PRE 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  x                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

x Preliminary Proxy Statement

 

¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

¨ Definitive Proxy Statement

 

¨ Definitive Additional Materials

 

¨ Soliciting Material Pursuant to §240.14a-12

    PRIMERICA, INC.    

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

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¨ Fee paid previously with preliminary materials.

 

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

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LOGO

April 5, 2013

To our fellow stockholders:

It is our pleasure to invite you to attend the 2013 Annual Meeting of Stockholders of Primerica, Inc. to be held on Wednesday, May 22, 2013 at 10:00 a.m., local time, at the Primerica TV Theater located in Primerica’s home office, One Primerica Parkway in Duluth, Georgia. The Annual Meeting will begin with a discussion of, and voting on, the matters described in the attached Proxy Statement and Notice of 2013 Annual Meeting of Stockholders, and will be followed by our report on Primerica’s financial performance and operations.

The Proxy Statement is critical to our corporate governance process. We use this document to discuss the proposals being submitted to a vote of stockholders at the Annual Meeting, solicit your vote on such proposals, provide you with information about our Board of Directors and certain executive officers, and inform you of the steps we are taking to fulfill our responsibilities to you as stockholders.

Your vote is important to us. Your broker cannot vote on certain of the proposals without your instruction. Please inform us, or your broker, as to how you would like us to vote your shares on the proposals set forth in the Proxy Statement if you do not plan to attend the Annual Meeting in person.

We look forward to seeing you at the Annual Meeting. For your convenience, directions to the Annual Meeting are provided on the back of this document.

If you cannot attend in person, you may listen to a live webcast of the Annual Meeting at our investor relations website, www.investors.primerica.com. On behalf of our management and directors, we want to thank you for your continued support of, and confidence in, our company.

Sincerely,

LOGO    LOGO
D. RICHARD WILLIAMS    JOHN A. ADDISON, JR.
Chairman of the Board and    Chairman of Primerica Distribution and
Co-Chief Executive Officer    Co-Chief Executive Officer

 


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NOTICE OF 2013 ANNUAL MEETING OF STOCKHOLDERS

 

Date and Time

May 22, 2013 at 10:00 a.m., local time

 

Place

The Primerica TV Theater located in Primerica’s home office, One Primerica Parkway, Duluth, Georgia 30099

 

Items of Business

  To amend our Restated Certificate of Incorporation to declassify our Board of Directors (Proposal 1);

 

   

To amend our Restated Certificate of Incorporation to remove the supermajority vote required to amend certain provisions of our Restated Certificate of Incorporation (Proposal 2);

 

   

To amend our Restated Certificate of Incorporation to remove inoperative language relating to certain former rights of Citigroup Inc. (Proposal 3);

 

   

To elect the nine directors nominated by our Board of Directors and named in the accompanying Proxy Statement if Proposal 1 to declassify our Board is approved (Proposal 4);

 

   

To elect the three directors nominated by our Board of Directors and named in the accompanying Proxy Statement if Proposal 1 to declassify our Board is not approved (Proposal 5);

 

   

To ratify the appointment of KPMG LLP as our independent registered public accounting firm for fiscal 2013 (Proposal 6); and

 

   

To transact such other business as may properly come before the Annual Meeting and any adjournments thereof.

 

Record Date

March 25, 2013. Only stockholders of record at the close of business on the record date are entitled to receive notice of, and to vote at, the Annual Meeting.

 

Proxy Voting

Please vote your shares at your earliest convenience. This will ensure the presence of a quorum at the Annual Meeting. Promptly voting your shares will save the expense and extra work of additional solicitation.

 

E-Proxy Process

We are taking advantage of the Securities and Exchange Commission rules allowing companies to furnish proxy materials to stockholders over the Internet. We believe that this “e-proxy” process expedites your receipt of proxy materials, while also lowering the costs and reducing the environmental impact of the Annual Meeting. We anticipate that a Notice of Internet Availability of Proxy Materials will first be mailed to our stockholders on or before April 5, 2013. This Notice will contain instructions on how to access the Proxy Statement and the 2012 Annual Report to Stockholders and how to vote over the Internet, or how to request and return a proxy card by mail. Please refer to the Notice of Internet Availability of Proxy Materials, proxy materials e-mail or proxy card you received for information on how to vote your shares and to ensure that your shares will be represented and voted at the Annual Meeting even if you cannot attend.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 22, 2013. Our Proxy Statement and the 2012 Annual Report to Stockholders are available free of charge at www.proxyvote.com.

By Order of our Board of Directors,

 

LOGO

PETER W. SCHNEIDER

Corporate Secretary

Duluth, Georgia

April 5, 2013


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PROXY SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information you should consider, and you should read the entire Proxy Statement carefully before voting.

We anticipate that a Notice of Internet Availability of Proxy Materials containing instructions on how to access this Proxy Statement and the 2012 Annual Report to Stockholders and how to vote over the Internet or how to request and return a proxy card by mail will first be mailed to our stockholders on or before April 5, 2013.

Annual Meeting of Stockholders

 

    Date and Time

May 22, 2013 at 10:00 a.m., local time

 

    Place

The Primerica TV Theater located in Primerica’s home office, One Primerica Parkway, Duluth, Georgia 30099

 

    Record Date

March 25, 2013

 

    Voting

Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director nominee and one vote for each of the proposals to be voted on.

 

    Admission

Attendance at the Annual Meeting will be limited to stockholders of Primerica or their authorized representatives as of the record date.

Voting Matters and Voting Recommendations

See “Matters to be Voted On” beginning on page 7 for more information.

 

Proposal

  Board Vote Recommendation

1.

  Amendment of our Restated Certificate of Incorporation to declassify our Board of Directors   “FOR”

2.

  Amendment of our Restated Certificate of Incorporation to remove the supermajority vote required to amend certain provisions of our Restated Certificate of Incorporation.   “FOR”

3.

  Amendment of our Restated Certificate of Incorporation to remove inoperative language relating to certain former rights of Citigroup Inc.   “FOR”

4.

  Election of nine directors (if Proposal 1 is approved)   “FOR” each director nominee

5.

  Election of three directors (if Proposal 1 is not approved)   “FOR” each director nominee

6.

 

Ratification of the appointment of KPMG LLP as our independent registered

public accounting firm

  “FOR”

 

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PROXY SUMMARY

 

Amendment of Our Restated Certificate of Incorporation to Declassify Our Board of Directors (Proposal 1)

See “Matters to be Voted On – Proposed Amendments of Our Restated Certificate of Incorporation – Proposal 1: Amendment of Our Restated Certificate of Incorporation to Declassify Our Board of Directors” beginning on page 7 for more information.

We are asking you to adopt and approve an amendment to our Restated Certificate of Incorporation to declassify our Board of Directors. Our Board believes that declassification is advisable and in the best interests of our stockholders. Our Board, upon the recommendation of the Nominating and Corporate Governance Committee of our Board (the “Corporate Governance Committee”), has unanimously approved the proposed amendment and recommends that our stockholders adopt and approve the proposed amendment.

Amendment of Our Restated Certificate of Incorporation to Remove the Supermajority Vote Required to Amend Certain Provisions of Our Restated Certificate of Incorporation (Proposal 2)

See “Matters to be Voted On – Proposed Amendments of Our Restated Certificate of Incorporation – Proposal 2: Amendment of Our Restated Certificate of Incorporation to Remove the Supermajority Vote Required to Amend Certain Provisions of Our Restated Certificate of Incorporation” on page 9 for more information.

We are asking you to adopt and approve an amendment to our Restated Certificate of Incorporation to remove language requiring the affirmative vote of at least 80% of the votes entitled to be cast in order to amend certain provisions of our Restated Certificate of Incorporation. Our Board of Directors believes that removal of this language is advisable and in the best interests of our stockholders as it will cause our stockholders to have greater control over certain provisions that govern us. Our Board, upon the recommendation of the Corporate Governance Committee, has unanimously approved the proposed amendment and recommends that our stockholders adopt and approve the proposed amendment.

Amendment of Our Restated Certificate of Incorporation to Remove Inoperative Language Relating to Certain Former Rights of Citigroup Inc. (Proposal 3)

See “Matters to be Voted On – Proposed Amendments of Our Restated Certificate of Incorporation – Proposal 3: Amendment of Our Restated Certificate of Incorporation to Remove Inoperative Language Relating to Certain Former Rights of Citigroup Inc.” beginning on page 10 for more information.

We are asking you to adopt and approve an amendment to our Restated Certificate of Incorporation to remove language that became inoperative when Citigroup Inc. (“Citigroup”) ceased to own specified amounts of our outstanding common stock. Our Board of Directors believes that removal of this language is advisable and in the best interests of our stockholders as it will improve the readability of our charter without impacting the Company’s governance. Our Board, upon the recommendation of the Corporate Governance Committee, has unanimously approved the proposed amendment and recommends that our stockholders adopt and approve the proposed amendment.

 

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PROXY SUMMARY

 

Election of Nine Directors if Proposal 1 is Approved (Proposal 4)

See “Matters to be Voted On – Election of Directors – Proposal 4: Election of Nine Directors if Proposal 1 is Approved” and “Board of Directors” beginning on pages 12 and 24, respectively, for more information.

The following table provides summary information about each director nominee in the event that Proposal 1 is approved as recommended by our Board. Each director is elected by a plurality of votes cast and, if elected pursuant to this proposal, will be elected to serve a one-year term.

 

Name   Age     Occupation   Independent   Committees

John A. Addison, Jr.

    55      Co-Chief Executive Officer, Primerica,
Inc.; Chairman, Primerica Distribution
  No   None

Joel M. Babbitt

    59      Chief Executive Officer, Mother Nature
Network
  Yes   Corporate Governance

P. George Benson

    66      President, The College of Charleston   Yes   Audit, Corporate

Governance

Michael E. Martin

    57      Partner, Warburg Pincus & Co.;
Managing Director, Warburg Pincus
LLC
  Yes   Compensation

Mark Mason

    43      Chief Executive Officer, Citi Holdings   Yes*   None*

Robert F. McCullough

    70      Private Investor   Yes   Audit, Compensation

D. Richard Williams

    56      Chairman and Co-Chief Executive
Officer, Primerica, Inc.
  No   None
Barbara A. Yastine     53      Chair, President and Chief Executive
Officer, Ally Bank
  Yes   Audit, Compensation

Daniel A. Zilberman

    39      Partner, Warburg Pincus & Co.;
Managing Director, Warburg Pincus
LLC
  Yes   Corporate Governance

 

  *  

Mr. Mason will not be considered an independent director under applicable rules until April 7, 2013, which will be the three year anniversary of our initial public offering (our “IPO”). He is therefore not eligible to serve on any Board committees until that date.

Each director nominee is a current director and attended at least 75% of the aggregate of all meetings of our Board and each committee of which he or she was a member during the year ended December 31, 2012 (“fiscal 2012”).

 

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PROXY SUMMARY

 

Election of Three Directors if Proposal 1 is Not Approved (Proposal 5)

See “Matters to be Voted On – Election of Directors – Proposal 5: Election of Three Directors if Proposal 1 is Not Approved” and “Board of Directors” beginning on pages 13 and 24, respectively, for more information.

The following table provides summary information about each director nominee in the event that Proposal 1 is not approved. Each director is elected by a plurality of votes cast and, if elected pursuant to this proposal, will be elected to serve a three-year term.

 

Name   Age     Occupation   Independent   Committees

P. George Benson

    66      President, The College of Charleston   Yes   Audit, Corporate
Governance

Michael E. Martin

    57      Partner, Warburg Pincus & Co.;
Managing Director, Warburg Pincus
LLC
  Yes   Compensation

Mark Mason

    43      Chief Executive Officer, Citi Holdings   Yes*   None*

 

  *  

Mr. Mason will not be considered an independent director under applicable rules until April 7, 2013, which will be the three year anniversary of our IPO. He is therefore not eligible to serve on any Board committees until that date.

Each director nominee is a current director and attended at least 75% of the aggregate of all meetings of our Board and each committee of which he was a member during fiscal 2012.

Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm (Proposal 6)

See “Matters to be Voted On – Ratification of the Appointment – Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm” and “Audit Committee Matters” beginning on pages 14 and 62, respectively, for more information.

We ask that our stockholders ratify the selection of KPMG LLP (“KPMG”) as our independent registered public accounting firm for the fiscal year ending December 31, 2013 (“fiscal 2013”). KPMG’s aggregate fees were $3.7 million for services provided in fiscal 2012 and $3.6 million for services provided in the year ended December 31, 2011 (“fiscal 2011”).

Executive Compensation Matters

See “Executive Compensation” beginning on page 32 for more information.

The Compensation Committee of our Board of Directors (the “Compensation Committee”) structured our executive compensation program to pay for performance and, over the long term, to provide compensation to our executive officers that is market competitive. Further, it is structured so that a meaningful percentage of compensation is tied to the achievement of challenging levels of corporate and personal performance objectives. In addition to cash incentives being determined based on

 

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PROXY SUMMARY

 

corporate and personal performance objectives, the size of annual equity grants is also determined based on these performance results. Accordingly, we view both cash and equity awards as performance-based elements of our executive compensation program, even though the equity awards that are granted have time-based vesting. Each named executive officer has a maximum permissible payout that is equal to a designated percentage of operating income before income taxes. The Compensation Committee then exercises negative discretion to determine the actual award based on certain performance objectives established at the beginning of the year.

Incentive compensation for fiscal 2012 performance reflects our financial and distribution results. Operating results for fiscal 2012 were strong, and the size of our life-licensed sales force increased for the first time in four years. Our fiscal 2012 performance was highlighted by the following achievements:

 

   

Operating revenues were $1,179.3 million in fiscal 2012, up 8.4% compared with $1,087.9 million in fiscal 2011. Net operating income was $174.5 million in fiscal 2012, up 11.9% compared with $156.0 million in fiscal 2011.

 

   

Operating earnings per diluted share improved 31.7% to $2.72 in fiscal 2012 compared with $2.07 in fiscal 2011.

 

   

Operating return on average equity improved to 14.3% in fiscal 2012 from 11.8% in fiscal 2011.

 

   

The size of our life-licensed sales force increased 1.3% to 92,373 at December 31, 2012 compared with 91,176 at December 31, 2011 despite a 21.7% decline in recruiting.

Based on our fiscal 2012 performance, the Compensation Committee approved a corporate performance payout equal to 104.4% of the target bonus amount. The Compensation Committee balanced strong personal performance with weaker performance against the corporate sales force objective and determined to pay each of our named executive officers between 100% and 120% of the individual portion of his or her target bonus amount.

2014 Annual Meeting

See “Stockholder Information” beginning on page 77 for more information.

 

   

Stockholder proposals submitted for inclusion in our 2014 proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”) must be received by us by December 6, 2013.

 

   

Notice of stockholder proposals that are not intended to be included in our 2014 proxy statement under Rule 14a-8 must be delivered to us no earlier than December 6, 2013 and no later than January 5, 2014.

 

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INFORMATION ABOUT THE ANNUAL MEETING

     1   

MATTERS TO BE VOTED ON

     7   

Proposed Amendments of Our Restated Certificate of Incorporation

     7   

Proposal 1: Amendment of Our Restated Certificate of Incorporation to Declassify Our

Board of Directors

     7   

Proposal 2: Amendment of Our Restated Certificate of Incorporation to Remove the Supermajority Vote Required to Amend Certain Provisions of Our Restated Certificate of Incorporation

     9   

Proposal 3: Amendment of Our Restated Certificate of Incorporation to Remove Inoperative Language Relating to Certain Former Rights of Citigroup Inc.

     10   

Election of Directors

     12   

Proposal 4: Election of Nine Directors if Proposal 1 is Approved

     12   

Proposal 5: Election of Three Directors if Proposal 1 is Not Approved

     13   

Ratification of the Appointment

     14   

Proposal 6: Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm

     14   

CORPORATE GOVERNANCE

     15   

Board Structure

     15   

Independence of Directors

     16   

Categorical Standards of Independence

     16   

Independence of Committee Members

     17   

Role of Compensation Consultant

     18   

Communicating with Our Board of Directors

     18   

Director Nomination Process

     19   

Board’s Role in Risk Oversight

     20   

Board Diversity

     21   

Code of Conduct

     21   

Section 16(a) Beneficial Ownership Reporting Compliance

     21   

Beneficial Ownership of Common Stock

     22   

BOARD OF DIRECTORS

     24   

Members of Our Board of Directors

     24   

Director Attendance at Board, Committee and Annual Meetings

     27   

Committees of Our Board of Directors

     27   

Director Compensation

     29   

EXECUTIVE COMPENSATION

     32   

Compensation Committee Report

     32   

Compensation Committee Interlocks and Insider Participation

     32   

Compensation Discussion and Analysis (“CD&A”)

     32   

Executive Compensation Tables

     47   

Employment Agreements with Named Executive Officers

     54   

Potential Payments and Other Benefits Upon Termination or Change of Control

     59   

 

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AUDIT COMMITTEE MATTERS

     62   

Audit Committee Report

     62   

Fees and Services of Our Independent Registered Public Accounting Firm

     63   

RELATED PARTY TRANSACTIONS

     64   

Policies and Procedures Governing Related Party Transactions

     64   

Transactions with Citigroup

     64   

Transactions with Warburg Pincus

     72   

STOCKHOLDER INFORMATION

     77   

Other Business for Presentation at the 2013 Annual Meeting

     77   

Other Information

     77   

Stockholder Proposals for Inclusion in the 2014 Proxy Statement

     77   

Procedures for Business Matters and Director Nominations for Consideration at the 2014
Annual Meeting of Stockholders

     77   

 

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INFORMATION ABOUT THE ANNUAL MEETING

 

Primerica, Inc. (“Primerica” or the “Company”) is furnishing this Proxy Statement in connection with the solicitation by its Board of Directors (our “Board” or our “Board of Directors”) of proxies for the Company’s 2013 Annual Meeting of Stockholders and any adjournments or postponements of the meeting (the “Annual Meeting”) for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held on Wednesday, May 22, 2013 at 10:00 a.m., local time, at the Primerica TV Theater located in Primerica’s home office, One Primerica Parkway, Duluth, Georgia 30099.

We anticipate that a Notice of Internet Availability of Proxy Materials containing instructions on (1) how to access this Proxy Statement and the 2012 Annual Report to Stockholders (the “Annual Report”) and (2) how to vote over the Internet or how to request and return a proxy card by mail will first be mailed to our stockholders on or before April 5, 2013.

What is the purpose of this Proxy Statement?

This Proxy Statement provides information regarding matters to be voted on at the Annual Meeting. Additionally, it contains certain information that the Securities and Exchange Commission (the “SEC”) requires us to provide annually to our stockholders. This Proxy Statement is also used by our Board of Directors to solicit proxies to be used at the Annual Meeting. Proxies are solicited to give all stockholders of record an opportunity to vote on the matters to be presented at the Annual Meeting, even if they cannot attend the meeting in person. Our Board has designated a Proxy Committee, which will vote the shares represented by proxies at the Annual Meeting in the manner indicated by the proxies (the “Proxy Committee”). The members of the Proxy Committee are John A. Addison, Jr. and D. Richard Williams, our Co-Chief Executive Officers, and Peter W. Schneider, our Executive Vice President, General Counsel and Corporate Secretary.

Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?

We are permitted by SEC rules to furnish our proxy materials over the Internet to our stockholders by delivering a Notice of Internet Availability of Proxy Materials in the mail. We believe that this “e-proxy” process expedites your receipt of proxy materials, while also lowering the costs and reducing the environmental impact of the Annual Meeting. Unless requested, holders of less than 1,000 shares of our common stock will not receive a printed copy of the proxy materials in the mail. Instead, the Notice of Internet Availability of Proxy Materials instructs you on how to access and review the Proxy Statement and the Annual Report over the Internet at www.proxyvote.com. The Notice of Internet Availability of Proxy Materials also instructs you as to how you may submit your proxy over the Internet, or how you can request a full set of proxy materials. If you receive a Notice of Internet Availability of Proxy Materials in the mail and would like to receive a printed copy of the proxy materials, then you should follow the instructions for requesting these materials provided in the Notice of Internet Availability of Proxy Materials.

Who is entitled to vote on the matters discussed in the Proxy Statement?

