contract ends with them mid-year and we are in the process of actually doing an exhaustive study of other [VA] producers and intend to take advantage of that exclusivity ending and offering additional products and we feel pretty confident that the additional products will be exciting to our sales force and so I don't see a negative impact after that contract ends.

Okay. Great. Then just moving to fixed indexed annuity product, I know sales grew nicely in the quarter I think they are up about 37%, sequentially after a smaller increase, which is 10% last quarter. So, just now that we are about a year from that product launch, I just want to see if there's any more color you can give on what drove the strong growth this quarter and what type of growth in that product you might expect to have?

I think in just growth in that business has been of several things, the biggest being the focus of our sales force that one of the things that we have cautiously, okay, driven is, and one of the things we saw is kind of a weakness in the system after the loss of the smart run business and a significant amount of cash forget the marketing to a client and the significant loss of cash or sales force gives what we saw and what we're [awarding] to sell our sales force was the stability of recurring income coming from the ISP business. I believe, that the biggest thing that drove the increase was, A, messaging and marketing from here, but more importantly adoption by our senior sales force leadership that this is a very important tool to not only serve their clients, but to build their businesses and build recurring income for their sale forces. I mean, not specific to the fixed indexed annuity, but of the examples I just used quite a bit in our regional vice president meetings was one of our senior, really good securities producers who now has over 15 million of assets under management in the managed accounts program. That's about $150,000 a year of residual income for him when the year starts, okay? And, so there has been, it really is a rising tide [boats], okay so the market's been good, hallelujah, okay? And the focus of our senior leadership many of whom and it's not just the focus of the guys who are National Securities' producers is the focus of our builders and our sales force of implementing these products into their business, so that it drives and grows cash flows for their team, I believe is the biggest, so the good [lord's will] and the markets corporate, if we are able to continue to drive that, we feel very good about those businesses.

Another item that occurred in the fixed indexed annuity is, there was a product change announced in the fourth quarter and we did receive incremental volume on agents trying to get access to the old product versus the new product, so there was somewhat of a spike in volume in the fourth quarter, but we do feel as John said very good about the product, for our conservative clients it provides great deal value.

Okay. Great. Any sense on just how much of that pull forward was in that sales number or is hard to fare that out?

It's fared it out. I mean, there is a lot of excitement around the product and the sales force. As John said, he is very much focused on it, so it's hard to distinguish, but I do think there was some volume from that pull forward.

Our next question is from Sean Dargan with Macquarie. Go ahead.

Thank you. Good morning. Just as I think about your capital position, 600% RBC is twice the bottom end of your long-term range. I think new production has been lower than maybe was assumed at the time of the IPO. Is there any sense of maybe you could speed up the amount of time it takes to get to your long-term goal of 300% to 350% RBC?

Well, just to be clear, one of the reasons we had comps up a bit in the fourth quarter and we didn't go into this lot detail, but it's pretty technical but it had to do with the x factors on deficiency reserves, so for you actuarial folks out there you'll know what I am talking about, but it was really because of [we've] had pretty in recent past stronger mortality experience, so we are allowed to remove some of the excess reserve if you will associate it with mortality through the deficiency reserve component, so a little bit of that. It wasn't necessarily expected to how we got to the yearend calculation. When we do the dividend that Rick described, that is really in hindsight or in foresight in our attempt to go ahead and bring that RBC ratio closer to where we think we need to be on a longer term basis. The one thing that I'll remind you of that we've discussed in the past that we are in a slightly different situation than what you use to see with some other insurers who are doing XXX transaction, we basically took in a mature block of business that was near the peak and did that transaction early last year, so we will need to start funding, if you will, the economic reserve basically over the course of the next few years, so we do need to hold to capital in order to do that, so we have considered all of that in our long-term target in the decision to come up which is $130 million to $160 million that Rick mentioned earlier and long-term business plan.

