Good morning, and welcome to the Primerica Second Quarter 2013 Financial Results Conference Call. All participants will be in listen-only mode. (Operator Instructions) Please note this event is been recorded. I would now like to turn the conference over to Kathryn Kieser, Senior Vice President of Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us today as we discuss Primerica's results for the second quarter of 2013. Yesterday afternoon, we issued our press release reporting financial results for the quarter ended June 30, 2013. 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 3 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 statement 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 material 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, 2012. This morning's call is being recorded and webcast live on the Internet. The webcast and corresponding slides will be available in the Investor Relations section of our website for at least 30 days after the presentation. After the prepared remarks, we will open the call for questions from our dial-in participants. Now I'll turn the call over to Rick.

Thank you Kathryn, and good morning, everyone. As you can see on page 4, during the second quarter of 2013, our operating revenues grew 4% and net operating income declined by $4.1 million, while operating income per diluted share of $0.71 was consistent with the prior year reflecting share repurchases. Strong investment and savings product performance and higher term life net premiums drove revenue growth in the quarter. Net investment income declined $2.6 million year over year; $1.6 million of the decline reflects a negative return on the deposit asset backing the 10% re-insurance agreement with Citigroup due to the impact of sharply rising interest rates on bond values. Share repurchases over the past 12 months as well as lower yields related to both the higher cash balances during the period and the run-off book yield in the low-rate environment also contributed to the decline. Second-quarter results were also pressured by higher expenses, including $1.6 million, related to the move to our new headquarters. Legal fees and expenses associated with the Florida retirement system arbitrations were $3.3 million, and impacted net operating earnings by $0.04 per diluted share in the second quarter. We believe these cases are without merit, and are vigorously defending them. During the second quarter, we were pleased to elect Gary Crittenden to our Board of Directors. As the former Chief Financial Officer of Citigroup, Gary was instrumental in Primerica's path to becoming a public Company. His financial acumen, incredible knowledge of our Company and of the financial services industry will be an asset to our Board. Shareholder value was enhanced in the quarter with the retirement of $155 million of common stock and warrants in June. This capital transaction positively impacted net operating income return on adjusted stockholders' equity, which increased from the first quarter of…

Thanks, Rick, and good morning everyone. I'll start by spending a few minutes talking about our convention, and then go into some of the sales force dynamics in the second quarter. During the second quarter, we hosted two big events. First was the ribbon-cutting ceremony in our new international headquarters in May, and then our biannual convention at the Georgia Dome in June. The convention has historically increased the energy level, excitement, and sense of team within the sales force, and this convention continued that tradition. The energetic environment, paired with the product, technology, and incentive announcements, created an excitement level that has increased post-convention activity. As you can see on page 5, this year's convention at the Georgia Dome had approximately 35,000 attendees from the US, Canada, and Puerto Rico. It took over 1,000 people to coordinate this event. Over the course of three days, reps attended 12 half-day workshops, including training based on each rep’s level as well as the technology initiatives. 41 exhibits of internal departments, as well as external product providers, were staffed with hundreds of exhibitors, who promoted recent initiatives and answered questions. Over 40 senior sales force leaders hosted team meetings, attended by anywhere from 200 to 4,000 reps at each meeting. At these meetings, they recognized teammates, provided training and challenged their team to grow. The convention culminated in the Georgia Dome, where motivational speeches were given and success was celebrated, as reps crossed the stage and received over 1,600 awards. During the event, we launched a website for our life insurance clients, enabling them to make payments and provide updated account information online. The launch of the new variable annuity and proprietary fixed indexed annuity offering through Lincoln National generated a lot of enthusiasm from our top investment producers. Our life insurance…