You are entitled to vote if you were a stockholder of record of our common stock as of the close of business on March 25, 2013 (the “record date”). Your shares can be voted at the Annual Meeting only if you are present in person or represented by a valid proxy.

What constitutes a quorum for the Annual Meeting?

The holders of a majority of the outstanding shares of our common stock as of the close of business on the record date must be present, either in person or represented by valid proxy, to constitute a quorum necessary to conduct the

 

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INFORMATION ABOUT THE ANNUAL MEETING

 

Annual Meeting. On the record date,              shares of our common stock were issued and outstanding. Shares represented by valid proxies received but marked as abstentions or as withholding voting authority for any or all director nominees, and shares represented by valid proxies received but reflecting broker non-votes, will be counted as present at the Annual Meeting for purposes of establishing a quorum.

How many votes am I entitled to for each share of the Company’s common stock I hold?

Each share of our common stock represented at the Annual Meeting is entitled to one vote for each director nominee with respect to the proposals to elect directors and one vote for each of the other proposals to be voted on.

What proposals will require my vote?

You are being asked to vote on the following proposals:

 

   

the amendment of our Restated Certificate of Incorporation to declassify our Board of Directors (Proposal 1);

 

   

the amendment of our Restated Certificate of Incorporation to remove the supermajority vote required to amend certain provisions of our Restated Certificate of Incorporation (Proposal 2);

 

   

the amendment of our Restated Certificate of Incorporation to remove certain inoperative language relating to former rights of Citigroup (Proposal 3);

 

   

the election of the nine director nominees named in this Proxy Statement if Proposal 1 is approved (Proposal 4);

 

   

the election of the three director nominees named in this Proxy Statement if Proposal 1 is not approved (Proposal 5); and

 

   

the ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2013 (Proposal 6).

What vote is required to approve each proposal or elect directors, and how will my vote be counted?

Proposal 1: Amendment of Our Restated Certificate of Incorporation to Declassify Our Board of Directors

This proposal requires approval by the holders of at least 80% of the shares outstanding. Any shares that are not voted (whether by abstention or otherwise) will have the effect of a vote against this proposal.

Proposal 2: Amendment of Our Restated Certificate of Incorporation to Remove the Supermajority Vote Required to Amend Certain Provisions of Our Restated Certificate of Incorporation

This proposal requires approval by the holders of at least 80% of the shares outstanding. Any shares that are not voted (whether by abstention or otherwise) will have the effect of a vote against this proposal.

Proposal 3: Amendment of Our Restated Certificate of Incorporation to Remove Certain Inoperative Language Relating to Former Rights of Citigroup Inc.

This proposal requires approval by the holders of at least a majority of the shares outstanding. Any shares that are not voted (whether by abstention or otherwise) will have the effect of a vote against this proposal.

Proposal 4: Election of Nine Directors if Proposal 1 is Approved

If Proposal 1 is approved and Proposal 4 is voted upon at the Annual Meeting in lieu of Proposal 5, then the nine director nominees who receive the highest number of properly executed votes will be elected as directors for the ensuing one year. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the outcome of the vote with respect to this proposal.

 

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INFORMATION ABOUT THE ANNUAL MEETING

 

Proposal 5: Election of Three Directors if Proposal 1 is Not Approved

If Proposal 1 is not approved and Proposal 5 is voted upon at the Annual Meeting in lieu of Proposal 4, then the three director nominees who receive the highest number of properly executed votes will be elected as directors for the ensuing three years. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the outcome of the vote with respect to this proposal.

Proposal 6: Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm

This proposal requires approval by the holders of at least a majority of the shares present in person or represented by valid proxy and entitled to vote at the Annual Meeting. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the outcome of the vote with respect to this proposal.

How does our Board of Directors recommend that I vote?

Our Board recommends that you vote:

 

   

“FOR” the amendment of our Restated Certificate of Incorporation to declassify our Board of Directors (Proposal 1);

 

   

“FOR” the amendment of our Restated Certificate of Incorporation to remove the supermajority vote required to amend certain provisions of our Restated Certificate of Incorporation (Proposal 2);

 

   

“FOR” the amendment of our Restated Certificate of Incorporation to remove certain inoperative language relating to former rights of Citigroup (Proposal 3);

 

   

“FOR” the election of the nine director nominees named in this Proxy Statement if Proposal 1 is approved (Proposal 4);

 

   

“FOR” the election of the three director nominees named in this Proxy Statement if Proposal 1 is not approved (Proposal 5); and

 

   

“FOR” the ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2013 (Proposal 6).

How do I vote?

If you are a registered stockholder, meaning that your shares are registered in your name and are not held through a broker, then you have four voting options. You may vote:

 

   

over the Internet at the web address noted in the Notice of Internet Availability of Proxy Materials, proxy materials e-mail or proxy card that you received (we encourage you to vote in this manner);

 

   

by telephone through the number noted on the proxy card that you received (if you received a proxy card);

 

   

by signing and dating your proxy card (if you received a proxy card) and mailing it in the prepaid and addressed envelope enclosed therewith; or

 

   

by attending the Annual Meeting and voting in person.

We encourage you to vote your shares as soon as possible by proxy even if you plan to attend the Annual Meeting.

If you are a beneficial holder (meaning that your shares are held through a broker, bank or other nominee), then please refer to the instructions provided by your broker, bank or other nominee regarding how to vote.

What is the difference between a registered stockholder and a beneficial holder of shares?

If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, then you are considered a “registered stockholder” with respect to those shares. Registered stockholders and holders of shares of stock held in the Primerica, Inc. Stock Purchase Plan (the “Stock Purchase Plan”) will receive a Notice of Internet Availability of Proxy Materials containing instructions on how to access this Proxy

 

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Statement and the Annual Report and how to vote over the Internet, how to request and return a proxy card by mail and how to vote by telephone.

If your shares are held in “street name” through a broker, bank or other nominee, then you are considered the “beneficial holder” of the shares held for you. Beneficial holders of shares should refer to the instructions provided by their broker, bank or other nominee regarding how to vote or to revoke voting instructions. The availability of Internet and telephone voting depends on the voting processes of the broker, bank or other nominee. As the beneficial holder, you have the right to direct your broker, bank or other nominee how to vote your shares. Beneficial holders may vote in person only if they have a legal proxy to vote their shares as described below.

I am a beneficial holder. How are my shares voted if I do not return voting instructions?

Your shares may be voted if they are held in the name of a brokerage firm, even if you do not provide the brokerage firm with voting instructions. Under the rules of the New York Stock Exchange (the “NYSE”), brokerage firms have the authority to vote shares on certain routine matters for which their customers do not provide voting instructions by the tenth day before the Annual Meeting. The ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2013 is considered a routine matter.

None of the proposals to amend our Restated Certificate of Incorporation nor the election of directors is considered a routine matter under the rules of the NYSE. If a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial holder of the shares with respect to that proposal, then the brokerage firm cannot vote the shares on that proposal. This is called a “broker non-vote.” In tabulating the voting result for any particular proposal, shares that are subject to broker non-votes with respect to that proposal will not be considered votes either for or against the proposal. It is very important that you provide voting instructions to your brokerage firm if you want your shares to be voted at the Annual Meeting on a non-routine matter.

Can I change my mind after I vote?

If you vote by proxy, you can revoke that proxy at any time before it is voted at the Annual Meeting. You can do this in one of the following three ways:

 

   

vote again using the Internet or by telephone prior to the Annual Meeting; or

 

   

sign another proxy card with a later date and return it to us prior to the Annual Meeting; or

 

   

attend the Annual Meeting in person and vote in person.

How will a proposal or other matter that was not included in this Proxy Statement be handled for voting purposes if it is raised at the Annual Meeting?

If any matter that is not described in this Proxy Statement should properly come before the Annual Meeting, then the Proxy Committee will vote the shares represented by valid proxies in accordance with its best judgment. Notwithstanding the foregoing, shares represented by valid proxies that are marked to deny discretionary authority to the Proxy Committee on other matters considered at the Annual Meeting will not be voted on those other matters and will not be counted in determining the number of votes cast with respect to those other matters. At the time this Proxy Statement was printed, management was unaware of any other matters that might be presented for stockholder action at the Annual Meeting.

Who will tabulate and certify the vote?

Representatives of Broadridge Financial Solutions, Inc. will tabulate the vote, and a representative of Carl T. Hagberg and Associates

 

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will act as the independent inspector of elections for the Annual Meeting and will certify the final vote.

What does it mean if I receive more than one Notice of Internet Availability of Proxy Materials, proxy materials e-mail or proxy card?

This means that you have multiple accounts holding shares of our common stock with brokers and/or our transfer agent. You will need to vote separately with respect to each Notice of Internet Availability of Proxy Materials, proxy materials e-mail or proxy card that you receive. Please vote all of the shares you are entitled to vote.

Does the Company participate in householding?

A single set of proxy materials, along with individual proxy cards, or individual Notices of Internet Availability of Proxy Materials will be delivered in one envelope to multiple stockholders of record having the same last name and address, unless contrary instructions have been received from an affected stockholder. This is referred to as “householding.” We believe this procedure provides greater convenience to our stockholders and saves money by reducing our printing and mailing costs and fees. If you would like to enroll in this service or receive individual copies of all documents, please contact Broadridge by calling toll-free at

1-800-542-1061, or by writing to Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717. Alternatively, if you participate in householding and would like to revoke your consent or otherwise would like to receive separate copies of our proxy materials, please contact Broadridge as described above.

A number of brokerage firms have instituted householding. If you hold your shares in street name, please contact your bank, broker or other holder of record to request information about householding.

How do I vote the shares that I purchased through the Stock Purchase Plan?

If you are a registered stockholder and you own shares of our common stock through the Stock Purchase Plan, and the accounts are registered in the same name, then you will receive one Notice of Internet Availability of Proxy Materials representing your combined shares. If your accounts are registered in different names, then you will receive separate Notices of Internet Availability of Proxy Materials. If you own shares only through the Stock Purchase Plan, then you will receive a Notice of Internet Availability of Proxy Materials representing those shares. If you hold shares through the Stock Purchase Plan, then your vote must be received by 11:59 p.m. Eastern daylight savings time on May 21, 2013, unless you vote in person at the Annual Meeting.

What happens if I abstain from voting?

Abstentions with respect to a proposal are counted for purposes of establishing a quorum. If a quorum is present, then abstentions will have the effect of a vote against Proposals 1, 2 and 3 (amendments of our Restated Certificate of Incorporation), will have no impact on the outcome of the vote with respect to Proposals 4 and 5 (election of directors) and will have no impact on the outcome of the vote with respect to Proposal 6 (ratification of the appointment of KPMG as our independent registered public accounting firm for fiscal 2013).

What do I need to do if I want to attend the Annual Meeting?

You do not need to make a reservation to attend the Annual Meeting. However, attendance at the Annual Meeting is limited to Primerica stockholders, members of their immediate families or their named representatives. The Company reserves the right to limit the number of named representatives who may attend the Annual Meeting.

 

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How can I listen to the live webcast of the Annual Meeting?

You may listen to a live webcast of the Annual Meeting at www.investors.primerica.com. The webcast will allow you to listen to the Annual Meeting, but stockholders accessing the Annual Meeting through the webcast will not be considered present at the Annual Meeting and will not be able to vote their shares through the webcast or ask questions. If you plan to listen to the live webcast, then please submit your vote prior to the Annual Meeting using one of the methods described under “How do I vote?” above. An archived copy of the webcast will be available at www.investors.primerica.com until at least June 21, 2013. Registration to listen to the webcast will be required. We have included our website address for reference only. The information contained on our website is not incorporated by reference into this Proxy Statement.

How are proxies solicited and what is the cost?

We bear all expenses incurred in connection with the solicitation of proxies. We have engaged AST Phoenix Advisors, Inc. to assist with the solicitation of proxies for an annual fee of $7,000 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of our common stock. Our directors, officers and employees also may solicit proxies by mail, telephone and personal contact. They will not receive any additional compensation for these activities.

IN ORDER THAT YOUR SHARES OF OUR COMMON STOCK MAY BE REPRESENTED AT THE ANNUAL MEETING IN CASE YOU ARE NOT PERSONALLY PRESENT, YOU ARE REQUESTED TO FOLLOW THE INSTRUCTIONS PROVIDED IN THE NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS.

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 22, 2013.

Our Proxy Statement and the 2012 Annual Report to Stockholders are available free of charge at www.proxyvote.com and at www.investors.primerica.com

 

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MATTERS TO BE VOTED ON

 

PROPOSED AMENDMENTS OF OUR RESTATED CERTIFICATE OF INCORPORATION

Proposal 1: Amendment of Our Restated Certificate of Incorporation to Declassify Our Board of Directors

After careful consideration, in February 2013 our Board of Directors, upon recommendation of the Corporate Governance Committee, voted unanimously to approve, and to recommend to our stockholders that they approve, an amendment to our Restated Certificate of Incorporation to declassify our Board of Directors effective at the Annual Meeting. This will allow our stockholders to vote on the election of our entire Board of Directors each year, rather than on a staggered basis as with our current classified board structure.

If our stockholders approve Proposal 1, then our Restated Certificate of Incorporation will be amended to provide for the annual election of all directors commencing immediately at the Annual Meeting. See “Matters to be Voted On – Election of Directors – Proposal 4: Election of Nine Directors if Proposal 1 is Approved.” As of April     , 2013, each of our directors whose term does not expire at the Annual Meeting has tendered his or her resignation, contingent and effective upon stockholder approval of Proposal 1.

If our stockholders do not approve Proposal 1, then our Board will remain classified, the contingent resignations will be ineffective, and our stockholders will instead be asked to elect only three directors at the Annual Meeting. See “Matters to be Voted On – Election of Directors – Proposal 5: Election of Three Directors if Proposal 1 is Not Approved.”

Current Classified Board Structure

Article FIFTH, Section C of our Restated Certificate of Incorporation currently requires that our Board of Directors be divided into three classes of approximately equal size (Class I, Class II and Class III), each with a three-year term. Generally, absent the earlier resignation or removal of a director, the terms of the classes are staggered, meaning that only one of the three classes stands for re-election at each annual meeting of stockholders.

Rationale for Declassification

In determining whether to propose declassifying our Board of Directors to our stockholders, our Board considered the arguments in favor of and against continuation of the classified board structure and determined that it would be in the best interests of the Company and our stockholders to amend our Restated Certificate of Incorporation to declassify our Board.

Our Board of Directors recognizes that a classified board structure may offer several advantages, such as promoting board continuity and stability, encouraging directors to take a long-term perspective, and ensuring that a majority of our Board will always have prior experience with the Company. Additionally, classified boards provide effective protection against unwanted takeovers and proxy contests as they make it difficult for a substantial stockholder to gain control of the board without the cooperation or approval of incumbent directors.

However, our Board of Directors also recognizes that a classified board structure may appear to reduce directors’ accountability to stockholders, since such a structure does not enable stockholders to express a view on each director’s performance by means of an annual vote. Moreover, many investors believe that the election of directors is the primary means for stockholders to influence corporate governance policies and to hold management accountable for implementing those policies.

Proposed Declassification of Our Board of Directors

Declassification of our Board of Directors requires several changes to our Restated Certificate of Incorporation. Specifically, Article

 

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FIFTH, Sections C, D and E of our Restated Certificate of Incorporation must be amended to delete the references to the classified board structure and related provisions and to provide our stockholders the ability to remove directors from our declassified Board with or without cause in accordance with the Delaware General Corporation Law. The text of the revised Article FIFTH, Sections C, D and E, marked to show the proposed deletions and insertions, is attached as Annex A to this Proxy Statement. If Proposal 1 is approved by our stockholders, then we will file with the Secretary of State of the State of Delaware an Amended and Restated Certificate of Incorporation which amends our Restated Certificate of Incorporation to reflect the proposed insertions and deletions set forth on Annex A and otherwise restates our Restated Certificate of Incorporation. If Proposal 2 or Proposal 3, or both, are also approved by our stockholders, then the Amended and Restated Certificate of Incorporation we file with the Secretary of State of the State of Delaware will also reflect the amendments to our Restated Certificate of Incorporation as indicated in such proposals which are so approved. See “— Proposal 2: Amendment of Our Restated Certificate of Incorporation to Remove the Supermajority Vote Required to Amend Certain Provisions of Our Restated Certificate of Incorporation” and “— Proposal 3: Amendment of Our Restated Certificate of Incorporation to Remove Inoperative Language Relating to Certain Former Rights of Citigroup Inc.”

 

The Amended and Restated Certificate of Incorporation will become effective upon its filing with the Secretary of State of the State of Delaware (which would occur during the Annual Meeting and prior to consideration of the proposal to elect directors). Our Board of Directors will then be declassified immediately, so that every director will stand for election at the Annual Meeting (and thereafter) for a one-year term.

Our Board of Directors has provisionally approved and adopted certain amendments to our Amended and Restated By-Laws to conform them to the Amended and Restated Certificate of Incorporation that we will file with the Secretary of State of the State of Delaware if Proposal 1 is approved by our stockholders. These amendments to our Amended and Restated By-Laws will become effective subject to, and upon, such filing.

Stockholders are requested in Proposal 1 to approve the proposed amendment of our Restated Certificate of Incorporation to declassify our Board of Directors effective at the Annual Meeting. Approval of Proposal 1 requires the affirmative vote of the holders of at least 80% of the shares outstanding. Any shares that are not voted (whether by abstention or otherwise) will have the effect of a vote against Proposal 1. Unless otherwise instructed, the members of the Proxy Committee will vote the proxies held by them “FOR” Proposal 1.

 

Our Board of Directors unanimously recommends a vote “FOR” the amendment of our Restated Certificate of Incorporation to declassify our Board of Directors.

 

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MATTERS TO BE VOTED ON

 

Proposal 2: Amendment of Our Restated Certificate of Incorporation to Remove the Supermajority Vote Required to Amend Certain Provisions of Our Restated Certificate of Incorporation

We are asking you to adopt and approve an amendment to our Restated Certificate of Incorporation to remove the supermajority vote required to amend certain provisions of our Restated Certificate of Incorporation. Our Board of Directors believes that removal of this language is advisable and in the best interests of our stockholders as it will cause the stockholders to have greater control over certain provisions governing the Company. Our Board, upon the recommendation of the Corporate Governance Committee, has unanimously approved the proposed amendment, and recommends that our stockholders adopt and approve the proposed amendment.

Description of Supermajority Vote Requirement

Article FIFTH, Section G of our Restated Certificate of Incorporation currently requires the affirmative vote of at least 80% of the votes entitled to be cast to amend any provision of Article FIFTH.

Rationale for Removal of Supermajority Vote Standard

Our Restated Certificate of Incorporation was adopted on March 31, 2010, immediately prior to our IPO by Citigroup, our former parent. Citigroup included the supermajority vote standard in our Restated Certificate of Incorporation to ensure that the provisions that govern the management of the business and the conduct of the affairs of the Company could not be amended unless the amendment was supported by holders of at least 80% of our outstanding shares. Citigroup no longer holds any of our common stock, and our Board of Directors believes that a majority of our stockholders

should have the right to modify these provisions of our Restated Certificate of Incorporation.

Proposed Amendment to Our Restated Certificate of Incorporation

If Proposal 2 is approved by our stockholders, then Article FIFTH, Section G of our Restated Certificate of Incorporation would be deleted. The text of the revised Article FIFTH, marked to show the proposed deletion, is attached as Annex B to this Proxy Statement. If Proposal 2 is approved by our stockholders, then we will file with the Secretary of State of the State of Delaware an Amended and Restated Certificate of Incorporation which amends our Restated Certificate of Incorporation to reflect the proposed deletion set forth on Annex B and otherwise restates our Restated Certificate of Incorporation. If Proposal 1 or Proposal 3, or both, are also approved by our stockholders, then the Amended and Restated Certificate of Incorporation we file with the Secretary of State of the State of Delaware will also reflect the amendments to our Restated Certificate of Incorporation as indicated in such proposals which are so approved. See “— Proposal 1: Amendment of Our Restated Certificate of Incorporation to Declassify Our Board of Directors” and “— Proposal 3: Amendment of Our Restated Certificate of Incorporation to Remove Inoperative Language Relating to Certain Former Rights of Citigroup Inc.” The Amended and Restated Certificate of Incorporation will become effective upon its filing with the Secretary of State of the State of Delaware.