Okay. Thank you. That was very helpful. I was just thinking about the tension between recruiting and licensing. Do you ever get sense and you are hitting a saturation point at which the people out there and population that you've reached who can pass the exams is maybe what it used to be and a follow-up question, you had any success in convincing any state departments to establish a Term Life only exam?

Go to the first is, of the things I worry about, which by the way are immense. One of the strengths of Rick and I is, he worries about everything. I don't worry about, and I worry about everything he doesn't worry about in between the two of us we were about worrying about everything that other the things that absolute. Just walk out of where go out next time you go to Home Depot, Walmart, just ask people you ever heard of Primerica. 95% never ever heard, I mean saturation is not our issue. Okay? if you look out right now, I believe one of the things I just get a whole presentation on is I believe our opportunity to bring young people into this business, I mean anybody that has kids under 20s, my boy is, the world is full of more college educated bar tenders than in any time in my lifetime. That is not the issue. The issue in all honesty is focus and what is a recruit. What is a recruit? Is a recruit a lead, okay? Because, it needs to be both things, clearly, you want to make sales with the new recruits market, but we clearly saw after the convention and crazy John went insane and it's two for one recruiting and all that stuff, we saw that we had truly steered too far direction and we needed to make an adjustment, but saturation, I got to tell you of the issues that I ever worry about, you look at the number of people that are recruited and people need opportunity now. That's not the concern. On the second thing, we've been significant improvement in state licensing, all around the where it's just gotten better and easier for someone to get a license…

Our next question is from Steven Schwartz with Raymond James. Go ahead please.

You're reminding me of Walmart kiosk, [socks] and stocks.

Yes. And, I did work there and I don't it's going to work now, so.

So, if I may, Alison, it was mentioned I don't think the number of, but I don't know if you want to put a number on it, but the VA incentive payments, could you maybe say how much that was and then I want to ask some more questions about it for us.

Sure. It came in about $1.3 million, less than it was last year. This year it was a little over $1 million. The year before it was a little over $2 million, so that's the relative range.

Okay. Thanks. Then just to go back to FRS, so just so I understand what's going on. I am not getting it. These are agents of yours, right? But they haven't sold any product of yours?

No.

No insurance, no ISP products or anything like today, these people. So, how did they get involved in all this?

Okay. Let me just sort of give a little bit more color on that, because at first stance it is quite hard to understand. Our agents do serve the middle income market and in Florida, they often meet with government employees who are very much middle-income, and part of when they were talking with government employees, one of the questions that government employees have is about their state pension plan and the choice they of switching from pension plan to an investment plan. Just in the nature of being in the house our agents answer those questions to the extent that it's appropriate, so that's how we come about talking about it. What you have is a law firm that went out and advertised for any person who spoke to a Primerica agent. Please come forward and they have this theory that it was inappropriate to switch from the pension plan to the investment plan and saying that our agents are the ones that advised the client to do that even though they never became our client. That's sort of the broad background in the allegation.

And how that could happen? A lot of our agents are retired state troopers or retired people that were teachers and they talked to people they know. And, so, it's a very unique case. We've never had anything like it, okay? And I think other than that, Rick, described it very well.

Okay. And, your lawyers, I don't know if you want to say this out loud, but your lawyer suggest what is your defense?

Again, it is probably not appropriate to go into sort of legal theories, but again just trying a little bit more color on, the state of Florida devised its retirement program very specifically having two programs, the pension plan and a investment plan. The investment plan option has been available for 11 years. The state of Florida has placed no limitations regarding when employees can make an election to go from the pension to the investment plan and there's a host of reasons employees might do that. As an example, if an employee has a desire to leave their retirement funds to their children in the lump sum, they can do that in the investment plan. They can't do that in the pension plan. So, there's many other reasons why it makes sense for them to be in the investment plan. The state provides all sorts of information, a 100 numbers these clients have taken advantage of that information and again the attorneys are just doing a mathematical exercise not taking it into account the other considerations out there, so thus we feel pretty good about our.