Thank you, John. Good morning everyone. My comments today will focus on our segment operating results, as well as company-wide investment asset performance, and insurance and operating expenses. I will conclude with a discussion of our future sources of distributable capital. Starting with the term life segment on slide six, in the second quarter term life net premiums increased 5%, and operating revenues increased 4% compared to the prior-year period. 2012 second-quarter results reflects the re-processing of certain re-insurance transactions that resulted in an increase in net premiums and a corresponding increase in claims for a net improvement to pre-tax operating income of less than $1 million. Excluding this re-processing, net premiums increased 10% and operating revenues increased 9% year over year. Allocated net investment income increased by 5%, as the growth in required statutory assets allocated to term life was partially offset by lower book yields. Incurred claims were in line with historical experience, but higher than the favorable results in the second quarter of 2012 by about $2 million, resulting in a 14% increase in benefit and claims, excluding the 2012 re-processed re-insurance transactions. Looking at the term life sub-segment, new term profit margins continue to expand with the leveraging of our fixed expense base, as the block of business builds. Benefits and claims grew in line with net premiums, while back amortization grew faster due to increased commission deferrals in recent periods and fluctuations in persistency. Partially offsetting this trend is that non-deferred insurance commissions continue to be lower than 2012 levels, due to changes in certain agent bonus programs, as discussed in previous earnings calls. Legacy pre-tax operating income was 7.1% of direct premium during the current quarter, improving from 6.7% in the previous quarter but decreasing from 8.1% in the prior-year period. We expect quarterly…

Thank you, Alison. Second-quarter results reflect our focus on driving long-term organic growth. Our recurring life insurance revenues, coupled with positive investment in savings products performance reflect the strong position of our core businesses. The ability to generate significant distributable earnings on annual basis underscores the strength of our franchise. The convention provided the environment and platform to launch our new products, technology initiatives, and incentive programs, and we are encouraged by the post-convention activity level. We must now build on that momentum to generate organic growth in order to positively impact future earnings and enhance shareholder value. With that, we will open it up for questions.

(Operator Instructions). At this time, we will pause momentarily to assemble our roster..And our first question is from Jeff Schuman of KBW.

Thanks. Good morning. Alison I was wondering if we couldfollow up a little bit on the comment you just made about the capital management. So, outside of the $40 million that originates from non-life activities, it sounds like distributable cash flow from the life is largely dependent on the reserve refinancings. And if the next on schedule for late 2014, does that essentially mean we should not look for much in the way of capital management until late 2014? Is that the right way to think about it?

I think Rick had mentioned earlier in his comments that we believe for 2013 our capital actions are complete with this recent transaction that we did. Our expectation is to be able to execute as soon as we get regulatory approval, another triple-X transaction sometime midyear 2014, in which case I'd say for the latter part of 2014 you should expect to see us trying to return that and redeploying that capital.

Okay. But given that that would be sort of a multi-year catch-up transaction, I mean, would the thought be that you would redeploy all of that in fairly short order with some of that kind of meted out over the next, I think you said something about meting out over the next two to three years, is that correct?

The idea would be to use whatever we're able to free up, if you will, to fund capital transactions over the course of the next several years. You know, Rick had mentioned earlier, and I will let him fill in any gaps to what I say. But one of the things is, obviously we now have completed our -- taking out our major concentrated shareholder. So, what we would look to do is create a strategy that is a little more consistent and ongoing in nature, often more predictable if you will, than our start and stop approach we've used historically since the IPO, especially given the fact that we no longer have those two specific concentrated shareholders. Additionally, I'm sure you're very well aware, around 2016, we do expect to see principle-based reserve may come into play. You know, obviously, there's a lot subject to change, including who will or will not approve principle-based reserves. But with that said, our current estimates do have us with a different financial profile, under PBR. So, we are looking to build a game plan that will fund us, if you will, through that period and then we'll be able to reassess what our ongoing needs will be from financing at that lower reserve level through PBR.

Okay. And can you help us at all with the ballpark of what the 2014 refinancing may be?

I think what we can share for you, we would expect to be able to redeploy the $150 million in 2014 and be able to maintain that general level over the course of the next several years.

Okay. That's very helpful. Thank you.

And our next question will come from Steven Schwartz of Raymond James and Associates.

Hey. Good morning, everybody.

Hello, Steve.

Hey. I have a couple on the convention. Alison, I don't think you said it. How much were the costs associated with the convention, and how were they allocated?

Yes. I don't think we actually disclosed the specific cost of the convention. But what I will say – and you don't ever see it pop up in a given quarter because we have – whether it be our incentive trips or the convention or the various meetings that we do throughout the year, we actually expense those ratably throughout the year under the concept that they match the premiums that are being getting generated. So, you won’t see a spike in, perhaps, the second quarter. And, I don't believe we have actually disclosed that specific amount. What I will say is, it generally is the offset of doing a second incentive trip in nonconvention years, so the amount we spend year-to-year is consistent.