Stockholders are requested in Proposal 2 to approve the proposed amendment of our Restated Certificate of Incorporation to remove the supermajority vote required to amend certain provisions of our Restated Certificate of Incorporation. Approval of Proposal 2 requires the affirmative vote of the holders of at least 80% of the shares outstanding. Any shares that are not voted (whether by abstention or otherwise) will have the effect of a vote against Proposal 2. Unless otherwise instructed, the members of the Proxy Committee will vote the proxies held by them “FOR” Proposal 2.

 

Our Board of Directors unanimously recommends a vote “FOR” the amendment of our Restated Certificate of Incorporation to remove the supermajority vote required to amend certain provisions of our Restated Certificate of Incorporation.

 

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Proposal 3: Amendment of Our Restated Certificate of Incorporation to Remove Inoperative Language Relating to Certain Former Rights of Citigroup Inc.

We are asking you to adopt and approve an amendment to our Restated Certificate of Incorporation to remove language that became inoperative when Citigroup ceased to own specified amounts of our outstanding common stock. Our Board of Directors believes that removal of this language is advisable and in the best interests of our stockholders as it will improve the readability of our charter without impacting the Company’s governance. Our Board, upon the recommendation of the Corporate Governance Committee, has unanimously approved the proposed amendment and recommends that our stockholders adopt and approve the proposed amendment.

Our Restated Certificate of Incorporation was adopted on March 31, 2010, immediately prior to our IPO by Citigroup, our former parent. Citigroup included certain language in our Restated Certificate of Incorporation to protect its rights so long as it remained a significant stockholder. On April 1, 2010, Citigroup sold a majority of our common stock to the public in our IPO and to funds managed by affiliates of Warburg Pincus & Co. and Warburg Pincus LLC. Thereafter, Citigroup sold a portion of its remaining shares of our common stock in a public offering in April 2011, sold an additional portion of its remaining shares of our common stock back to the Company in November 2011, and sold all its remaining shares of our common stock in a public offering in December 2011.

If approved by our stockholders, our Restated Certificate of Incorporation will be amended to remove all of such inoperative language.

Description of Former Rights

Articles SEVENTH, EIGHTH, NINTH, TENTH and portions of Article ELEVENTH contain certain rights of Citigroup with respect to the governance of the Company. Because Citigroup is no longer a stockholder of the Company, Articles SEVENTH, EIGHTH, and NINTH and portions of Article ELEVENTH are no longer relevant or appropriate for the Company. Furthermore, (i) Article TENTH, by its terms, ceased to be operative following the first date on which Citigroup ceased to beneficially own shares entitled to 50% or more of the votes entitled to be cast by the holders of our common stock then outstanding and (ii) portions of Article ELEVENTH, by their terms, are operative only for as long as Citigroup beneficially owns shares entitled to vote at least a specified percentage of the votes entitled to be cast by the holders of our common stock outstanding.

Rationale for Removal of Citigroup Rights

Citigroup provided for certain rights to protect it in connection with its affiliation with the Company. Because Citigroup is no longer a stockholder of the Company, these rights are no longer relevant or appropriate for the Company.

Proposed Amendment to Our Restated Certificate of Incorporation

If Proposal 3 is approved by our stockholders, then Articles SEVENTH, EIGHTH, NINTH and TENTH and portions of Article ELEVENTH of our Restated Certificate of Incorporation would be deleted. The text of our Restated Certificate of Incorporation affected by, and marked to show, the proposed deletions is attached as Annex C to this Proxy Statement. If Proposal 3 is approved by our stockholders, then we would file with the Secretary of State of the State of Delaware an Amended and Restated Certificate of Incorporation which amends our Restated Certificate of Incorporation to reflect the proposed deletions set forth on Annex C and otherwise restates our Restated Certificate of Incorporation. If Proposal 1 or Proposal 2, or both, are also approved by our stockholders, then the Amended and Restated Certificate of Incorporation we file with the Secretary of State of the State of Delaware will also reflect the amendments to our Restated Certificate of

 

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Incorporation as indicated in such proposals which are so approved. See “— Proposal 1: Amendment of Our Restated Certificate of Incorporation to Declassify Our Board of Directors” and “— Proposal 2: Amendment of Our Restated Certificate of Incorporation to Remove the Supermajority Vote Required to Amend Certain Provisions of Our Restated Certificate of Incorporation.” The Amended and Restated Certificate of Incorporation will become effective upon its filing with the Secretary of State of the State of Delaware.

Stockholders are requested in Proposal 3 to approve the proposed amendment to our Restated Certificate of Incorporation to remove inoperative language relating to certain former rights of Citigroup. Approval of Proposal 3 requires the affirmative vote of the holders of at least a majority of the shares outstanding. Any shares that are not voted (whether by abstention or otherwise) will have the effect of a vote against Proposal 3. Unless otherwise instructed, the members of the Proxy Committee will vote the proxies held by them “FOR” Proposal 3.

 

Our Board of Directors unanimously recommends

a vote “FOR” the amendment of our Restated Certificate of Incorporation to

remove inoperative language relating to certain former rights of Citigroup Inc.

 

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ELECTION OF DIRECTORS

Proposal 4: Election of Nine Directors if Proposal 1 is Approved

(Proposal 4 Will Not be Considered if Our Stockholders Do Not Approval Proposal 1.)

Our Board of Directors currently has nine members. If Proposal 1 is approved, then we will elect each director to serve a one-year term at each Annual Meeting of Stockholders. For additional information about the director nominees and their qualifications, see “Board of Directors – Members of Our Board.” Each director will be elected by a plurality of the votes cast and, if elected pursuant to Proposal 4, will be elected to serve a one-year term commencing at the Annual Meeting. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the outcome of the vote. If Proposal 1 is approved, then the nominees for the election of directors at the Annual Meeting are as follows:

 

Name    Age      Occupation    Date of Initial Election

John A. Addison, Jr.

     55       Co-Chief Executive Officer, Primerica,
Inc.; Chairman, Primerica Distribution
   October 2009

Joel M. Babbitt

     59       Chief Executive Officer, Mother
Nature Network
   August 2011

P. George Benson

     66       President, The College of Charleston    April 2010

Michael E. Martin

     57       Partner, Warburg Pincus & Co.;
Managing Director, Warburg Pincus
LLC
   April 2010

Mark Mason

     43       Chief Executive Officer, Citi Holdings    March 2010

Robert F. McCullough

     70       Private Investor    March 2010

D. Richard Williams

     56       Chairman and Co-Chief Executive
Officer, Primerica, Inc.
   October 2009

Barbara A. Yastine

     53       Chair, President and Chief Executive
Officer, Ally Bank
   December 2010

Daniel A. Zilberman

     39       Partner, Warburg Pincus & Co.;
Managing Director, Warburg Pincus
LLC
   April 2010

Unless otherwise instructed, the members of the Proxy Committee will vote the proxies held by them “FOR” the election to our Board of Directors of the nominees named above.

 

Our Board of Directors unanimously recommends a vote “FOR” the election to our Board of Directors of the nominees named above.

 

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Proposal 5: Election of Three Directors if Proposal 1 is Not Approved

(Proposal 5 Will Not be Considered if Our Stockholders Approve Proposal 1.)

Our Board of Directors currently has nine members. We divide our Board into three classes, with each class currently consisting of three members. At each Annual Meeting of Stockholders, we elect one class of directors to serve a three-year term. If Proposal 1 is not approved by our stockholders, then at the Annual Meeting we will elect three directors to hold office until the 2016 Annual Meeting of Stockholders. For additional information about the director nominees and their qualifications, see “Board of Directors – Members of Our Board.” Each director will be elected by a plurality of the votes cast and, if elected pursuant to Proposal 5, will be elected to serve a three-year term commencing at the Annual Meeting. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the outcome of the vote. If Proposal 1 is not approved, then the nominees for the election of directors at the Annual Meeting are as follows:

 

Name    Age      Occupation    Date of Initial Election

P. George Benson

     66       President, The College of Charleston    April 2010

Michael E. Martin

     57       Partner, Warburg Pincus & Co.; Managing
Director, Warburg Pincus LLC
   April 2010

Mark Mason

     43       Chief Executive Officer, Citi Holdings    March 2010

 

Unless otherwise instructed, the members of the Proxy Committee will vote the proxies held by them “FOR” the election to our Board of Directors of the nominees named above.

 

If Proposal 1 is not approved and the nominees standing for election under this Proposal 5 are elected, then our directors will serve in the classes specified below:

 

Name   

Class III

(Standing for election for a
term expiring at the 2016
Annual Meeting)

  

Class I

(Term expires at the
2014 Annual Meeting)

  

Class II

(Term expires at the
2015 Annual Meeting)

John A. Addison, Jr.

        X     

Joel M. Babbitt

        X     

P. George Benson

   X          

Michael E. Martin

   X          

Mark Mason

   X          

Robert F. McCullough

        X     

Barbara A. Yastine

             X

D. Richard Williams

             X

Daniel A. Zilberman

             X

 

Our Board of Directors unanimously recommends a vote “FOR” the election to our Board of Directors of the nominees named above.

 

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Ratification of The Appointment

Proposal 6: Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm

The Audit Committee of our Board (the “Audit Committee”) has authority to retain and terminate the Company’s independent registered public accounting firm. The Audit Committee has appointed KPMG as the independent registered public accounting firm to audit the consolidated financial statements of the Company and its subsidiaries for fiscal 2013. Although stockholder ratification of the appointment of KPMG is not required, our Board of Directors believes that submitting the appointment to the stockholders for ratification is a matter of good corporate governance. If the stockholders should not ratify the appointment of KPMG, the Audit Committee will reconsider the appointment. For a description of the fees paid to KPMG, see “Audit Committee Matters – Fees and Services of Our Independent Registered Public Accounting Firm – Fees Paid to Our Independent Registered Public Accounting Firm.”

One or more representatives of KPMG are expected to be present at the Annual Meeting. The representatives will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.

To ratify the appointment of KPMG as our independent registered public accounting firm for fiscal 2013, the holders of at least a majority of the shares present in person or represented by valid proxy and entitled to vote at the Annual Meeting must vote “FOR” Proposal 6. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the outcome of the vote. Unless otherwise instructed, the members of the Proxy Committee will vote the proxies held by them “FOR” the ratification of the appointment of KPMG.

 

 

Our Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of KPMG LLP as our

independent registered public accounting firm.

 

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CORPORATE GOVERNANCE

 

Our Board has adopted Corporate Governance Guidelines that are posted on the corporate governance page of our investor relations website at www.investors.primerica.com and print copies of which are available to our stockholders upon request. The Corporate Governance Guidelines set forth the practices that our Board follows with respect to matters such as director responsibilities, compensation, and access to management. In addition, the Corporate Governance Guidelines address the use of outside advisors, management succession and our Board’s annual self-assessment.

Board Structure

Our Board currently consists of nine directors. Our Restated Certificate of Incorporation gives our Board the right to set the number of directors at no less than three members and no more than 15 members.

The Company’s governance documents provide our Board with flexibility to select the appropriate leadership structure for the Company. Our Board does not have a policy as to whether the roles of Chairman of the Board and Co-Chief Executive Officer should be separate or whether the Chairman of the Board should be a management or a non-management director. The Corporate Governance Committee may, from time to time, make recommendations to our Board regarding the leadership structure of our Board, including the position of Chairman of the Board.

Currently, the Company has a combined Chairman of the Board and Co-Chief Executive Officer. Under our Amended and Restated By-laws, the Chairman of the Board presides over meetings of our Board and meetings of our stockholders, while the Co-Chief Executive Officers have general and active management of the business affairs and property of the Company, subject to the supervision and oversight of our Board. Mr. Williams has served as Chairman of the Board and Co-Chief Executive Officer since October 2009.

Mr. Martin, one of our independent directors, serves as the Lead Director of our Board (the “Lead Director”). As the primary interface between management and our Board, the Lead Director provides a valuable counterweight to the combined Chairman and Co-Chief Executive Officer role and serves as a key contact for the non-management directors, thereby enhancing our Board’s independence from management. The Lead Director’s responsibilities include:

 

   

consulting with the Chairman of the Board regarding the agenda for meetings of our Board;

 

   

scheduling and preparing agendas for meetings of non-management directors;

 

   

presiding over meetings of non-management directors and executive sessions of meetings of our Board from which employee directors are excluded;

 

   

acting as principal liaison between non-management directors and the Chairman of the Board on sensitive issues; and

 

   

raising issues with management on behalf of the non-management directors when appropriate.

Our Board has adopted a number of corporate governance-related measures to provide what it views as an appropriate balance between the respective needs for dependable strategic leadership by Mr. Williams as the Chairman of the Board and Co-Chief Executive Officer, on one hand, and the oversight and objectivity of independent directors, on the other. For example, only two of our directors are members of management and all of our Board’s committees – the Audit Committee, the Compensation Committee and the Corporate Governance Committee – consist entirely of independent directors. All directors play an active role in overseeing the Company’s business both at our Board and committee levels. In addition, directors have full and free access to members of management and the authority to retain independent financial, legal or other

 

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CORPORATE GOVERNANCE

 

advisors as they deem necessary without consulting, or obtaining the approval of, any member of management. Also, our Board holds separate executive sessions of its non-management directors and its independent directors at least annually. The Lead Director presides over these sessions.

Our Board believes that having a single leader serving as Chairman of the Board and Co-Chief Executive Officer, together with an experienced and engaged Lead Director, is the most appropriate leadership structure for the Company at this time and is in the best interests of our stockholders because it provides decisive and effective leadership. Further, the Company’s independent directors were all elected to our Board in connection with our IPO or later and, therefore, have a much more limited history with the Company than our Co-Chief Executive Officers. Our Board also believes that this leadership structure, when combined with the Company’s other governance policies and procedures, provides appropriate opportunities for oversight, discussion and evaluation of decisions and direction by our Board.

Independence of Directors

Mr. Addison, Chairman of Primerica Distribution and Co-Chief Executive Officer, and Mr. Williams, Chairman of the Board and Co-Chief Executive Officer, are not independent because they are members of management and employees of the Company.

Mr. Mason will be considered independent under the rules applicable to companies listed on the NYSE as of April 7, 2013. Until the closing of our IPO on April 7, 2010, the Company was a wholly owned subsidiary of Citigroup. Because of his affiliation as an officer of Citigroup, Mr. Mason had not previously been considered independent under the rules applicable to companies listed on the NYSE.

Our Board annually assesses the outside affiliations of each director to determine if any of these affiliations could cause a potential conflict of interest or could interfere with the independence of the director. Based on information furnished by all directors regarding their relationships with Primerica and its subsidiaries and research conducted by management and discussed with our Board with respect to outside affiliations, our Board has determined that none of the directors that served on our Board during fiscal 2012 has or had a material relationship with Primerica other than through his or her role as director, and, except as set forth above, each is independent because he or she satisfies:

 

   

the categorical standards set forth below;

 

   

the independence standards set forth in Rule 10A-3 of the Exchange Act; and

 

   

the criteria for independence set forth in Section 303A.02(b) of the NYSE Listed Company Manual.

A determination of independence under these standards does not mean that a director is disinterested under Section 144 of the Delaware General Corporation Law. Each director, relevant committee and our full Board may also consider whether any director is interested in any transaction brought before our Board or any of its committees for consideration.

Categorical Standards of Independence

The Company has established categorical standards of independence for our Board, which are described in the Corporate Governance Guidelines that are posted on the corporate governance page of our investor relations website at www.investors.primerica.com. To be considered independent for purposes of the director qualification standards, (i) the director must meet bright-line independence standards under the NYSE Listed Company Manual and (ii) our Board must affirmatively determine that the director otherwise has no material relationship with the Company, directly or as an officer, shareowner or partner of an organization that has a relationship with the Company.

To assist it in determining each director’s independence in accordance with the NYSE’s

 

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rules, our Board has established guidelines, which provide that a director will be deemed independent unless:

 

(a) (1) the director is an employee, or an immediate family member of the director is an executive officer, of the Company or any of its affiliates, or (2) the director was an employee, or the director’s immediate family member was an executive officer, of the Company or any of its affiliates during the immediately preceding three years;

 

(b) (1) the director presently receives during any consecutive 12-month period more than $120,000 in direct compensation from the Company or any of its affiliates, or an immediate family member of the director presently receives during any consecutive 12-month period more than $120,000 in direct compensation for services as an executive officer of the Company or any of its affiliates, excluding director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), or (2) the director or the director’s immediate family member had received such compensation during any consecutive 12-month period within the immediately preceding three years;

 

(c) (1) the director is a current partner or employee of a firm that is the Company’s internal or independent auditor, (2) an immediate family member of the director is a current partner of such a firm, (3) an immediate family member of the director is a current employee of such a firm and personally works on the Company’s audit, or (4) the director or an immediate family member of the director was, within the last three years, a partner or employee of such a firm and personally worked on the Company’s audit within that time period;

 

(d) (1) an executive officer of the Company serves on the board of directors of a company that, at the same time, employs the director, or an immediate family member of the director, as an executive officer, or (2) Primerica and the company of which the director or his or her immediate family member is an executive officer had such relationship within the immediately preceding three years;

 

(e) (1) the director is a current executive officer or employee, or an immediate family member of the director is a current executive officer, of another company that makes payments to or receives payments from the Company for property or services in an amount which, in any single fiscal year, exceeds the greater of $1 million, or two percent (2%) of such other company’s consolidated gross revenues, or (2) Primerica and the company of which the director is an executive officer or employee or his or her immediate family member is an executive officer had such relationship within the immediately preceding three years;

 

(f) the director serves as an executive officer, director or trustee, or his or her immediate family member who shares the director’s household serves as an executive officer, director or trustee, of a charitable organization, and within the last three years, discretionary charitable contributions by the Company to such organization, in the aggregate in any one year, exceed the greater of $1 million or two percent (2%) of that organization’s total annual charitable receipts;

 

(g) the director has any interest in an investment that the director jointly acquired in conjunction with the Company;

 

(h) the director has, or his or her immediate family member has, a personal services contract with the Company; or

 

(i) the director is affiliated with, or his or her immediate family member is affiliated with, a paid advisor or consultant to the Company.

Independence of Committee Members

As of December 31, 2012, the Audit, Compensation and Corporate Governance

 

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Committees were fully independent in accordance with the NYSE Listed Company Manual and our Board’s director independence standards described above. In fiscal 2012, no member of the Audit Committee received any compensation from Primerica other than directors’ fees, and no member of the Audit Committee was, or is an affiliated person of, Primerica (other than by virtue of his or her directorship). Members of the Audit Committee meet the additional standards of audit committee members of publicly traded companies required by the Sarbanes-Oxley Act. Members of the Compensation Committee meet the additional standards applicable to outside directors under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and qualify as non-employee directors as defined in Rule 16b-3 under the Exchange Act.

Role of Compensation Consultant

The Compensation Committee retained Pearl Meyer & Partners (“Pearl Meyer”) as its independent consultant for fiscal 2012 and determined that the Company would not retain Pearl Meyer for any projects in fiscal 2012 without the prior consideration and consent of the Compensation Committee. Pearl Meyer’s responsibilities for fiscal 2012 included:

 

   

reviewing drafts of meeting agendas, materials, and minutes, as requested;

 

   

reviewing the work of any other consultants;

 

   

reviewing drafts of major management proposals;

 

   

bringing any concerns or issues to the attention of the Compensation Committee Chair;

 

   

evaluating the competitiveness of executive pay;

 

   

evaluating the competitiveness of non-management director pay, as requested;

 

   

preparing materials for the Compensation Committee in advance of meetings;

 

   

attending Compensation Committee meetings;

 

   

reviewing and commenting on compensation-related proxy disclosures;

 

   

reviewing the Compensation Committee Charter;

 

   

reviewing executive compensation tally sheets;

 

   

teleconferences with the Compensation Committee Chair and management;

 

   

being available for additional consultation to the Compensation Committee Chair; and

 

   

undertaking special projects at the request of the Compensation Committee Chair.