I really think that's about as far as we should talk about or whatever.

Okay. That's fair. If I can ask just one more, it sounds like you've got individual cases, individual arbitrations, little groups, is there a class action possibility?

No. These are arbitrations and our plan is to defend vigorously. Steven, I think that' s just as far as we need.

Our final question is from Mark Hughes with SunTrust. Go ahead please.

Yes. Thank you. I guess, you could take it is a testament of the preciseness of your sales force that they have such a broad impact in Florida.

Yes. Also, it's a testament to attorneys, so.

That goes without saying. Alison, you had discussed operating expense uptick. You had mentioned $3.5 million. Was inclusive of the extra $1 million in legal expenses, or was that just the underlying conversation is that sort of thing?

That was a great question, because as I was awaiting it. I realized it was not particularly clear. I think the best way to look at it would be to add those two numbers together, so most likely given the what we know today with the expenses on the legal side and some of the other things we just know our planned in the first quarter (Inaudible) $4.5 million in total.

How much of that I think was the equity compensation. You pulled that out for the adjusted EPS?

Yes. Actually when it's equity compensation, it's specifically a payroll tax item, so the equity compensation is obviously accrued throughout the year, but when we go ahead and do those vest, so there are a larger components that's associated with all the crunching if you will with your payroll taxes, so I would say about $1 million of it was that.

So, $1 million of that $4.5 million will be kind of adjusted out?

I wouldn't say adjusted out. It's just it will repeat for say.

Okay. I think I understand. You talked about the legacy firm business margin might decline going forward. The pace over the last year looks like is about 300 basis points. Is that a reasonable pace to think about or 2013, is that ballpark-ish?

300 basis points? I mean, I have to go look in the supplement, but I think that sounds a little bit speed. As the margins gone from I think somewhere in the mid-8 to the low-8 type of trend, I mean, there's definitely month-to-month fluctuations, but it's going down more in that sort of range, so maybe in that 30 basis points. I don't know. Did you mean 30 basis points?

Yes. I am looking at, well, I have got operating income for the Term Life legacy business, and we can talk about it offline, but from your perspective the magnitude of the margin decline, was it similar to what we would have seen over the last year?

Yes. It. The only increase, which is what I highlighted is that there is the. We did do the redundant reserve financing in 2012 and that did increase our expenses to obviously [count] in 2011.

Right. Okay. Then, John, a follow-up question for the convention, what will we see in terms of recruiting? Is this going to be another big recruiting even like we have in 2011? Sounds like you probably intend to be a bit more selective. How should we think about that?

Selective masses, we want the convention to be gigantic, okay? And, we are moving into right now just geared up in Boca promoting two things. Number one, the grand opening of our new headquarters, we are running a contest for people to come in for the integral ribbon cutting and the opening of the new theater in the home, mall office and all of that, so we are driving towards that even and we are going to drive like crazy towards the dome. We want to have a big crowd and launch the greatest contest ever run in the history of America, okay? So, we've want to drive in a healthy way toward recruiting, trying to as I have said many times to you the only the hardest thing in the world to do walk in [shoe]. I mean, where you are keeping, where both ores are hitting the water instead of just paddling on side and spinning in circles and we want to have healthy growth in recruiting, but we want to use that convention as a giant magnet to draw in a lot of people, so no. It's not like we are going hey this year, we just want have the people there and it ought to be okay. I am about to pump up the volume in a pretty major and a massive way. You guys will have a great time.

Just to elaborate, if you are referring to the promotion that we had coming out of the convention, where we had the half-priced, at this point we don't have any intention of doing that again, but we'll make that judgment as we get closer.

I'll be there you'll have me there.

Sure. We'll have your reserve seat. So, guys if that's all, thank you so much for your time and let's hope you all have a great, I hope the ones of you in the Northeast, lots of bread and milk so you don't freeze to death over the next few days. Hey, everybody have a great day. See you guys.

Bye.

The conference has now concluded. Thank you for attending.