Okay. That's cool. John, maybe you can talk about the – I'll call it the theory of the convention? If I remember correctly, you've got 35,000 people attending.

Yes.

I think that was way down from two years ago?

Two years ago, we were at about 40,000.

Okay.

And it's 35,000. And the difference Stephen was not in – the difference was we had – we were big, big recruiting heading into convention in 2011, so there were more unlicensed recruits there than there were at this event. Okay? So the difference was recruiting. So, it really was not a significant difference and there was really no difference in the crowd of licensed representatives that you had in the room who are actually the people who can really go out and do something.

Okay. And then are you willing to go a little bit deeper into what the short-term incentive is that you were talking about?

What we did – yes. I'll talk a little bit about– I'll talk a little bit about that and kind of the momentum that we saw coming out of the event and try to answer your question. When we did – 2011, which I think you were at the event, we did – crazy John went insane slammed the car hood, and did a two for one recruiting. You know it was $50 IBA recruit (inaudible) humanity. And we did recruit humanity. And we didn't see – in all honesty, as we talked about in the compensation change, conversations we had, the pull through and the licensing rate out of that, although it did lead to good life insurance sales, so it was not right -- mean – it was’nt something you went, "Oh my God. What a disaster!" Okay? But you certainly looked at it and that was what led us to go, "We got to focus on more on licensing, if we really want a long-term grow the size of the sales force." This incentive was for July only, okay, versus that incentive went July and August. It was much more a – it was much focused on recruiting and premium and being able to earn some additional income. It was not like a slash in the rate or whatever. So, in July, we had what we feel is very good production. Recruiting was up double digits, licensing double digits, insurance sales were up as well as security sales. So, it was a kind of walk and chew gum month where it wasn't just one thing jumped, things moved. Now, we did not run the incentive into August this time. And last August, we had a very strong recruiting August. Okay? And so, as we look at the comparables going forward in the month, we don't see July carrying forward through the entire quarter. But Stephen, what we're trying to accomplish is, kind of organic real growth in the field and not being crazy-John-went-insane-incentives-spiking things. And so, coming out of the July month end, you know, today, John feels good. Okay? You know, August we'll see how John feels at the end of the month, but you know today John feels good seeing the healthy trends that I'm seeing in what's going on in the sales force, so that was a very rambling typical John answer. But I hope it leads kind of got toward what you wanted to know.

I appreciate it. Thanks, everybody.

And our next question is from Sean Dargan of Macquarie.

Thanks and good morning.

Good morning, Sean.

Specific about your capital deployment in 2014 onward, you do have a limited flow. Your stock is trading at two times book. So, it seems to me that the – I guess -- desirability of repurchasing your stock on the open market is perhaps less than it is for other life insurers. I'm just wondering what your appetite for M&A is and whether the regulators have a view as to that deployment of capital versus share repurchase? And if there's anything out there culturally that would fit within Primerica?

Yes. This is Rick. When we did the IPO at the time we said that we didn't believe M&A was a viable strategy, and we still feel that way. Over time, we may re-assess that, but it is very difficult to find businesses that do fit into our culture in the same way. So, we are generating a lot of capital, and we do believe that share repurchases at this point are the appropriate way of doing. Obviously, that's something that you assess when the capital is available and we will do so. But right now, we still believe that is the right way of redeploying excess capital.

Okay. Thank you. That's all I had.

And our next question is from Dan Bergman of UBS.

Hi. Good morning.

Good morning. Hey. How are you doing, Dan?

Good. How are you?

Doing incredible.

Great, actually I just wanted to follow up on your earlier remarks. I think a couple of quarters ago, I think you said a quarterly recruiting level around the kind of 48,000, 49,000 level that you'd seen in the second and third quarters last year, and this quarter new recruits came in a little bit above the level. So, I just want to see if you had any updated thoughts around where new recruits may trend going forward? And specifically, was there any kind of one-time benefit from the convention in these numbers or would you view that kind of 50,000 level as a sustainable level following the kind of July incentive deal?