See “Executive Compensation — Compensation Discussion and Analysis (“CD&A”) — Fiscal 2012 Executive Compensation — Compensation Consultant Role.”

Communicating with Our Board of Directors

Our stockholders and other interested persons may communicate with the Audit Committee Chair or the Lead Director by addressing such communications to them in care of the Company’s Corporate Secretary, at the Company’s principal executive office address at One Primerica Parkway, Duluth, Georgia 30099. Further, our stockholders and other interested persons may communicate with the Company’s non-management directors or independent directors, each as a group, by addressing such communications to them in care of the Company’s Corporate Secretary at the Company’s principal executive office address. Our stockholders and other interested persons may also communicate with our Board, the Audit Committee, the non-management directors and the Chairman of the Board by sending an e-mail message as follows:

 

   

with our Board, to boardofdirectors@primerica.com;

 

   

with the Audit Committee, to auditcommittee@primerica.com;

 

   

with the non-management directors, to nonemployeedirectors@primerica.com; or

 

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with the Chairman of the Board, to chairman@primerica.com.

In accordance with a policy approved by the Audit Committee, the Company’s General Counsel or, solely with respect to matters that are not reasonably likely to have legal implications for the Company, the Compliance and Ethics Officer is required to:

 

   

report communications of concerns relating to accounting, finance, internal controls, or auditing matters to the Audit Committee;

 

   

investigate communications of concerns relating to conduct of employees, including concerns related to internal policies;

 

   

report communications of concerns relating to non-compliant behavior, such as allegations of violations of the Company’s Code of Conduct or antitrust violations, to the Audit Committee; and

 

   

determine whether to maintain or discard the following communications received:

 

   

bulk mail,

 

   

solicitations to purchase products or services, and

 

   

all other communications that do not fall into the specific categories noted above.

If the correspondence is specifically marked as a private communication to our Board (or a specific member or members of our Board), the Corporate Secretary will not open or read the correspondence, and will forward it to the addressee. These procedures may change from time to time, and you are encouraged to visit our investor relations website for the most current means of communicating with our directors.

Director Nomination Process

In discharging its responsibility, the Corporate Governance Committee receives input from the Chairman of the Board, other directors and, if applicable, the Corporate Governance Committee’s independent professional search firm. It also considers and evaluates any candidates recommended by stockholders, as described below.

Our Board has determined that its members should bring to the Company a broad range of experience, knowledge and judgment. A successful board candidate must be prepared to represent the interests of the Company and all its stockholders, not the interests of particular constituencies. The Corporate Governance Committee and our Board have not established specific minimum age, education, years of business experience or specific types of skills for potential candidates. The factors considered by the Corporate Governance Committee and our Board in their review of potential candidates include whether:

 

   

the candidate has exhibited behavior that indicates he or she is committed to the highest ethical standards;

 

   

the candidate has had business, governmental, non-profit or professional experience at the Chairman, Chief Executive Officer, Chief Operating Officer or equivalent policy-making and operational level of a large organization that indicates that the candidate will be able to make a meaningful and immediate contribution to our Board;

 

   

the candidate has special skills, expertise and background that would complement the attributes of the existing directors, taking into consideration the diverse communities and geographies in which the Company operates;

 

   

the candidate has financial expertise;

 

   

the candidate will effectively, consistently and appropriately take into account and balance the legitimate interests and concerns of all of our stockholders and our other stakeholders in reaching decisions, rather than advancing the interests of a particular constituency;

 

   

the candidate possesses a willingness to challenge management while working constructively as part of a team in an environment of collegiality and trust; and

 

   

the candidate will be able to devote sufficient time and energy to the performance of his or her duties as a director.

 

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The Corporate Governance Committee carefully reviews all current directors and director candidates in light of these factors based on the context of the current and anticipated composition of our Board, the current and anticipated operating requirements of the Company and the long-term interests of our stockholders. In reviewing a candidate, the Corporate Governance Committee considers the integrity of the candidate and whether the candidate would be independent as defined in the Corporate Governance Guidelines and the NYSE Listed Company Manual. The Corporate Governance Committee expects a high level of involvement from our directors and reviews, if applicable, a candidate’s service on other boards to assess whether the candidate has sufficient time to devote to Board duties.

The Corporate Governance Committee decides whether to further evaluate each candidate and may select an independent professional search firm to assist in the discharge of its duties. The evaluation includes a thorough reference check, interaction and interviews, and discussions about the candidate’s qualifications, availability and commitment. After discussion of each candidate’s qualifications, the Corporate Governance Committee Chair interviews each candidate. The Corporate Governance Committee Chair then selects certain candidates to be interviewed by the Chairman of the Board and other members of the Corporate Governance Committee. The Corporate Governance Committee reviews the results of all interviews and makes a recommendation to our full Board with respect to the election of a potential candidate to our Board. Our Board expects that all candidates recommended to our Board will have received the approval of all members of the Corporate Governance Committee.

Any stockholder who wishes to have the Corporate Governance Committee consider a candidate for election to our Board is required to give written notice of his or her intention to make such a nomination. For a description of the procedures required to be followed for a stockholder to nominate a director, see “Stockholder Information — Procedures for Business Matters and Director Nominations for Consideration at the 2014 Annual Meeting of Stockholders — Notice Requirements for Nomination of Directors.” A proposed nomination that does not comply with these requirements will not be considered by the Corporate Governance Committee. There are no differences in the manner in which the Corporate Governance Committee considers or evaluates director candidates it identifies and director candidates who are recommended by our stockholders.

Board’s Role in Risk Oversight

Our Board is ultimately responsible for establishment of our risk management framework, and responsibility for significant risk management policies resides with the Audit Committee under powers delegated by our Board. Our Board believes that having a combined Chairman of the Board and Co-Chief Executive Officer provides a unique perspective on risk oversight. Our most senior executive officers are responsible for collaborating with the Audit Committee to provide oversight with respect to the risk management process, as well as prioritize and validate key risks. Management is then responsible for implementing the Board-approved risk management strategy and developing policies, controls, processes and procedures to identify and manage risks. Management periodically reports to the Audit Committee on the effectiveness of its management of key business risks.

Each Board committee is responsible for monitoring and reporting on the material risks associated with its respective subject matter areas:

 

   

the Audit Committee is responsible for oversight of our accounting and financial reporting processes, the integrity of our financial statements, and the review, and approval or ratification of, any related party transactions;

 

   

the Compensation Committee is responsible for the oversight of risks associated with our compensation practices, including limiting

 

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instances in which compensation could be tied to excessive risk taken by management (see “Executive Compensation – Compensation Discussion and Analysis (“CD&A”) – Risks Related to Compensation Policies and Practices”); and

 

   

the Corporate Governance Committee is responsible for the oversight of our corporate governance risks, including director independence and succession planning.

In terms of overseeing the broader company-wide risk management program, the Audit Committee is responsible for ensuring all risk areas, including regulatory and compliance, are being monitored by senior management and that all risk management matters are being reported to our Board or appropriate Board committee and being addressed as needed. Additionally, our Board collectively reviews, and is responsible for, risks associated with our strategic plans.

In fiscal 2012, management discussed the Company’s risk profile with our Board, established a Risk Committee that regularly monitors the major risks facing the Company and presented a status update of these actions to our Board. The Risk Committee presents to the Audit Committee quarterly and to our Board annually. In addition, the Company continued to develop its internal audit function.

Our General Counsel regularly briefs our Board, and our Chief Auditor regular briefs, and meets in Executive Session with, the Audit Committee. The Audit Committee uses the results of its discussions with our Chief Auditor to set the audit schedule for the internal audit group. Our internal audit group identifies, assesses and assists management in addressing and managing risks by using the Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission, also known as the COSO framework.

Board Diversity

Diversity is very important to us. We strive to offer an inclusive business environment that offers and benefits from diversity of people, thought, and experience. This also holds true for our Board. Although we have no formal written policy, pursuant to our Corporate Governance Guidelines our Board annually reviews the appropriate skills and characteristics of its members in light of the current composition of our Board, and diversity is one of the factors used in this assessment. In addition, in identifying a director candidate, the Corporate Governance Committee and our Board consider and discuss diversity, among the other factors discussed under “— Director Nomination Process,” with a view toward the role and needs of our Board as a whole. When identifying director nominees, the Corporate Governance Committee and our Board generally view diversity expansively to include, without limitation, concepts such as race, gender, national origin, differences of viewpoint and perspective, professional experience, education, skill and other qualities or attributes that together contribute to the successful functioning of our Board.

Code of Conduct

Our Code of Conduct applies to all employees, directors, and officers of the Company and its subsidiaries. The Code of Conduct is posted on the Corporate Governance page of our investor relations website at www.investors.primerica.com and is available in print free of charge to our stockholders who request a copy. The Company also has made available an Ethics Hotline, which permits employees to anonymously report a violation of the Code of Conduct. Any changes to the Code of Conduct will be posted on the Company’s website.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires executive officers and directors and persons who beneficially own more than 10% of our common stock (the “Reporting Persons”) to file initial reports of ownership and reports of changes in ownership with the SEC. Reporting Persons are required by SEC rules to furnish the Company with copies of all Section 16(a) forms they file.

 

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Based solely on a review of the copies of such forms furnished to the Company and written representations from the executive officers and directors, the Company believes that the Reporting Persons complied with all Section 16(a) filing requirements during fiscal 2012 except that a Form 4 reporting both the February 2012 stock grant and the withholding of shares to pay taxes on the vesting of shares in February 2012 for each executive officer (Messrs. Michael C. Adams, John A. Addison Jr., Chess E. Britt, Jeffrey S. Fendler, William A. Kelly, Gregory C. Pitts, Peter W. Schneider, Glenn J. Williams and D. Richard Williams and Ms. Alison S. Rand) was filed approximately one week late because the required information was not received by the appropriate individuals in a timely manner.

Beneficial Ownership of Common Stock

The following table furnishes information, as of February 28, 2013, as to shares of our common stock beneficially owned by: (i) each person or entity who we know to be the beneficial owner of more than 5% of our common stock, (ii) each of our directors (including each nominee for director) and our named executive officers identified in “Executive Compensation – Compensation Discussion and Analysis (“CD&A”)”; and (iii) our directors and executive officers as a group. As of February 28, 2013, there were 56,675,584 shares of our common stock outstanding.

 

Name of Beneficial Owner (1)    Number of
Shares of
Common
Stock
Beneficially
Owned (2)
     Percent of
Outstanding
Common
Stock (3)
 

5% Beneficial Owners:

     

Warburg Pincus Private Equity X, L.P. and

Warburg Pincus X Partners, L.P. (4)

     6,591,731         10.9

Wellington Management Company, LLP (5)

     5,176,665         9.1

Ruane, Cunniff & Goldfarb Inc. (6)

     3,720,625         6.6

Baron Capital Group, Inc. (7)

     3,033,716         5.4

Brave Warrior Advisors, LLC (8)

     3,022,508         5.3

FMR LLC (9)

     2,937,296         5.2

Burgundy Asset Management Ltd. (10)

     2,829,206         5.0

Directors and Executive Officers:

     

D. Richard Williams (11)

     529,271         *   

John A. Addison, Jr. (11)

     460,567         *   

Joel M. Babbit (11)

     5,906         *   

P. George Benson (11)(12)

     3,490         *   

Michael E. Martin (4)(11)(13)

     6,597,670         10.9

Mark Mason (11)(14)

     3,131         *   

Robert F. McCullough (11)(12)

     5,998         *   

Barbara A. Yastine (11)

     8,486         *   

Daniel A. Zilberman (4)(11)(13)

     6,597,670         10.9

Gregory C. Pitts (11)(15)

     90,425         *   

Alison S. Rand (11)

     74,418         *   

Peter W. Schneider (11)

     83,780         *   

Glenn J. Williams (11)

     129,876         *   

All directors, director nominees and executive officers as a group (17 people) (16)

     8,307,650         13.7

 

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* Less than one percent.
(1) The address for each of our directors (other than Messrs. Martin, Mason and Zilberman) and executive officers is c/o Primerica, Inc., One Primerica Parkway, Duluth, Georgia 30099.
(2) Unless otherwise indicated, the beneficial owners have sole voting power and investment power with respect to shares of our common stock beneficially owned by them.
(3) Based on 56,675,584 shares of our common stock outstanding, except as otherwise noted.
(4) Includes 4,103,110 shares issuable upon exercise of warrants held by Warburg Pincus Private Equity X, L.P. and Warburg Pincus X Partners L.P. (together, “Warburg Pincus”). The exercise price for the warrants is $18.00 per share. The percent of the Company’s common stock outstanding that is beneficially owned by Warburg Pincus is based on 60,778,694 shares of the Company’s common stock outstanding, which includes the 4,103,110 shares issuable upon exercise of the warrant. The address for each of Warburg Pincus Private Equity X, L.P. and Warburg Pincus X Partners, L.P. is c/o Warburg Pincus LLC, 450 Lexington Avenue, New York, New York 10017-3911. Warburg Pincus Private Equity X, L.P. and Warburg Pincus X Partners, L.P. are affiliates of Warburg Pincus & Co. and Warburg Pincus LLC. Pursuant to the Securities Purchase Agreement, by and among Citigroup, Primerica and Warburg Pincus, dated as of February 8, 2010 (the “Securities Purchase Agreement”), Warburg Pincus & Co. and Warburg Pincus LLC (the controlling affiliates of Warburg Pincus) have agreed that, subject to exceptions, they and their controlled affiliates will not own more than 35% of the voting power of our outstanding voting securities or more than 45% of our economic equity interests.
(5) Based on a Schedule 13G filed by Wellington Management Company, LLP (“Wellington”) on February 14, 2013. Wellington has shared dispositive power with respect to all of these shares, and shared voting power with respect to 4,103,933 of these shares. Wellington’s address is 280 Congress Street, Boston, MA 02210.
(6) Based on a Schedule 13G filed by Ruane, Cunniff & Goldfarb Inc. (“Ruane”) on February 14, 2013. Ruane has sole voting power with respect to 3,705,000 of these shares and sole dispositive power with respect to all of these shares. Ruane’s address is 767 Fifth Avenue, New York, NY 10153-4798.
(7)

Based on a Schedule 13G filed by BAMCO, Inc., Baron Capital Group, Inc., Baron Capital Management, Inc. and Ronald Baron (collectively, “Baron”) on February 14, 2013. BAMCO has shared voting power with respect to 2,494,500 shares and shared dispositive power with respect to 2,814,500 shares. Baron Capital Group, Inc. and Ronald Baron each have shared voting power with respect to 2,713,716 and shared dispositive power with respect to 3,033,716 shares. Baron Capital Management, Inc. has shared voting power and shared dispositive power with respect to 219,216 shares. Baron’s address is 767 Fifth Avenue, 49th Floor, New York, NY 10153.

(8)

Based on a Schedule 13G filed by Brave Warrior Advisors, LLC (“Brave Warrior”) on February 14, 2013. Brave Warrior’s address is 12 East 49th Street, New York, NY 10017.

(9) Based on a Schedule 13G filed jointly by FMR LLC (“FMR”), Mr. Edward C. Johnson 3d, and Fidelity Management & Research Company on February 14, 2013. FMR has sole voting power with respect to 2,935 of these shares, and sole dispositive power with respect to all of these shares. FMR’s address is 82 Devonshire Street, Boston, MA 02109.
(10) Based on a Schedule 13G filed by Burgundy Asset Management Ltd. (“Burgundy”) on February 11, 2013. Burgundy has sole voting power with respect to 1,930,671 of these shares and sole dispositive power with respect to all of these shares. Burgundy’s address is 181 Bay Street, Suite 4510, Toronto, Ontario, M5J 2T3.
(11) Includes unvested restricted shares.
(12) Excludes 5,003 unvested deferred stock units issued in connection with the non-employee director deferred compensation plan.
(13) Each of Messrs. Martin and Zilberman is a Partner of Warburg Pincus & Co. and a Managing Director of Warburg Pincus LLC. Other than 5,003 unvested restricted shares, all shares indicated as owned by each of Messrs. Martin and Zilberman are included because of their affiliation with the Warburg Pincus entities. The address for Messrs. Martin and Zilberman is c/o Warburg Pincus LLC, 450 Lexington Avenue, New York, New York, 10017-3911. Each of Messrs. Martin and Zilberman disclaims beneficial ownership of any of our shares held by Warburg Pincus.
(14) The address for Mr. Mason is c/o Citigroup Inc., 399 Park Avenue, New York, New York 10022. Because of Citigroup’s ownership interest in the Company until December 2011, Mr. Mason did not receive cash or equity compensation for serving as a director until 2012.
(15) Includes 36,415 shares as to which Mr. Pitts has shared voting and investment power.
(16) Includes all shares beneficially owned by Warburg Pincus.

 

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Members of Our Board of Directors

The following information about each member of our Board of Directors includes their business experience, director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications attributes or skills that caused the Corporate Governance Committee and our Board of Directors to determine that each individual should serve as one of our directors.

 

LOGO

John A. Addison, Jr. is the Chairman of Primerica Distribution, has served as our Co-Chief Executive Officer since 1999 and has served our Company in various capacities since 1982 when he joined us as a business systems analyst. Mr. Addison has served in numerous officer roles with Primerica Life Insurance Company (“Primerica Life”), a life insurance underwriter, and Primerica Financial Services, Inc. (“PFS”), a general agent, both of which are subsidiaries of Primerica. He served as Vice President and Senior Vice President of Primerica Life. He also served as Executive Vice President and Group Executive Vice President of Marketing. In 1995, he became President of the Primerica operating unit of Citigroup and was promoted to Co-Chief Executive Officer in 1999. Mr. Addison earned his B.A. in Economics from the University of Georgia and his M.B.A. from Georgia State University.

Mr. Addison brings to our Board his 12 years of experience as our Co-Chief Executive Officer and nearly 30 years of understanding our Company and our business, along with general management and marketing expertise.

 

LOGO

Joel M. Babbit is the Co-Founder and Chief Executive Officer of Mother Nature Network, one of the leading resources for environmental news and information. Prior to launching Mother Nature Network in 2009, Mr. Babbit spent more than 20 years in the advertising and public relations industry, creating two of the largest advertising agencies in the Southeastern US – Babbit and Reiman (acquired by London-based GGT) and 360 (acquired by WPP Group’s Grey Global Group). Following the acquisition of 360 by Grey Global Group in 2002, Mr. Babbit served as President and Chief Creative Officer of the resulting entity, Grey Atlanta, until 2009. He also previously served as President of WPP Group’s GCI, a public relations firm, and as Executive Vice President and General Manager for the New York office of advertising agency Chiat/Day Inc. Advertising. Following his hometown of Atlanta being awarded the 1996 Summer Olympics, and at the request of Mayor Maynard Jackson, Mr. Babbit took a leave of absence from the private sector to serve as Chief Marketing and Communications Officer for the City and as a member of the Mayor’s cabinet.

Mr. Babbit brings to our Board his 20 years of experience in marketing and advertising, his management experience and his expertise in social media.

 

LOGO

P. George Benson has been the President of the College of Charleston in Charleston, South Carolina since February 2007. From June 1998 until January 2007, he was Dean of the Terry College of Business at the University of Georgia. From July 1993 to June 1998, Mr. Benson served as Dean of the Rutgers Business School at Rutgers University and, prior to that, Mr. Benson was on the faculty of the Carlson School of Management at the University of Minnesota. Mr. Benson currently serves as Chair of the Board of Directors for the Foundation for the Malcolm Baldrige National Quality Award, was Chairman of the Board of Overseers for the Baldrige Award Program from 2004 to 2007 and was a national judge for the Baldrige Award from 1997 to 2000. He also serves as a member of the Boards of Directors of AGCO Corporation and Crawford & Company. Mr. Benson was a member of the Board of Directors of Nutrition 21, Inc. from 1998 to 2010.

 

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Mr. Benson received a B.S. degree in Mathematics from Bucknell University, completed graduate work in operations research in the Engineering School of New York University and earned a Ph.D. in business from the University of Florida.

Mr. Benson brings to our Board significant expertise in academics, senior management, corporate governance, strategic planning, risk and asset management, and finance. In particular, our Board considered his experience managing the College of Charleston’s staff of more than 2,000, budget of more than $230 million and endowment of more than $60 million, as well as his service on the boards of directors of other public companies and as a member of their audit committees.

 

LOGO

Michael E. Martin is a Partner of Warburg Pincus & Co. and a Managing Director of the private equity firm Warburg Pincus LLC, where he is head of its financial services group and a member of its Executive Management Group. Prior to joining Warburg Pincus & Co. and Warburg Pincus LLC in 2009, Mr. Martin was President of Brooklyn NY Holdings, LLC, a private investment company, from 2006 to 2008. Mr. Martin worked at UBS Investment Bank from 2002 to 2006, where he served as a Vice Chairman and Managing Director of UBS Investment Bank and a member of its Board of Directors and Global Executive Committee. He has held senior positions at the investment bank Credit Suisse First Boston, and prior to that he practiced corporate law at the law firm of Wachtell, Lipton, Rosen & Katz. Mr. Martin also serves on the Board of Directors of National Penn Bancshares, Inc. and he was a member of the Board of Directors of BPW Acquisition Corp. from 2008 to 2010 and of SLM Corporation from 2008 to 2012. Mr. Martin received a B.S. in economics from Claremont Men’s College and a J.D. from Columbia University School of Law.

Mr. Martin has been designated by Warburg Pincus to be one of our directors pursuant to its rights under the Securities Purchase Agreement. For a description of transactions between the Company and Warburg Pincus, see “Related Party Transactions — Transactions with Warburg Pincus.”

Mr. Martin brings to our Board expertise in general management, legal, corporate governance, finance, executive compensation, strategic planning, risk and asset management, investment banking and capital markets, and mergers and acquisitions (“M&A”).

 

LOGO

Mark Mason has been the Chief Executive Officer of Citi Holdings, an operating segment of Citigroup that comprises financial services company Citi Brokerage and Asset Management, Global Consumer Finance and Special Assets Portfolios, since January 2012. He previously served as the Chief Operating Officer for Citi Holdings from January 2009 to December 2011 and the Chief Financial Officer from January 2006 to December 2008. Mr. Mason joined Citigroup in 2001 and has also served as the Chief Financial Officer and Head of Strategy and M&A for Citigroup’s Global Wealth Management Division, Chief of Staff to Citigroup’s Chairman and Chief Executive Officer, Chief Financial Officer and Chief Operating Officer for Citigroup Real Estate Investments and Vice President of Corporate Development at Citigroup. Prior to joining Citigroup, Mr. Mason held various positions at Lucent Technologies, Marakon Associates, a strategy consulting firm, and Goldman, Sachs & Co. He received a Bachelor of Business and Administration in finance from Howard University and an M.B.A. from Harvard Business School.

Mr. Mason brings to our Board expertise in general management, finance, strategic planning, M&A, and investment banking and capital markets.

 

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Robert F. McCullough has been a private investor since January 2007. He previously was Senior Partner of the investment fund manager Invesco Ltd. (formerly AMVESCAP PLC) from June 2004 to December 2006. Prior thereto, he was Chief Financial Officer of AMVESCAP PLC from April 1996 to May 2004. Mr. McCullough joined the New York audit staff of Arthur Andersen LLP in 1964, served as Partner from 1972 until 1996, and served as Managing Partner in Atlanta from 1987 until 1996. Mr. McCullough also serves on the Boards of Directors of Acuity Brands, Inc. and Schweitzer-Mauduit International, Inc. Mr. McCullough was a member of the Board of Directors of Comverge, Inc. from 2006 to 2009 and of Mirant Corporation from 2003 to 2006. He received his B.B.A. in Accounting from the University of Texas at Austin.

LOGO

Mr. McCullough brings to our Board expertise in senior management, finance and accounting, corporate governance, and M&A. In particular, our Board considered his broad perspective in accounting, financial controls and financial reporting matters and his extensive audit experience based on his lengthy career in public accounting and his experience serving as the chairman of the audit committees and governance committees of several public companies.

 

LOGO

D. Richard Williams is Chairman of the Board of Directors, has served as our Co-Chief Executive Officer since 1999 and has served our Company since 1989 in various capacities, including as the Chief Financial Officer and Chief Operating Officer of the Primerica operating unit of Citigroup. Mr. Williams serves on the Board of Trustees for the Woodruff Arts Center, the Board of Directors of the Anti-Defamation League Southeast Region and the Atlanta Area Council of the Boy Scouts of America. Mr. Williams earned both his B.S. degree and his M.B.A. from the Wharton School of the University of Pennsylvania.

Mr. Williams has led our company as Co-Chief Executive Officer for 11 years and brings to our Board more than 20 years of knowledge of the Company’s business, finances and operations along with expertise in senior management, finance, M&A, strategic planning, and risk and asset management.

 

LOGO

Barbara A. Yastine has been the Chair, President and Chief Executive Officer of Ally Bank since March 2012. With $92 billion in assets and $48 billion in deposits, Ally Bank is the dominant operating subsidiary of Ally Financial, Inc., the leading U.S. independent auto finance company. She previously served as Chief Administrative Officer of Ally Financial from May 2010 to March 2012, overseeing the risk, compliance, legal and technology areas. Prior to joining Ally Financial, she served as a Principal of Southgate Alternative Investments, a start-up diversified alternative asset manager, beginning in June 2007. From August 2004 through June 2007, Ms. Yastine was self-employed as an independent consultant. Before that, she was Chief Financial Officer for investment bank Credit Suisse First Boston from October 2002 to August 2004. From 1987 through 2002, Ms. Yastine worked at Citigroup and its predecessor companies. She graduated with a B.A. in Journalism from New York University, where she also earned her M.B.A.

Ms. Yastine brings to our Board expertise in general management, risk and asset management, finance and strategic planning. In particular, our Board considered her significant current and past experience serving in senior management positions in the investment banking and capital markets industries.

 

LOGO

Daniel A. Zilberman is a Partner of Warburg Pincus & Co. and a Managing Director of the private equity firm Warburg Pincus LLC, where he focuses on investments in insurance companies, banks, asset managers and service providers to the financial services industry. Prior to joining

 

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Warburg Pincus & Co. and Warburg Pincus LLC in 2005, Mr. Zilberman worked at Evercore Capital Partners, a private equity firm, from 2003 to 2005 and Lehman Brothers from 1997 to 1999 and 2001 to 2002. Mr. Zilberman received a B.A. in International Relations from Tufts University and an M.B.A. in Finance from the Wharton School of the University of Pennsylvania.

Mr. Zilberman was initially designated by Warburg Pincus to be one of our directors pursuant to its rights under the Securities Purchase Agreement. For a description of transactions between the Company and Warburg Pincus, see “Related Party Transactions — Transactions with Warburg Pincus.”

Mr. Zilberman brings to our Board experience in general management, finance, M&A, strategic planning, government and regulatory affairs, and investment banking and capital markets.

Director Attendance at Board, Committee and Annual Meetings

During fiscal 2012, our Board held eight meetings, including four telephonic meetings. Each director attended at least 75%, collectively, of the meetings of our Board and its committees on which he or she served during fiscal 2012. In addition, each director except for Mr. Babbit attended the 2012 Annual Meeting of Stockholders. The non-management directors meet separately in regularly scheduled executive sessions, and the independent directors meet in their own executive session at least annually. Our Lead Director presided at the executive sessions of the non-management directors and the independent directors. Directors are expected to attend annual meetings of stockholders of the Company.

Committees of Our Board of Directors

Our Board has three standing committees that assist it in carrying out its duties – the Audit Committee, the Compensation Committee and the Corporate Governance Committee. The charter of each committee is available on our Investor relations website at www.investors.primerica.com and may be obtained, without charge, by contacting the Corporate Secretary, Primerica, Inc., One Primerica Parkway Duluth, Georgia 30099.

The following chart shows information regarding the membership of each of our Board’s standing committees as of December 31, 2012.

 

Name    Audit    Compensation    Nominating
and
Corporate
Governance

John A. Addison, Jr. (1)

              

Joel M. Babbit

             ü

P. George Benson

   ü         Chair

Michael E. Martin

        Chair     

Mark Mason (2)

              

Robert F. McCullough

   Chair    ü     

D. Richard Williams (1)

              

Barbara A. Yastine

   ü    ü     

Daniel A. Zilberman

             ü

Number of fiscal 2012 meetings

   17    7    4

 

(1) Employee of Primerica
(2) Employee of Citigroup (the Company’s former parent)

 

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Audit Committee

The Audit Committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act. Its primary purpose is to assist our Board in fulfilling its responsibility to our stockholders relating to the financial reporting process and systems of internal control. The Audit Committee is also responsible for determining whether the Company’s financial systems and reporting practices were established in accordance with applicable requirements. Further, the Audit Committee retains and terminates the Company’s independent registered public accounting firm and approves its services and fees.

Our Board has determined that all Audit Committee members are financially literate as required by the NYSE Listed Company Manual. Our Board has further determined that the Audit Committee Chair qualifies as an audit committee financial expert within the meaning of the rules and regulations of the SEC, and that all of the Audit Committee members are independent as required by the NYSE Listed Company Manual.

Compensation Committee

The Compensation Committee is responsible for overseeing the Company’s overall human resources compensation program, including executive compensation, incentive plans, benefit plans and equity plans. The Compensation Committee approves and oversees the administration of the Company’s material benefit plans, policies and programs, including all of the Company’s equity plans and incentive plans. The Compensation Committee also reviews and approves principal elements of total compensation for the Company’s executive officers and employment agreements for certain of the Company’s executive officers. Further, the Compensation Committee is responsible for reviewing and recommending the compensation of non-management directors to the full Board, as well as reviewing and recommending directors’ and officers’ indemnification and insurance matters.

The Compensation Committee may delegate certain powers and functions with respect to employee benefit plans to the plan administration committee or to the respective plan administrators, or other appropriate committees or individuals, if such delegation is consistent with the Company’s overall compensation policies, provided that the Compensation Committee may not delegate the power to: (i) create, authorize, approve, amend and/or terminate any new or existing incentive compensation or equity-based plan in which members of senior management or directors participate; or (ii) terminate, or substantially reduce or freeze benefits or future accruals under, any plan other than welfare benefit plans.

The Compensation Committee discusses, evaluates and reviews the Company’s policies and practices of compensating its employees, including non-executive officers, as they relate to risk management practices and risk-taking incentives and takes such action as it deems necessary to limit risks relating to compensation. See “Corporate Governance — Board’s Role in Risk Oversight.”

Nominating and Corporate Governance Committee

The Corporate Governance Committee takes a leadership role in shaping corporate governance policies and practices, including recommending to our Board the Corporate Governance Guidelines applicable to the Company and monitoring the Company’s compliance with such policies, practices and guidelines. The Corporate Governance Committee is also responsible for identifying individuals qualified to become Board members, recommending to our Board the director nominees to be considered for election at the next annual meeting of stockholders, and leading our Board in its annual review of its performance. The Corporate Governance Committee considers submissions of director candidates submitted by stockholders in accordance with the procedures described under “Corporate Governance – Director Nomination Process.” The Corporate Governance Committee is responsible for

 

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oversight of executive succession planning and, in 2012, the Corporate Governance Committee began to exercise oversight of our newly-formed political action committee and our government relations strategy.

Director Compensation

The Compensation Committee, which consists solely of independent directors, is responsible for reviewing and considering any revisions to director compensation. Our Board reviews the Compensation Committee’s recommendations and determines the amount of director compensation annually. Executive officers have no role in determining or recommending director compensation. Our Board determined that compensation for non-management directors should be a mix of cash and equity-based compensation. Directors who are employees of Primerica did not receive any fees or additional compensation for their service on our Board in fiscal 2012. The interests of our non-management directors are aligned with the interests of our stockholders by linking a portion of their compensation to stock performance.

Annual Retainer

In fiscal 2012, non-management directors received an annual retainer of $150,000, which was paid 50% in cash and 50% in restricted stock vesting over a three-year period. In addition, for fiscal 2012, the following cash payments were approved:

 

   

Lead Director — $25,000;

 

   

Audit Committee Chair — $25,000;

 

   

Compensation Committee Chair — $15,000;

 

   

Corporate Governance Committee Chair — $15,000;

 

   

Independent directors — an annual fee of $10,000 for service on any committee for which they do not serve as Chair; and

 

   

Each member of the Audit Committee — additional compensation of $750 per meeting ($1,125 for the Audit Committee Chair) for work the Audit Committee was requested to undertake in connection with our repurchase in April 2012 of approximately 5.7 million shares of our common stock from Warburg Pincus at a price of $26.15 per share (the “April Repurchase”).

We pay the cash portion of the annual fee in quarterly installments. Except to the limited extent noted above, we do not pay meeting fees.

In early 2013, the Compensation Committee recommended, and the Board approved, a change in the payment of the equity portion of annual retainer. Beginning in fiscal 2013, non-management directors will receive 50% of their annual retainer in restricted stock units that will vest on the earlier of one year from the grant date and the date of the following year’s annual meeting of stockholders. Shares underlying the restricted stock units will be deferred until such date as the director no longer serves as a member of our Board.

Travel Expenses

The Company reimburses all directors for travel and other related expenses in connection with attending Board and committee meetings and Board-related activities.

 

  Primerica 2013 Proxy Statement   29


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Director Compensation Table

The following table shows fiscal 2012 compensation for our non-management directors.

 

Name    Annual
Fees
     Other
Fees (1)
     Equity
Awards
(2)
    All Other
Compensation
(3)
     Total  

Joel M. Babbit

   $ 85,000         —        $ 74,987      $ 1,175       $ 161,162   

P. George Benson

   $ 102,250       $ 2,250       $ 74,987 (4)    $ 1,359       $ 180,846   

Michael A. Martin

   $ 115,000         —        $ 74,987      $ 1,135       $ 191,122   

Mark Mason

   $ 75,000         —         $ 74,987      $ 657       $ 150,644   

Robert F. McCullough

   $ 113,375       $ 3,375       $ 74,987 (4)    $ 1,495       $ 193,232   

Barbara A. Yastine

   $ 96,500       $ 1,500       $ 74,987      $ 1,542       $ 174,529   

Daniel A. Zilberman

   $ 85,000         —        $ 74,987      $ 1,135       $ 161,122   

 

(1) Special project fee to Audit Committee members in connection with the April Repurchase.
(2) Each non-management director was granted 3,131 shares of our common stock, representing the number of whole shares of restricted stock (or, at the director’s election, deferred stock units) equal to $75,000 divided by $23.95 (the closing market price of our common stock on the NYSE on the trading day immediately preceding the grant date). For the valuation assumptions underlying the awards, see our audited financial statements for fiscal 2012 included in the Company’s Annual Report on Form 10-K for fiscal 2012.

At December 31, 2012, our non-management directors held unvested restricted stock awards and deferred stock units as follows, representing all of their outstanding awards as of that date:

 

Name   Grant
Date
     Number of Shares or
Units of Stock That
Have Not Vested (a)
       Market Value of
Shares or Units of
Stock That
Have Not Vested (b)
 

Joel M. Babbit

  08/01/11        1,850         $ 55,519   
  05/16/12        3,131           93,961   
      

 

 

      

 

 

 
             4,981         $ 149,480   

P. George Benson

  04/23/10        831         $ 24,938   
  05/18/11        1,872           56,179   
  05/16/12        3,131           93,961   
      

 

 

      

 

 

 
             5,834         $ 175,078   

Michael A. Martin

  05/18/11        1,872         $ 56,179   
  05/16/12        3,131           93,961   
      

 

 

      

 

 

 
             5,003         $ 150,140   

Mark Mason

  05/16/12        3,131         $ 93,961   
      

 

 

      

 

 

 
             3,131         $ 93,961   

Robert F. McCullough

  04/19/10        1,334         $ 40,033   
  05/18/11        1,872           56,179   
  05/16/12        3,131           93,961   
      

 

 

      

 

 

 
             6,337         $ 190,173   

Barbara A. Yastine

  12/07/10        849         $ 25,478   
  05/18/11        1,872           56,179   
  05/16/12        3,131           93,961   
      

 

 

      

 

 

 
             5,852         $ 175,618   

Daniel A. Zilberman

  05/18/11        1,872         $ 56,179   
  05/16/12        3,131           93,961   
      

 

 

      

 

 

 
             5,003         $ 150,140   

 

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  (a) All restricted shares and deferred stock units vest in equal installments on the first, second and third anniversary of the grant date.
  (b) Represents the number of unvested restricted shares and deferred stock units owned at December 31, 2012 multiplied by $30.01, the closing market price per share of our common stock on the NYSE on that date.
(3) Represents dividends paid on unvested restricted shares and deferred stock units.
(4) Messrs. Benson and McCullough elected to receive their equity awards in the form of deferred stock units under the Nonemployee Directors’ Deferred Compensation Plan. See “— Deferred Compensation.”

 

Deferred Compensation

Our Board adopted the Primerica, Inc. Nonemployee Directors’ Deferred Compensation Plan in November 2010, under which non-management directors may elect to defer all or a portion of their directors’ fees. At the director’s option, we will convert all or a portion of his or her cash fees otherwise payable during a calendar quarter to deferred stock units equal in number to the maximum number of shares of our common stock, or fraction thereof (to the nearest one hundredth (1/100) of one share), which could be purchased with the dollar amount of such fees at the closing market price of our common stock on the first trading day of the following calendar quarter. These deferred stock units will be fully vested on such date.

At the director’s option, we credit his or her deferral account with deferred stock units equal in number to the number of restricted stock awards to which the director was otherwise entitled. Any deferred stock units that are issued upon deferral of restricted stock awards are subject to the same vesting provisions as the restricted stock awards themselves. We also credit the deferral account with deferred stock units equal in number to the maximum number of shares of our common stock, or fraction thereof (to the nearest one hundredth (1/100) of one share), which could have been purchased with the cash dividend, if any, which would have been payable had the participant received restricted stock awards to which he or she was otherwise entitled. The deferred stock units credited in lieu of the payment of dividends on restricted stock awards are fully vested on the dividend payment date.

We make deferred payments, at the director’s election, within 60 days of termination of Board service or, in the case of an installment election, within 60 days of termination of Board service and up to five anniversaries of such date.

During fiscal 2012, Messrs. Benson and McCullough participated in the Nonemployee Directors’ Deferred Compensation Plan.

Director Stock Ownership Guidelines

Our non-management directors are required to own shares valued at three times their annual cash retainer. In determining compliance with these guidelines, stock ownership includes shares beneficially owned by the director (or by immediate family members) and unvested restricted shares and deferred stock units. The participants have five years from the date of their initial election to our Board to achieve the targeted level of stock ownership.

 

  Primerica 2013 Proxy Statement   31


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EXECUTIVE COMPENSATION

 

The subsections within this Executive Compensation section are intended to be read together, and each section provides information not included in the others. For background information on the Compensation Committee and its responsibilities, see “Board of Directors — Committees of Our Board of Directors — Compensation Committee.”

In this Executive Compensation section, the terms “we,” “our,” and “us” refer to management, the Company and, as applicable, the Compensation Committee.

Compensation Committee Report1

The Compensation Committee participated in the preparation of the Compensation Discussion and Analysis and reviewed and discussed successive drafts with management. Following completion of this process, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for fiscal 2012 and this Proxy Statement.

COMPENSATION COMMITTEE:

Michael E. Martin, Chair

Robert F. McCullough

Barbara A. Yastine

Compensation Committee Interlocks and Insider Participation

Each of Messrs. Martin and McCullough and Ms. Yastine served as a member of the Compensation Committee during all of fiscal 2012. None of the current or former members of the Compensation Committee is a former or current officer or employee of the Company or any of its subsidiaries.

Compensation Discussion and Analysis (“CD&A”)

Our fiscal 2012 named executive officers were:

 

   

D. Richard Williams — Chairman of the Board and Co-Chief Executive Officer;

 

   

John A. Addison, Jr. — Chairman of Primerica Distribution and Co-Chief Executive Officer;

 

   

Gregory C. Pitts — Executive Vice President and Chief Operating Officer;

 

   

Alison S. Rand — Executive Vice President and Chief Financial Officer;

 

   

Peter W. Schneider — Executive Vice President, General Counsel, Corporate Secretary and Chief Administrative Officer; and

 

   

Glenn J. Williams — President.