That is – that's a very good question. Sofirst to answer was there a benefit in the quarter, no, there wasn't. Okay? June was not a great recruiting month because we had everybody on buses to Atlanta. Okay? So, if anything, there was a dampening to the quarter on the recruiting. As I said, we had a very good July, not a crazy-John-went-insane July but a good-healthy July. I think we still feel good about that range that we said, but we're actually optimistic that we may do better than that. Okay? So that's kind of where we are right now. And you know in complete candor, which is always my 100% goal on you guys who are very good in your following of us, is we had a good incentive for July, not a crazy incentive, and we had good results in July that we all feel very good about kind of the health of the numbers in how they look. We don't have that running in August, and we kind of will see how that shapes out and stuff, but I think we still feel very comfortable with that estimates. But if anything, we feel comfortable that we may do a little better than that estimate.

Okay. Great. That's very helpful. And then, actually I want to switch gears a little bit. I was hoping you could provide a little more color on how you might expect variable annuity sales to trend going forward, given the kind of recent movements with the expirations of the met exclusive and the introduction of the new Lincoln product this summer?

Sure. Let's talk about that. Yes. I mean as you noted, Met has changed the income benefits on their products making them a little bit less attractive for people who are looking for the income benefit. They still do have the open architecture, so we think the product is very appropriate for our people who are looking to do – looking towards not the income benefit but the investment options on it. The Lincoln introduction of their choice plus product really does fill that hole and then some for people who are looking for the income benefit. Dynamics of -- we actually think we have a better product portfolio depth and offering than we had previously. But the one thing that I will – that I mentioned in my comments was, last year we did have significant transfers of clients from older contracts into newer contracts that will be somewhat of a headwind for the third quarter. But, overall, we feel good relative to the VA volume. The other dynamic that you do see is with the continuing improvement in the equity markets, the guarantees in variable annuities are a little bit less desirable, and people are moving into the mutual fund business, and that is a lot (inaudible) driving the mutual fund sales.

Very helpful. Thank you.

And the next questions will come from Mark Hughes of SunTrust.

Hi. Thank you very much.

Hey, Mark.

Hey. This legal spending, do you expect it to be at the same level in Q3? Any judgment on how long that is going to continue?

Sure. Let me just sort of comment about where we are on that. Currently, there are 22 pending arbitrations. We have completed three this year, We have six more scheduled for this year. And at present, we have five scheduled for 2014 with probably more to be scheduled. So, the likelihood is that the spending will continue at about this rate through 2014.

Is there any chance some judge somewhere may just toss out this whole thing case or these cases?

Well, it is not up to a judge to toss it out. They are arbitrations, and you know we have completed three arbitrations; in two public employee received no monetary award; in the third, they received a small monetary award that really was inconsequential to the company and considerably less than what they had experienced. So we're just taking them one at a time.

Okay. And then the legacy term premium seems to be persisting pretty well. Is this better than you had expected? Should we look at this persistency, at least that we have seen here lately as a good rate going forward?

I think what I said in my prepared comments was we expected the direct premium to be 3% to 5%, and I believe we were well within that range, though this is very much within what our expectations would be.

Yes. Okay. And then – non-renewals, you have done very well with that measure lately. John, any reason to think that will change going back to the more historically normal level?

I'll let Rick speak in for a second to you guys about kind of the rate of terminations and stuff. You know – we believe that the reason for that is that the same reason mutual fund sales were up, middle income market has a little more confidence about things, and biggest hit we believe we took on non-renewals during the great recession was, people had to pay money to renew their license, and if they hadn’t made a sale lately, they go -- that is one thing I could not do. So, we believe that is kind of at the rate, but with seasonality related to it. And Rick, why don't you help a second and give them a little bit more guidance.

Yes. I do think if you look at the rate of terminations and non-renewals as a percentage of the beginning sales force, for the second quarter it was 8.3%. I believe it is going to sort of bounce around between 8.5% and 9%, we might see some seasonal fluctuation in that. Given what happened, hopefully it will be at the lower end of the range, but we will see it unfold.

Thank you.

All right. Okay. If there are no other questions thank you very much. Have a good day.

Have a great day, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.