Executive Summary

The Compensation Committee structured our executive compensation program to pay for performance and, over the long term, to provide compensation to our executive officers that is market competitive.

 

 

1 The material in the 2012 Compensation Committee Report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement or any portion hereof into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts.

 

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Fiscal 2012 Operating and Financial

Results (1)

 

During fiscal 2012, the Company maintained its strong financial condition despite economic challenges affecting our customer base. The following table illustrates the Company’s performance in fiscal 2012 relative to performance in fiscal 2011.

 

     Fiscal 2012     Fiscal 2011     Change  

Operating Revenues

  $ 1,179.3 million      $ 1,087.9 million        8.4

Net Operating Income

  $ 174.5 million      $ 156.0 million        11.9

Operating Return on Average Equity

    14.3     11.8        

Operating Earnings Per Diluted Share

  $ 2.72      $ 2.07        31.7

Size of Life-Licensed Sales Force at Year-End

    92,373        91,176        1.3

Market Price Per Share at Fiscal Year End

  $ 30.01      $ 23.24        29.1

Total Shareholder Return

    30.2 % (2)      -3.8 % (3)         

 

(1) Includes financial results that were not prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). See “Non-GAAP Financial Measures” in Annex D to this Proxy Statement for a reconciliation to GAAP results.
(2) Represents the percentage change in the price of our common stock from December 31, 2011 to December 31, 2012 plus the 2012 dividends.
(3) Represents the percentage change in the price of our common stock from $24.25 at December 31, 2010 to December 31, 2011 plus the 2011 dividends.

 

Changes to Fiscal 2012 Executive Compensation

For fiscal 2012, the Compensation Committee made the following changes to our executive compensation program:

 

   

Our Board indicated that it expected management to focus on capital management, including refinancing the outstanding indebtedness to Citigroup, our former parent, and completing a redundant reserve financing transaction. To incentivize capital management activities, the portion of the performance objectives reflected by net operating income was reduced from 50% for fiscal 2011 to 25% for fiscal 2012 and operating return on average equity was added as a new component representing the remaining 25% for fiscal 2012.

 

   

In February 2012, the Compensation Committee determined that our executive officers should receive one-third of their equity award value in the form of non-qualified stock options. Many of our peer companies use a mix of stock options and restricted stock and the Compensation Committee wanted to create a stronger linkage between executive pay and shareholder return. The Compensation Committee granted stock options to our executive officers in February 2013 based on fiscal 2012 performance. The award value of each stock option was equal to one-third of the award date value of a share of restricted stock.

Pay-for-Performance

The Compensation Committee structured our 2012 executive compensation program so that a meaningful percentage of compensation is tied to the achievement of challenging levels of both corporate performance and personal objectives. Cash incentives and equity awards are both determined based on corporate and personal performance. Accordingly, we view both cash and equity awards as performance-based elements of our compensation program.

Each named executive officer has a maximum permissible payout that is equal to a designated percentage of operating income before income taxes. The Compensation Committee then exercises negative discretion to determine the actual award based on corporate and personal performance objectives that are established at the beginning of each fiscal year.

 

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Because our Co-Chief Executive Officers have greater responsibilities than our other named executive officers and because they are ultimately responsible for the Company’s strategic direction and overall results, our pay-for-performance approach provides for a larger portion of their total compensation to be “at-risk” in the form of incentive awards. The following chart reflects the mix of fixed versus performance-based compensation for the Co-Chief Executive Officers and our other named executive officers, on average, in fiscal 2012.

 

LOGO

The Compensation Committee believes that the Co-Chief Executive Officers should be more accountable for overall corporate performance than the other executive officers and, as a result, the relative weighting of corporate performance is higher for the Co-Chief Executive Officers. The chart below sets forth the relative weighting of the corporate and personal performance components for fiscal 2012.

 

LOGO

 

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Corporate Performance Objectives

Corporate performance for fiscal 2012 was measured based on four separate objectives, each of which accounted for 25% of the total corporate incentive payout:

 

Corporate
Objective
   Rationale   Weighting     Performance Level Payout (1)   Fiscal 2012 Result   Payout
Factor

Operating Revenue

  

Reflects life and securities

sales as well as the

performance of our

insurance in force and

assets under management

    25  

Threshold: 85% of the Target level

 

Target: 100%

 

Maximum: 115% of the Target level

  $1,179.3 million    

Net Operating Income

  

Reflects the overall success

of our Company, our ability

to manage expenses, our

business mix and our

achievement of pricing

objectives

    25  

Threshold: 85% of the Target level

 

Target: 100%

 

Maximum: 115% of the Target level

  $174.5 million    

Operating Return on Average Equity

  

Reflects net operating

income performance as well

as the effectiveness of

capital management

strategies

    25  

Threshold: 85% of the Target level

 

Target: 100%

 

Maximum: 115% of the Target level

  14.3%    

Size of Life-Licensed Sales Force at Year-End

  

Represents recruiting,

licensing efficiency, turnover

rates and long-term

sustainability

    25  

Threshold: 90% of the Target level

 

Target: 100%

 

Maximum: 110% of the Target level

  92,373    
  Total Payout Factor:   104.4%

 

(1) For results between threshold and maximum levels, the actual payout factor is extrapolated. The Compensation Committee intentionally narrowed the payout band for the sales force metric because it believes that performance in only the narrower band would justify an incentive payout.

 

Management viewed the financial corporate performance objectives as aggressive but achievable. However, the size of life-licensed sales force was viewed as very aggressive. The Compensation Committee intentionally set a target level that it believed would be challenging in order to incentivize management to focus on initiatives that would reverse the trend of a declining sales force.

Personal Performance Objectives

Each named executive officer had personal performance objectives for fiscal 2012 that were approved by the Compensation Committee. These goals focused on the professional development of each named executive officer and the further improvement of efficiencies supporting the effectiveness of the organization

 

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as well as certain non-financial objectives tied to the needs of the business. Each of our named executive officers exhibited strong personal performance against these objectives. The Compensation Committee determined to pay our named executive officers at the following levels based on achievement of their personal performance objectives:

 

Name    Individual
Performance
Payout
Factor
 

D. Richard Williams

     100

John A. Addison, Jr.

     100

Gregory C. Pitts

     120

Alison S. Rand

     110

Peter W. Schneider

     110

Glenn J. Williams

     110

Fiscal 2012 Executive Compensation

Compensation Program Objectives

Our executive compensation program was designed to achieve four primary objectives:

 

Compensation Program Objective    How Objective is Achieved
Motivate and reward executives when they deliver desired business results and stockholder value near term    Cash and equity-based incentive awards are based on corporate and personal performance.
Align executive and stockholder interests over the long-term    Equity-based incentive awards are tied to corporate and personal performance and their value increases with stock price appreciation. Beginning with fiscal 2013 grants for fiscal 2012 performance, awarded a portion of equity in non-qualified stock options to further link executive performance with stockholder interests.
Avoid pay programs that may encourage excessive or unreasonable risk-taking, misalign the timing of rewards and performance, or otherwise fail to promote the creation of long-term stockholder value    The range of performance and payout levels is linear, so that management is not encouraged to take excessive risk to reach a higher level of achievement. In addition, there is a cap for the maximum performance at each level.
Attract and retain the very best executive talent    Executives are held accountable for results and rewarded above target levels when corporate and personal goals are exceeded. When goals are not met, compensation awards are below target levels.

 

In approving incentive compensation for fiscal 2012 performance, the Compensation Committee considered the results of the Company’s most recent advisory vote on executive compensation at the 2011 Annual Meeting of Stockholders. Because approximately 92.5% of votes cast approved the executive compensation program as described in our 2011

 

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proxy statement, the Compensation Committee has not made significant changes to our executive compensation program. However, in order to further align executive pay and Company performance in fiscal 2012 and beyond, the Compensation Committee approved changes to the performance measures and relative weightings used to determine both cash and equity awards in fiscal 2012 and also changed the equity grant mix for executive officers from 100% restricted stock to 2/3 restricted stock and 1/3 stock options. See “– Fiscal 2013 Executive Compensation”.

 

Compensation Elements

The elements of our executive compensation program are described below.

 

Element    Key Features
Base Salary    Each named executive officer’s base salary is a fixed dollar amount, as described in his or her employment agreement. The amounts were designed to provide a competitive fixed rate of pay recognizing different levels of responsibility and performance within the Company.

Incentive Awards

  

Incentive awards are granted to reward employees for achieving critical Company goals. A portion of the incentive awards are equity-based to provide incentive for long-term creation of stockholder value.

•     For fiscal 2012, each named executive officer’s maximum permissible payout was equal to a designated percentage of operating income before income taxes

 

•     The Compensation Committee exercised negative discretion to reduce awards to amounts that reflect achievement of corporate and personal objectives

 

•     Any portion of the incentive award above target may be paid in restricted stock at the Compensation Committee’s discretion. The Compensation Committee elected to pay a portion of the amounts above target in the form of equity and a portion of such amounts in cash.

 

•     Our named executive officers are eligible for additional discretionary incentive awards paid in the form of restricted stock. In fiscal 2012, the Compensation Committee elected not to grant discretionary incentive awards.

Benefit Programs

   Our named executive officers participate in the same benefit programs that are offered to other salaried employees

Perquisites

   Limited perquisites are provided to executives to enhance the personal health of our named executive officers and to encourage spousal attendance at Company events

 

Elements of Compensation: Base Salary

Base salary is a fixed portion of compensation based on an individual’s skills, responsibilities and experience. At the time of our IPO, base salaries were not differentiated among our named executive officers other than our Co-Chief Executive Officers, and the Compensation Committee has not increased the salaries of our named executive officers since that time.

Elements of Compensation: Incentive Awards

In fiscal 2012, both cash and equity awards, which combined represent the majority of the compensation paid to our named executive officers, were based on corporate and personal performance. Fiscal 2012 incentive opportunities were structured in terms of maximum permissible

 

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payouts corresponding with a specified percentage of operating income before income taxes.2 The table below sets forth the fiscal 2012 target cash and equity award incentive payments for our named executive officers, as well as each executive’s total target incentive award as a percentage of salary.

 

Name    Annual
Salary
     Target Cash
Award
     Target
Equity
Award
     Total Target
Incentive
Award
     Total Target
Incentive Award
as a Percentage
of Salary
 

D. Richard Williams

   $ 750,000       $ 1,500,000       $ 1,250,000       $ 2,750,000         366.7

John A. Addison, Jr.

   $ 750,000       $ 1,500,000       $ 1,250,000       $ 2,750,000         366.7

Gregory C. Pitts

   $ 450,000       $ 250,000       $ 400,000       $ 650,000         144.4

Alison S. Rand

   $  450,000       $  300,000       $  400,000       $ 700,000         155.6

Peter W. Schneider

   $ 450,000       $ 600,000       $ 450,000       $ 1,050,000         233.3

Glenn J. Williams

   $ 450,000       $ 600,000       $ 450,000       $ 1,050,000         233.3

 

In determining the total incentive award for each named executive officer, the Compensation Committee considered corporate performance, the contribution of each named executive officer to the Company’s successes, the achievement of each named executive officer’s personal performance objectives, and the overall performance of each named executive officer.

The table below sets forth the fiscal 2012 actual incentive payments, as well as the maximum permissible payout for each named executive officer.

 

Name    Actual
Cash
Award
     Actual
Equity
Award
     Total
Incentive
Award
     Maximum
Permissible
Payout as a
Percentage
of Operating
Income  Before
Income Taxes
    Maximum
Permissible
Payout as a
Dollar Amount
 

D. Richard Williams

   $ 1,549,500       $ 1,291,250       $ 2,840,750         2.00   $ 5,359,020   

John A. Addison, Jr.

   $ 1,549,500       $ 1,291,250       $ 2,840,750         2.00   $ 5,359,020   

Gregory C. Pitts

   $ 308,211       $ 410,949       $ 719,160         0.75   $ 2,009,633   

Alison S. Rand

   $ 319,920       $ 426,560       $ 746,480         0.75   $ 2,009,633   

Peter W. Schneider

   $ 639,840       $ 479,880       $ 1,119,720         0.75   $ 2,009,633   

Glenn J. Williams

   $ 639,840       $ 479,880       $ 1,119,720         0.75   $ 2,009,633   

 

 

2 Operating income before income taxes equals the income before income taxes, adjusted to exclude the impact of realized investment gains and losses and the expense associated with our IPO-related equity awards.

 

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The table below sets forth the actual incentive award for each named executive officer as a percentage of target cash and target equity.

 

Name   Actual Cash
Award
    Target Cash
Award
    Actual Cash
Award as a %
of Target
    Actual
Equity
Award
    Target
Equity
Award
    Actual Equity
Award as a
% of Target
    Total
Incentive
Award as a %
of Target
 

D. Richard Williams

  $ 1,549,500      $ 1,500,000        103.3   $ 1,291,250      $ 1,250,000        103.3     103.3

John A. Addison Jr.

  $ 1,549,500      $ 1,500,000        103.3   $ 1,291,250      $ 1,250,000        103.3     103.3

Gregory C. Pitts

  $ 308,211      $ 250,000        123.3   $ 410,949      $ 400,000        102.7     110.6

Alison S. Rand

  $ 319,920      $ 300,000        106.6   $ 426,560      $ 400,000        106.6     106.6

Peter W. Schneider

  $ 639,840      $ 600,000        106.6   $ 479,880      $ 450,000        106.6     106.6

Glenn J. Williams

  $ 639,840      $ 600,000        106.6   $ 479,880      $ 450,000        106.6     106.6

 

The Compensation Committee approves all stock awards to our named executive officers. The grant date is the date the awards are approved by the Compensation Committee. We do not coordinate equity grants with the release of material information. Further, we do not accelerate or delay equity grants in response to material information, nor does the Company delay the release of material information for any reason related to the granting of equity awards.

Elements of Compensation: Benefits

As with other employees, our named executive officers are eligible to participate in our employee health benefit programs, including health and dental insurance plans, and a life insurance program on the same terms as regular employees. In addition, all employees receive dividends on unvested restricted stock, and regular employees are entitled to a Company match of employee contributions to our 401(k) plan.

Elements of Compensation: Perquisites

The Compensation Committee provides only limited perquisites to its executive officers. In fiscal 2012, those perquisites consisted of executive physicals and spousal travel.

 

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Comparison of Compensation Policies and Programs for Our Co-Chief Executive Officers and Our Other Named Executive Officers

Our compensation policies are similar for all of our named executive officers except as described below. The Co-Chief Executive Officer employment agreements differ slightly from the employment agreements for our other named

executive officers because the Compensation Committee wanted to ensure that our Co-Chief Executive Officers were committed to remain with the Company for a significant period of time following our IPO.

 

Item    Co-Chief Executive Officers    Other Named Executive Officers

Employment Agreements Term

   Five-year term, expiring on August 19, 2015 followed by annual auto-renewals.    Three-year initial term, expiring on August 19, 2013 followed by annual auto-renewals; amended in February 2013 to begin annual auto-renewals on June 1, 2014.

Base Salary

   Subject to annual review and may be increased but not decreased    Subject to annual review beginning in February 2014 and may be increased or decreased as a result of such review

Target Cash Incentive Award

   200% of base salary    Specified annually by the Compensation Committee

Medical Benefits – COBRA

   Entitled to COBRA benefits for 18 months after termination by the Company for cause or without good reason or due to nonrenewal of employment agreement   

Medical Benefits – Lifetime

   Along with spouses and dependents, entitled to lifetime participation in the Company’s medical benefits at their own expense   

 

The Compensation Setting Process

Tally Sheets

The Compensation Committee reviews executive officer tally sheets at least annually to see the evolution of each named executive officer’s compensation over time. These tally sheets set forth all components of compensation, a summary of the equity granted to each named executive officer since our IPO and the value of such holdings under various assumed share prices, as well as the value of benefit plans and programs and perquisites. The tally sheets also set forth the estimated value that each of our named executive officers would realize upon separation under various scenarios, including voluntary termination of employment with and without good reason, involuntary termination of employment with and without cause, termination of employment in connection with a change of control, and death or disability.

 

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Use of a Peer Group

The Compensation Committee reviews peer analyses as part of its process of evaluating and setting compensation for our named executive officers. The Compensation Committee does not seek to benchmark or set compensation at any specific level relative to the peer data. Instead, the Compensation Committee used this information primarily as background with respect to compensation plan design decisions and as a general reference point for pay levels.

In selecting peer companies, the Compensation Committee sought companies operating in similar industries (life insurance, financial services and direct marketing), with a similar business model (target customer, independent sales force and profitability) and similar size (revenue and market capitalization). This approach reflects the uniqueness and complexity of Primerica’s product and service mix, as opposed to focusing on a more narrow view of Primerica as a traditional life insurance company. Because of the unique nature of our business model, not all selected peer companies fit all identified criteria. The following peer group for fiscal 2012 executive compensation was unchanged from that used in assessing fiscal 2011 executive compensation:

 

Name of Peer Company    Fiscal Year
2011
Revenue
     Fiscal Year 2011
Net Income
     Industry
     (In millions)       

American Equity Investment Life Holding Company

   $ 1,140       $ 86       Life & Health Insurance

Ameriprise Financial, Inc.

   $ 10,239       $ 1,136       Life & Health Insurance

FBL Financial Group, Inc.

   $ 616       $ 55       Life & Health Insurance

Herbalife Ltd.

   $ 3,455       $ 413       Direct Marketing —Personal Products

LPL Investment Holdings Inc.

   $ 3,479       $ 170       Investment Banking & Brokerage

Nu Skin Enterprises, Inc.

   $ 1,744       $ 153       Direct Marketing — Personal Products

Protective Life Corporation

   $ 3,518       $ 339       Life & Health Insurance

Raymond James Financial, Inc.

   $ 3,400       $ 278       Investment Banking & Brokerage

Stifel Financial Corp.

   $ 1,442       $ 84       Investment Banking & Brokerage

Symetra Financial Corporation

   $ 1,999       $ 200       Life & Health Insurance

Torchmark Corporation

   $ 3,378       $ 518       Life & Health Insurance

Tupperware Brands Corporation

   $ 2,585       $ 218       Direct Marketing — Housewares & Specialties

Waddell & Reed Financial, Inc.

   $ 1,197       $ 175       Asset Management & Custody Banks

Primerica, Inc.

   $ 1,103       $ 178      

Life Insurance;

Investment Banking & Brokerage

 

The peer group compensation analysis for fiscal 2012 was intentionally limited to aggregate named executive officer pay levels for five of the Company’s six named executive officers, as opposed to individual executive comparisons, because:

 

   

the Company’s Co-Chief Executive Officer leadership structure is difficult to benchmark on a position-by-position basis;

 

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the Company’s disclosed named executive officer positions are different from those disclosed by peer companies;

 

   

the Company’s named executive officers have certain contractual arrangements for a specified period of time; and

 

   

the purpose of the benchmark exercise was to obtain a high-level assessment of competitive positioning; not to inform decisions regarding individual executive pay opportunity levels.

Based on the peer group assessment, the Compensation Committee’s independent consultant concluded that the target pay opportunities for the named executive officers as a group were positioned near the peer group median and that the target pay mix between fixed and variable pay was also comparable to our peers. The analysis also compared the Company’s cash and equity incentive plan with those of the peer companies, which revealed that the Company’s programs were generally consistent with peer companies except for a lower maximum award opportunity as a percent of target for the cash incentive program (150% compared to 200% for many peers) and the absence of stock options as a form of equity award (which remains prevalent among peers). The Compensation Committee considered these analyses and findings as part of its overall decision-making process regarding fiscal 2012 executive compensation and decided to grant one-third of the equity value of the incentive award in the form of non-qualified stock options in 2013.

Compensation Consultant

The Compensation Committee retained Pearl Meyer as its independent compensation consultant for fiscal 2012. During fiscal 2012, Pearl Meyer reviewed management recommendations regarding compensation programs, provided competitive market data and information regarding peer companies, assessed proposed plan designs, provided periodic updates on trends and developments in executive compensation and made recommendations with respect to executive compensation. Pearl Meyer does not provide services to management or the Company, but management works closely with Pearl Meyer as requested by and on behalf of the Compensation Committee. In November 2012, the Compensation Committee considered the independence of Pearl Meyer in light of new SEC rules and the then proposed NYSE listing standards. The Compensation Committee requested and received a report from Pearl Meyer addressing the consulting firm’s independence, including the following factors: (i) other services provided to us by the consultant; (ii) fees paid by us as a percentage of the consulting firm’s total revenue; (iii) policies or procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (iv) any business or personal relationships between the individual consultants involved in the engagement and a member of the Compensation Committee; (v) any company stock owned by the individual consultants involved in the engagement; and (vi) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. The Compensation Committee discussed these considerations and concluded that the work of the consultant did not raise any conflict of interest concerns.

Management’s Role in Setting Executive Compensation

The Compensation Committee determines the compensation and retention package of our Co-Chief Executive Officers, considering the employment agreements and receiving input, recommendations and market data as it deems appropriate from the Compensation Committee’s independent compensation consultant.

Our Co-Chief Executive Officers participate in setting the compensation of the other executive officers through their recommendations to the Compensation Committee. Our other named executive officers do not directly participate in determining their compensation. For our named

 

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executive officers other than our Co-Chief Executive Officers, our Co-Chief Executive Officers made recommendations for each individual’s compensation package to the Compensation Committee. In making these recommendations, our Co-Chief Executive Officers considered the individual’s performance and past contributions to the Company, the potential future contribution of the individual to the Company and achievement of the Company’s business and financial goals, including the potential for the individual to make even greater contributions to the Company in the future than he or she has in the past, the risk that the individual may be lured away by a competitor and market compensation data. The Compensation Committee then discussed these recommendations with our Co-Chief Executive Officers. The Compensation Committee further reviewed and discussed these recommendations in executive sessions, and as part of these discussions, the Compensation Committee discussed the proposed compensation and retention programs with its independent compensation consultant.

Fiscal 2013 Executive Compensation

Since the end of fiscal 2012, the Compensation Committee has determined the extent to which the Company achieved the fiscal 2012 performance objectives required to earn cash and equity incentive awards. Based in part on the competitive review process completed in fiscal 2012 and in consideration of the Company’s performance in fiscal 2012 and outlook for fiscal 2013, the Compensation Committee approved the following actions for fiscal 2013:

 

   

Reduced the weighting of Operating Revenues, as a percentage of the corporate performance objectives, from 25% to 20%, and increase the weighting of Size of Life-Licensed Sales Force, as a percentage of the corporate performance objectives, from 25% to 30% in order to more accurately reflect the importance to the Company of the size of its sales force; and

 

   

Analyzed peer group compensation on an individual named executive officer basis.

Post-Termination Compensation

The Company has no executive deferred compensation plan or defined pension plan and has no agreements that trigger payouts solely due to a change in control of the Company. The Compensation Committee has approved employment agreements with each named executive officer that provide for severance and change of control benefits if the named executive officer’s employment terminates for a qualifying event or circumstance, such as being terminated without cause or leaving employment for good reason, as these terms are defined in the respective officer’s employment agreement. Upon a change of control (as defined in the agreements) of the Company, certain situations may enable each named executive officer to terminate his or her employment for good reason. Additional information regarding the employment agreements is found under “ — Employment Agreements with Named Executive Officers” below, and a quantification of benefits that would have been received by the named executive officers had termination occurred on December 31, 2012 is found under “ — Potential Payments and Other Benefits Upon Termination or Change of Control”.

The Compensation Committee believes that these severance and change of control benefits are an important part of a competitive overall compensation arrangement for our named executive officers and are consistent with the objective of attracting, motivating and retaining highly talented executives. The Compensation Committee also believes that change of control benefits will help to secure the continued employment and dedication of our named executive officers, mitigate concern that they might have regarding their continued employment prior to or following a change of control, and encourage independence and objectivity when considering possible transactions that may be in the best interests of our stockholders but may possibly result in the

 

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termination of their employment. Finally, the Compensation Committee believes that post-termination non-disclosure, non-competition and non-solicitation covenants to which our named executive officers have agreed in consideration for the Company providing these severance and change of control benefits are highly beneficial to the Company.

The Compensation Committee believes that the payment of specified multiples of base salary and target bonus and the accelerated vesting of restricted stock awards are consistent with competitive practices for positions at the level of our named executive officers. The potential amount of severance benefits an executive may receive in the event of a change of control did not influence the Compensation Committee’s decisions regarding other compensation elements due to the fact that a change of control may never occur during the named executive officer’s term of employment.

Compensation Policies

Compensation Clawbacks

The Primerica, Inc. Amended and Restated 2010 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) provides that the Compensation Committee may require the reimbursement of cash or forfeiture of equity awards if it determines that an award that was granted, vested or paid based on the achievement of performance criteria would have not been granted, vested or paid absent fraud or misconduct, an event giving rise to a restatement of the Company’s financial statements or a significant write-off not in the ordinary course affecting the Company’s financial statements. The clawback language will be expanded to the extent required by the SEC in a manner consistent with rules expected to be adopted in connection with The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Stock Ownership

Stock Ownership and Stock Retention Guidelines

We have the following stock ownership guidelines in place for our named executive officers:

 

Co-Chief Executive Officers

   5 times base salary

Other Named Executive Officers

   2.5 times base salary

In determining compliance with these guidelines, stock ownership includes shares beneficially owned by the participant (or by immediate family members) and unvested restricted stock. The participants have until the later of April 1, 2015 or five years from the date of their appointment or election to achieve the targeted level of stock ownership. Until the ownership guidelines are satisfied, our named executive officers are required to hold 75% of the net shares (after satisfying withholding for taxes) of awards from the Company’s equity-based incentive compensation program. To monitor compliance with these guidelines, the Compensation Committee annually reviews the stock ownership of the named executive officers. As of December 31, 2012, all named executive officers satisfied the stock ownership guidelines and, therefore, were not subject to additional holding periods.

Pre-Set Trading Plans

As of December 31, 2012, each of our named executive officers was a party to a Rule 10b5-1 trading plan that provides for the sale by an independent broker-dealer of shares in order to fund taxes due upon the vesting of restricted shares. In addition, each of our named executive officers is a party to a Rule 10b5-1 trading plan that provides for the sale of shares at certain designated prices or on certain designated dates. The purpose of such plans is to enable (i) shares to be sold by our named executive officers to fund taxes due upon the vesting of restricted shares and (ii) our named executive officers to recognize the value of their

 

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compensation and diversify their holdings of our common stock during periods in which they would otherwise be unable to buy or sell such stock because important information about Primerica had not been publicly released.

Hedging of Company Stock

Primerica’s insider trading policy provides that employees, officers and members of our Board and its subsidiaries, and their related persons, are prohibited from purchasing, selling or trading in options, warrants, puts and calls or similar instruments on our common stock or selling our common stock short. In addition, employees, officers and members of our Board, and their related persons, may not hold our securities in margin accounts or pledge our securities.

Tax and Accounting Implications

Tax Implications

While reserving our right to offer such compensation arrangements as may from time to time be necessary to attract and retain top-quality management, we intend generally to structure such arrangements, where feasible, to minimize or eliminate the impact of the limitations of Section 162(m) of the Code. Section 162(m) limits the federal income tax deductibility of compensation paid to our Co-Chief Executive Officers and to each of our four other most highly compensated executive officers (excluding our Chief Financial Officer). Under Section 162(m), we may deduct such compensation with respect to any of these individuals only to the extent that during any fiscal year such compensation does not exceed $1,000,000 or meets certain other conditions (such as qualification of the compensation as performance-based compensation under Section 162(m)).

In designing our compensation programs, we also take into consideration the impact of Section 409A of the Code. Section 409A imposes additional significant taxes in the event that an executive officer, director or service provider receives deferred compensation that does not satisfy the requirements of Section 409A. Consequently, we structured our employment agreements and our equity awards in a manner intended either to avoid the application of Section 409A or to comply with its requirements.

We also consider Section 280G of the Code and related sections, which provide that our named executive officers could be subject to significant additional taxes if the total amount of payments to such officer that is contingent upon a change of control of Primerica (within the meaning of Section 280G), equals or exceeds three times the executive’s base amount (generally, the individual’s average annual compensation for the five calendar years immediately preceding the change of control). Subject to certain exceptions, the portion of such payments in excess of the base amount may be treated as parachute payments under Section 280G. A portion of such payments would not be deductible by the Company, and the executive would be subject to a 20% excise tax on such portion of the payments. The employment agreements between the Company and our named executive officers attempt to minimize the likelihood of lost deductions and the imposition of excise taxes should a change of control transaction occur. However, there is no assurance that payments actually received by each of the executives in connection with a change of control transaction, if one were to occur, will be deductible by the Company or will not be subject to an excise tax. The ultimate determination would depend on various factors at the time a change of control transaction occurs, including transaction price, the actual base amount and other variables that cannot presently be predicted.

While the Compensation Committee believes that tax deductibility of compensation is an important consideration, the ultimate goal of the Compensation Committee is to provide compensation that is in the best interests of the Company. Therefore, the Compensation Committee reserves flexibility to approve compensation arrangements that are not fully tax deductible.

 

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Accounting for Executive Compensation

Base salaries and cash incentive awards to our named executive officers are expensed over the period in which they are earned. As such, the cash incentive award that was earned during 2012 and paid in March 2013 was recorded during fiscal 2012. Equity incentive awards to our named executive officers consist of restricted stock awards and, beginning in 2013, non-qualified stock options. The financial effects of granting equity incentive awards are recognized in accordance with GAAP. As such, the equity incentive award is measured at fair value on the date of grant and expensed during the requisite service period for those awards that are expected to vest, taking into account estimated forfeitures. The classification of the expense associated with equity incentive awards to our named executive officers follows the same classification as salary and cash incentive awards and is included in Other Operating Expenses on our Consolidated Statement of Income.

Risks Related to Compensation Policies and Practices

The Company has in place a risk management discipline that is designed to capture, monitor and control the risks created by its business activities, and the Compensation Committee considers risk in developing the compensation policies and practices for all employees, including our named executive officers. Although our compensation programs are generally designed to pay for performance and provide incentive-based compensation, the programs contain various mitigating factors to ensure our employees, including our named executive officers, are not encouraged to take unnecessary risks in managing our business.

These factors include:

 

   

oversight of programs (or components of programs) by committees of our Board, including the Compensation Committee;

 

   

internal controls that are designed to keep our financial and operating results from being susceptible to manipulation by any employee, including our named executive officers;

 

   

discretion provided to our Board and the Compensation Committee (including negative discretion) to set targets, monitor performance and determine final payouts;

 

   

oversight of Company activities by a broad-based group of functions within the organization, including Human Resources, Finance, and Legal and at multiple levels within the organization (both corporate and business unit/region);

 

   

a mixture of programs that provide focus on both short- and long-term goals and that provide a mixture of cash and stock-based compensation;

 

   

caps on the maximum incentive payouts available to our named executive officers;

 

   

incentives focused primarily on the use of reportable and broad-based financial metrics, with no one factor receiving an excessive weighting;

 

   

service-based vesting conditions with respect to equity awards;

 

   

clawback provisions in the Omnibus Incentive Plan; and

 

   

the significant long-term ownership interests in the Company held by certain of our key executive officers.

The Compensation Committee has determined that the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

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Executive Compensation Tables

Summary Compensation Table

The following table describes total compensation earned during fiscal 2012, fiscal 2011 and the year ended December 31, 2010 (“fiscal 2010”) for our named executive officers.

 

Name and Principal Position

 

Year

   

Salary
($)

   

Bonus
($)

   

Stock

Awards

($)

   

Option

Awards

($)

   

Non-Equity

Incentive Plan

Compensation

($)

   

Change in

Pension Value

and

Nonqualified

Deferred

Compensation

Earnings

($)

   

All Other

Compensation

($)

   

Total ($)

 
(A)   (B)     (C)     (D)     (E)     (F)     (G)     (H)     (I)     (J)  

D. Richard Williams

    2012      $ 750,000        —        $ 1,245,294 (1) (2)      —        $ 1,549,500 (3)    $ 18,034 (4)    $ 80,795 (5)    $ 3,643,623   

Chairman of the Board and 

    2011      $ 750,000        —        $ 449,978 (2) (6)      —        $ 1,494,375 (7)    $ 17,560 (4)    $ 58,182      $ 2,770,095   

Co-Chief Executive Officer

    2010      $ 672,115        —        $ 10,970,200 (8)      —        $ 1,500,000 (9)    $ 18,873 (4)    $ 102,067      $ 13,263,255   

John A. Addison, Jr.

    2012      $ 750,000        —        $ 1,245,294 (1) (2)      —        $ 1,549,500 (3)    $ 10,618 (4)    $ 87,429 (5)    $ 3,642,841   

Chairman of Primerica

    2011      $ 750,000        —        $ 449,978 (2) (6)      —        $ 1,494,375 (7)    $ 35,856 (4)    $ 55,993      $ 2,786,202   

Distribution and Co-Chief Executive Officer

    2010      $ 672,115        —        $ 10,953,700 (8)      —        $ 1,500,000 (9)    $ 25,511 (4)    $ 111,593      $ 13,262,919   

Gregory C. Pitts

    2012      $ 450,000        —        $ 398,776 (1)      —        $ 308,211 (3)      —        $ 30,849 (5)    $ 1,187,836   

Executive Vice President and

    2011      $ 450,000        —        $ 399,977 (6)      —        $ 249,250 (7)      —        $ 26,043      $ 1,125,270   

Chief Operating Officer

    2010      $ 422,713        —        $ 1,647,130 (8)      —        $ 250,000 (9)    $ 41,468 (4)    $ 23,466      $ 2,384,777   

Alison S. Rand

    2012      $ 450,000        —        $ 398,776 (1)      —        $ 319,920 (3)    $ 17,614 (4)    $ 27,741 (5)    $ 1,214,051   

Executive Vice President and

    2011      $ 450,000        —        $ 399,977 (6)      —        $ 299,100 (7)    $ 2,942 (4)    $ 22,983      $ 1,175,002   

Chief Financial Officer

    2010      $ 419,626        —        $ 1,781,235 (8)      —        $ 300,000 (9)    $ 5,533 (4)    $ 11,146      $ 2,517,540   

Peter W. Schneider

    2012      $ 450,000        —        $ 448,633 (1)      —        $ 639,840 (3)    $ 3,679 (4)    $ 32,543 (5)    $ 1,574,695   

Executive Vice President, General Counsel,

    2011      $ 450,000        —        $ 449,978 (6)      —        $ 598,200 (7)    $ 3,581 (4)    $ 27,505      $ 1,529,264   

Corporate Secretary and Chief Administrative

Officer

    2010      $ 422,115        —        $ 2,703,610 (8)      —        $ 600,000 (9)    $ 3,851 (4)    $ 21,701      $ 3,751,277   

Glenn J. Williams

    2012      $ 450,000        —        $ 448,633 (1)      $ 639,840 (2)    $ 2,952 (4)    $ 33,216 (5)    $ 1,574,641   

President

    2011      $ 450,000        —        $ 449,978 (6)      $ 408,770 (2)    $ 2,879 (4)    $ 24,758      $ 1,336,385   
      2010      $ 429,808        —        $ 2,212,130 (8)      —        $ 410,000 (9)    $ 3,099 (4)    $ 15,204      $ 3,070,241   

 

(1) Represents restricted shares granted in February 2012 for performance in fiscal 2011. For the valuation assumptions underlying the awards, see our audited financial statements for fiscal 2012 included in the Company’s Annual Report on Form 10-K for fiscal 2012.
(2) Messrs. R. Williams and Addison would each have been awarded $1,250,000 in restricted stock awards in 2011, but they requested that the Compensation Committee reallocate $1,500,000 of their awards to create an additional equity award pool for grants of restricted stock units to sales representatives.
(3) Represents incentive awards paid in cash in March 2013 for performance in fiscal 2012.
(4) Represents the positive changes in the present value of the pension benefits for each named executive officer under The Citigroup Pension Plan (the “Citigroup Pension Plan”) and The Travelers Retirement Benefits Equalization Plan (the “Travelers Nonqualified Plan”). The change in pension value for 2010 for Messrs. Addison and Pitts and Ms. Rand also includes any applicable adjustment for termination from The Citigroup Pension Plan calculated at the termination date from such plan. The amount of each named executive officer’s above-market or preferential earnings on compensation that was deferred on a basis that was not tax-qualified was $0.
(5) Represents dividends paid on unvested restricted stock, the 401(k) plan matching contribution for the 2012 plan year, executive healthcare benefits and spousal travel. No perquisites or personal benefits for any named executive officer exceeded the greater of $25,000 or 10% of the total except that Messrs. R. Williams and Addison each received dividends on unvested restricted shares in the amount of $66,594.
(6) Represents restricted shares granted in February 2011 for performance in fiscal 2010. For the valuation assumptions underlying the awards, see our audited financial statements for fiscal 2011 included in the Company’s Annual Report on Form 10-K for fiscal 2011.
(7) Represents incentive awards paid in cash in March 2012 for performance in fiscal 2011.
(8) Includes our IPO-related one-time equity awards, and represents the award of stock-based compensation by Primerica and Citigroup in 2010. For the valuation assumptions underlying the Primerica awards, see our audited financial statements for fiscal 2010 included in the Company’s Annual Report on Form 10-K for fiscal 2010. For the valuation assumptions underlying the Citigroup awards, see Citigroup’s audited financial statements for fiscal 2010 included in its Annual Report on Form 10-K for the year ended December 31, 2010. The Citigroup awards were granted in February 2010 (prior to our IPO) for performance in the year ended December 31, 2009 (“fiscal 2009”).
(9) Represents incentive awards paid in cash in March 2011 for performance in fiscal 2010.

 

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Salary (Column C)

These amounts reflect base salary earned by our named executive officers. Base salary for named executive officers in fiscal 2012 was unchanged from fiscal 2011. See “Compensation Discussion and Analysis (“CD&A”) — Fiscal 2012 Executive Compensation — Compensation Elements.”

Bonus (Column D)

Primerica did not award any non-incentive cash compensation to our named executive officers in fiscal 2012, fiscal 2011 or fiscal 2010.

Stock Awards (Column E)

The dollar amounts for the awards represent the grant date fair value computed in accordance with GAAP and will vary from the actual amount ultimately realized by our named executive officers. The ultimate value of the award will depend on the price of our common stock on the date that the award vests. Details about fiscal 2012 awards are included in the Grant of Plan-Based Awards Table. Fiscal 2010 amounts reflected grants of both Primerica restricted stock and Citigroup stock equivalent awards.

Option Awards (Column F)

Primerica did not award any stock options to our named executive officers in fiscal 2012, fiscal 2011 or fiscal 2010. Although the Company has not historically awarded stock options, the Compensation Committee has granted our named executive officers one-third of the value of their 2013 equity awards in the form of non-qualified stock options for performance in fiscal 2012.

Non-Equity Incentive Plan Compensation (Column G)

These amounts (i) reflect non-equity incentive plan compensation awards, which were earned by our named executive officers under the Omnibus Incentive Plan based on corporate and personal performance during fiscal 2012, fiscal 2011 and fiscal 2010 and (ii) were approved by the Compensation Committee in February 2013, 2012 and 2011, respectively.

Change in Pension Value and Nonqualified Deferred Compensation Earnings (Column H)

These amounts are the positive changes in the present value of the pension benefits for each named executive officer under The Citigroup Pension Plan and the Travelers Nonqualified Plan. These benefits are all provided under Citigroup plans; Primerica does not have a pension plan or a deferred compensation plan.

All Other Compensation (Column I)

These amounts reflect the combined value of each named executive officer’s perquisites, personal benefits and compensation that is not otherwise reflected in the table.

Fiscal 2012 Grants of Plan-Based Awards Table

The following table provides information about each grant of plan-based awards made to our named executive officers during fiscal 2012.

Each of the incentive awards granted by Primerica during fiscal 2012 and reported in the below table was granted under, and is subject to the terms of, the Omnibus Incentive Plan. The Omnibus Incentive Plan is administered by the Compensation Committee. The Compensation Committee has authority to interpret the Omnibus Incentive Plan and make all required determinations under the Omnibus Incentive Plan. Awards granted under the Omnibus Incentive Plan are transferable to trusts established solely for the benefit of the grantee’s family members or to a beneficiary of a named executive officer upon his or her death.

 

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        Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards (1)(2)
    Estimated Future Payouts Under
Equity Incentive Plan
Awards (2)
 

Maximum

Based
on 162(m)

Bonus (3)

 

All

Other

Stock
Awards:
Number

of

Shares

of

Stock

or Units

(#) (4)

   

Grant

Date Fair
Value of
Stock and
Option
Awards

 
Name   Grant Date   Threshold ($)     Target ($)     Maximum ($)     Threshold ($)   Target ($)     Maximum ($)      
(A)   (B)   (C)     (D)     (E)     (F)   (G)     (H)   (I)   (J)     (K)  

D. Richard Williams

  (5)

02/21/12

  $ 750,000      $ 1,500,000      $ 2,193,750      N/A   $ 1,250,000      $1,828,125   $5,359,020     48,931      $ 1,245,294   

John A. Addison, Jr.

  (5)

02/21/12

  $ 750,000      $ 1,500,000      $ 2,193,750      N/A   $ 1,250,000      $1,828,125   $5,359,020     48,931      $ 1,254,294   

Gregory C. Pitts

  (5)

02/21/12

    N/A      $ 250,000      $ 360,000      N/A   $ 400,000      $576,000   $2,009,633     15,669      $ 398,776   

Alison S. Rand

  (5)

02/21/12

    N/A      $ 300,000      $ 432,000      N/A   $ 400,000      $576,000   $2,009,633     15,669      $ 398,776   

Peter W. Schneider

  (5)

02/21/12

    N/A      $ 600,000      $ 864,000      N/A   $ 450,000      $648,000   $2,009,633     17,628      $ 448,633   

Glenn J. Williams

  (5)

02/21/12

    N/A      $ 600,000      $ 864,000      N/A   $ 450,000      $648,000   $2,009,633     17,628      $ 448,633   

 

(1) Represents total incentive award amounts for each named executive officer for performance in fiscal 2012, which were paid in February 2013 (equity) and March 2013 (cash).
(2) The cash incentive award and the number of restricted shares and non-qualified stock options awarded to each named executive officer under the incentive compensation plan in February and March 2013 for performance in fiscal 2012, as well as the grant date fair value of such awards, are set forth below:

Fiscal 2013 Grants for Fiscal 2012 Performance

 

      Cash
Incentive
Award
     Stock Incentive Award (a)      Total
Incentive
Award
 
      Number of
Shares
Awarded
(b)
     Number of
Stock
Options
Awarded
(c)
     Equity
Award
Value
    

D. Richard Williams

   $ 1,549,500         26,381         39,572       $ 1,291,250       $ 2,840,750   

John A. Addison, Jr.

   $ 1,549,500         26,381         39,572       $ 1,291,250       $ 2,840,750   

Gregory C. Pitts

   $ 308,211         8,396         12,594       $ 410,949       $ 719,160   

Alison S. Rand

   $ 319,920         8,714         13,072       $ 426,560       $ 746,480   

Peter W. Schneider

   $ 639,840         9,804         14,706       $ 479,880       $ 1,119,720   

Glenn J. Williams

   $ 639,840         9,804         14,706       $ 479,880       $ 1,119,720   

 

  (a) Represents the portion of the Total Incentive Award designated to be paid in equity as opposed to cash.
  (b) Based on two-thirds of the Equity Award Value divided by $32.63, which was the closing price of our common stock on the trading day immediately preceding the grant date.
  (c) Based on one-third of the Equity Award Value, divided by $32.63, which was the closing price of our common stock on the trading day immediately preceding the grant date, which was then multiplied by the agreed upon conversion ratio of 3:1 between options and restricted stock.
(3) Represents a designated percentage of operating income before income taxes for fiscal 2012, which was equal to $268.0 million. “Operating income before income taxes” is defined as Primerica’s income before income taxes, adjusted to exclude the impact of realized investment gains and losses and the expense associated with our IPO-related equity awards. The maximum permissible payout was determined in the aggregate only and it is not broken down between the cash and equity components.
(4) Represents restricted shares granted under the incentive compensation plan in February 2012 for performance in fiscal 2011. The right to receive these shares was disclosed as an estimated future payout in the 2012 proxy statement.
(5) The Compensation Committee approved the 2012 incentive compensation program on February 21, 2012. Grants under the program were made on February 20, 2013.

 

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Estimated Future Payouts Under Non-Equity Incentive Plan Awards (Columns C, D and E)

These amounts reflect the annual incentive compensation amounts that could have been earned during fiscal 2012 based upon the achievement of performance goals under the Omnibus Incentive Plan. The threshold and target amounts for our Co-Chief Executive Officers represent 100% and 200% of annual base salary, respectively. Although the maximum permissible incentive compensation payout is equal to a designated percentage of operating income before income taxes (See Column I), the Compensation Committee exercised negative discretion to reduce awards to amounts that reflect achievement of corporate and personal objectives. The incentive program provides for a maximum payout of 150% of target for corporate performance and 135% of target for individual performance, adjusted for the relative weighting of each such component.

The annual cash incentive compensation earned in fiscal 2012 by our named executive officers was approved by the Compensation Committee in February 2013 and paid in March 2013. These amounts are reflected in column (G) of the Summary Compensation Table. The terms of these awards are described under “Compensation Discussion and Analysis (“CD&A”) – Fiscal 2012 Executive Compensation – Compensation Elements.”

Estimated Future Payouts Under Equity Incentive Plan Awards (Columns F, G and H)

The target equity incentive award represents an amount designated by the Compensation Committee at the beginning of fiscal 2012. Although the maximum permissible incentive compensation payout is equal to a designated percentage of operating income before income taxes (See Column I), the Compensation Committee exercised negative discretion to reduce awards to amounts that reflect achievement of corporate and personal objectives. The incentive program provides for a maximum payout of 150% of target for corporate performance and 135% of target for individual performance, adjusted for the relative weighting of each such component.

Maximum Based on 162(m) Bonus Pool (Column I)

The overall maximum incentive award, which is equal to a specified percentage of operating income before income taxes, reflects an aggregate maximum for cash incentive and stock-based incentive awards.

All Other Stock Awards (Column J)

This column represents awards granted in 2012 for fiscal 2011 performance. The restrictions on all restricted stock awards lapse in equal installments on the first, second and third anniversary of the date of grant. Further, the restrictions on these restricted stock awards lapse automatically upon the death of the grantee. Upon disability of the grantee, the restricted stock continues to vest for 12 months and, if the grantee remains on approved disability leave, then the unvested portion vests as of the first anniversary of the commencement of such disability leave. Holders of restricted stock have the right to vote and dividend rights, but do not have the right to dispose of their restricted stock awards.

Grant Date Fair Value of Restricted Stock (Column K)

These amounts reflect $25.45 per share, which was the closing price of our common stock on the trading day immediately preceding the grant date.

Outstanding Equity Awards at Fiscal Year-End Table

Primerica Awards

The following table sets forth information regarding Primerica equity awards outstanding as of December 31, 2012, based on the closing price of our common stock on that date of $30.01 per share.

 

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              PRIMERICA AWARDS  
              Stock Awards  
Name      Grant Date      Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
       Market Value
of Shares or
Units of
Stock That
Have Not
Vested ($)
 

D. Richard Williams

     04/01/10        191,667 (1)       $ 5,751,927   
     02/22/11        12,920 (2)         387,729   
     02/21/12        48,931 (3)       $ 1,468,419   
         

 

 

      

 

 

 
                253,518         $ 7,608,075   

John A. Addison, Jr.

     04/01/10        191,667 (1)       $ 5,751,927   
     02/22/11        12,920 (2)         387,729   
     02/21/12        48,931 (3)       $ 1,468,419   
         

 

 

      

 

 

 
                253,518         $ 7,608,075   

Gregory C. Pitts

     04/01/10        30,000 (1)       $ 900,300   
     02/22/11        10,336 (2)         310,183   
     02/21/12        15,669 (3)         470,227   
         

 

 

      

 

 

 
                56,005         $ 1,680,710   

Alison S. Rand

     04/01/10        33,334 (1)       $ 1,000,353   
     02/22/11        10,336 (2)         310,183   
     02/21/12        15,669 (3)         470,227   
         

 

 

      

 

 

 
                59,339         $ 1,780,763   

Peter W. Schneider

     04/01/10        38,334 (1)       $ 1,150,403   
     02/22/11        11,628 (2)         348,956   
     02/21/12        17,628 (3)         529,016   
         

 

 

      

 

 

 
                67,590         $ 2,028,376   

Glenn J. Williams

     04/01/10        38,334 (1)       $ 1,150,403   
     02/22/11        11,628 (2)         348,956   
     02/21/12        17,628 (3)         529,016   
         

 

 

      

 

 

 
                67,590         $ 2,028,376   

 

(1) Vests on April 1, 2013
(2) Vests in equal installments on February 22, 2013 and February 22, 2014.
(3) Vests in three equal annual installments beginning on February 21, 2013.

 

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Citigroup Awards

The following table sets forth information regarding Citigroup equity awards outstanding

as of December 31, 2012. All share numbers and exercise prices reflect a 10-for-1 reverse stock split effected on May 9, 2011.

 

     Option Awards  
Name    Grant Date      Number of
Securities
Underlying
Unexercised
Options
(#) (1)
     Option
Exercise
Price
($)
     Option
Expiration
Date
 

D. Richard Williams

     10/29/2009         4,893       $ 40.80         10/29/2015   

John A. Addison, Jr.

     10/29/2009         4,667       $ 40.80         10/29/2015   

Gregory C. Pitts

     10/29/2009         4,488       $ 40.80         10/29/2015   

Alison S. Rand

     10/29/2009         5,709       $ 40.80         10/29/2015   

Peter W. Schneider

     10/29/2009         8,114       $ 40.80         10/29/2015   

Glenn J. Williams

     10/29/2009         4,261       $ 40.80         10/29/2015   

 

(1) The options were scheduled to vest in three equal annual installments beginning on October 29, 2010, but vesting was accelerated to April 15, 2010 in connection with our IPO. The closing price of Citigroup’s common stock on December 31, 2012 on the NYSE was $39.56 per share.

 

Fiscal 2012 Option Exercises and Stock Vested Table

This table shows restricted stock held by our named executive officers for which restrictions lapsed during fiscal 2012. The dollar values shown in this table reflect the value realized on the vesting date, which differ from the grant date fair value disclosed elsewhere in this Proxy Statement.

 

     Stock Awards  
Name    Number of
Shares Acquired
on Vesting (#) (1)
           Value Realized
on Vesting ($) (2)
 

D. Richard Williams

     198,126            $ 4,997,211   

John A. Addison, Jr.

     198,126            $ 4,997,211   

Gregory C. Pitts

     35,167            $ 888,524   

Alison S. Rand

     38,500            $ 972,548   

Peter W. Schneider

     44,146            $ 1,115,130   

Glenn J. Williams

     44,146            $ 1,115,130   

 

(1) Includes shares that were withheld for the payment of taxes due upon the vesting of the restricted stock awards.
(2) Represents the number of shares of our common stock acquired on the vesting dates of February 22, 2012 and April 1, 2012 multiplied by the closing stock price of our common stock of $25.59 and $25.21, respectively, on that date or, if not a trading day, the next trading day prior to that date.

 

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Pension Plan Table

The following table sets forth information for each of our named executive officers regarding each plan that provides for payments or other benefits at, following, or in connection with retirement. These benefits are all provided under Citigroup plans and Citigroup provided the plan descriptions. Primerica does not have a pension plan.

 

Name    Plan Name      Number of
Years Credited
Service (#)
     Present Value of
Accumulated
Benefit ($) (1)
     Payments
During Last
Fiscal Year ($)
 

D. Richard Williams

     The Citigroup Pension Plan         28.42       $ 261,358       $ —    
       Travelers Nonqualified Plan         22.42       $ 145,928       $ —    

John A. Addison, Jr.

     The Citigroup Pension Plan         25.08       $ —        $ —    
       Travelers Nonqualified Plan         19.08       $ 78,185       $ 4,433   

Gregory C. Pitts (2)

     The Citigroup Pension Plan         N/A       $ —        $ —    
       Travelers Nonqualified Plan         N/A       $ —        $ —    

Alison S. Rand

     The Citigroup Pension Plan         12.92       $ —        $ 76,655  
       Travelers Nonqualified Plan         6.92       $ —        $ 9,226   

Peter W. Schneider

     The Citigroup Pension Plan         7.50       $ 72,384       $ —    
       Travelers Nonqualified Plan         1.50       $ 10,699       $ —    

Glenn J. Williams

     The Citigroup Pension Plan         8.00       $ 61,624       $ —    
       Travelers Nonqualified Plan         2.00       $ 5,393       $ —    

 

(1) The material assumptions used in determining the present value of the plan benefits are (a) a discount rate of 3.90%, and (b) an interest credit rate on cash balance plan benefits of 2.90%.
(2) Mr. Pitts’ pension benefits were fully paid in 2010.

 

The Citigroup Pension Plan    The purpose of this broad-based, tax-qualified retirement plan is to provide retirement income on a tax-deferred basis to all U.S. employees of Citigroup, including Primerica’s employees through April 7, 2010, the closing date of our IPO. Effective January 1, 2002, this plan adopted a single cash balance benefit formula for most of the covered population, including our named executive officers. This benefit is expressed in the form of a hypothetical account balance. Benefit credits accrued annually at a rate between 1.5% and 6% of eligible compensation; the rate increased with age and service. Interest credits are applied annually to the prior year’s balance, and are based on the yield on 30-year Treasury bonds (as published by the Internal Revenue Service). Employees became eligible to participate in The Citigroup Pension Plan after one year of service, and benefits generally vested after three years of service. Effective December 31, 2006, The Citigroup Pension Plan was closed to new members, and effective December 31, 2007, future cash balance plan accruals ceased. All named executive officers were eligible for benefit accruals under this plan and continue to earn interest credits, like other participants.

Eligible compensation generally includes base salary and wages, plus shift differential and overtime (including any before-tax contributions to a 401(k) plan or other benefit plans), incentive awards paid in cash during such year, including any amount payable for such year, but deferred under a deferred compensation agreement, commissions paid during such year, any incentive bonus or commission granted during such year in the form of restricted stock or stock options under the Citigroup Capital Accumulation Plan, but excluding compensation payable after termination of employment, sign-on and retention bonuses, severance pay, cash and non-cash fringe benefits, reimbursements, tuition benefits, payment for unused vacation, any amount attributable to the exercise of a stock option, or attributable to the vesting of, or an 83(b) election with respect to, an award of restricted stock, moving expenses,

 

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welfare benefits, and payouts of deferred compensation. Annual eligible compensation was limited by Internal Revenue Service rules to $225,000 for 2007 (the final year of cash balance benefit accrual).

The normal form of benefit under The Citigroup Pension Plan is a joint and survivor annuity for married participants (payable over the life of the participant and spouse) and a single life annuity for unmarried participants (payable for the participant’s life only). Although the normal form of the benefit is an annuity, the hypothetical account balance is also payable as a single lump sum, at the election of the participant. The Citigroup Pension Plan’s normal retirement age is 65 years old. All optional forms of benefit under this formula available to our named executive officers are actuarially equivalent to the normal form of benefit. Benefits are eligible for commencement under the plan upon termination of employment at any age, so there is no separate eligibility for early retirement.

The Travelers Retirement Benefits Equalization Plan    The Travelers Nonqualified Plan, a nonqualified retirement plan, provides retirement benefits using the applicable Citigroup Pension Plan formula, but based on The Citigroup Pension Plan’s definition of (i) compensation, in excess of the Code’s qualified plan compensation limit ($170,000 for 2001), or (ii) benefits, in excess of the Code’s qualified plan benefit limit ($140,000 for 2001). In 1994, the Travelers Nonqualified Plan was amended to limit qualifying compensation under the plan to $300,000 and was further amended in 2001 to cease benefit accruals after 2001 for most participants (including our named executive officers).

All other terms of the Travelers Nonqualified Plan are the same as under The Citigroup Pension Plan, including definitions of eligible compensation and normal retirement age. The optional forms of benefit available under the Travelers Nonqualified Plan and their equivalent values are the same as those under The Citigroup Pension Plan.

Nonqualified Deferred Compensation Table

The following table provides information concerning the nonqualified deferred compensation of each of our named executive officers as of and for the year ended December 31, 2012. The amounts shown in the table represent the value of deferred stock granted to each named executive officer by Citigroup prior to our IPO.

 

Name   Aggregate
Earnings in
Last Fiscal
Year ($)
    Aggregate
Withdrawals/
Distributions ($)
    Aggregate
Balance at
Last Fiscal
Year End ($)
 

D. Richard Williams

  $ 19,731      $ 44,001        —     

John A. Addison, Jr.

  $ 18,922      $ 42,196        —     

Gregory C. Pitts

  $ 5,885      $ 13,123        —     

Alison S. Rand

    —          —          —     

Peter W. Schneider

  $ 9,703      $ 21,639        —     

Glenn J. Williams

  $ 5,372      $ 11,979        —     

Employment Agreements with Named Executive Officers

We entered into an employment agreement with each of our named executive officers as of August 19, 2010. The agreements with each named executive officer other than our Co-Chief Executive Officers were amended and restated as of February 15, 2013. Except as otherwise indicated, each of the employment agreements contains the same material terms and conditions, which are set forth below. The terms “cause,” “good reason” and “change of control” are defined in the applicable employment agreement and are summarized under “— Potential Payments and Other Benefits Upon Termination or Change of Control.”

Positions and Employment Period

Pursuant to their respective employment agreements, Mr. R. Williams has been appointed Chairman of our Board and Mr. Addison has been appointed Chairman of Primerica Distribution, and both Messrs. R. Williams and Addison shall continue to serve as our Co-Chief Executive Officers and shall continue to be nominated to serve on our Board.

 

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The initial term of each Co-Chief Executive Officer employment agreement ends on August 19, 2015. The initial term of each employment agreement with respect to each named executive officer, other than a Co-Chief Executive Officer, was scheduled to end on August 19, 2013 but was amended prior to the first auto-renewal to end on June 1, 2014. Each employment agreement will automatically renew for successive one-year periods, unless the Company or the executive provides 90 days prior written notice that the employment agreement will not be renewed.

Base Salary

Each Co-Chief Executive Officer’s annual base salary during the period of his employment shall be no less than $750,000, subject to annual review by the Compensation Committee for increase but not decrease pursuant to its normal performance review policies for senior executives. The annual base salary for each named executive officer, other than our Co-Chief Executive Officers, shall be $450,000, subject to annual review by the Compensation Committee pursuant to its normal performance review policies for senior executives and subject to increase or decrease as a result of such review.

Annual Cash Bonus

Each Co-Chief Executive Officer will be eligible to receive an annual cash bonus upon achieving certain performance targets that shall be established in good faith by the Compensation Committee, with the threshold and target annual cash bonus amounts being equal to 100% and 200%, respectively, of the Co-Chief Executive Officer’s annual base salary. Each named executive officer, other than our Co-Chief Executive Officers, will be eligible to receive an annual cash bonus upon achieving certain performance targets that shall be established by the Compensation Committee, with such named executive officer’s target annual cash bonus opportunity to be determined by the Compensation Committee based upon the recommendations of our Co-Chief Executive Officers. At the Compensation Committee’s discretion, the Company may pay a portion of each annual bonus for any named executive officer in the form of restricted stock or restricted stock units, subject to certain restrictions.

Long-Term Incentive Awards

Each named executive officer is eligible to receive, in the good faith discretion of the Compensation Committee, annual equity compensation awards granted pursuant to the Company’s long-term incentive compensation arrangements, which awards will be granted based on the performance of both the named executive officer and the Company and, in the case of our Co-Chief Executive Officers, will have time-based vesting. Upon the termination of a Co-Chief Executive Officer’s employment (i) by the Company without cause or due to the Co-Chief Executive Officer’s disability or the Company’s nonrenewal of his employment agreement or (ii) by the Co-Chief Executive Officer for good reason or as a result of the Co-Chief Executive Officer’s death, any long-term incentive award granted to the Co-Chief Executive Officer under his employment agreement will either vest immediately or continue to vest in accordance with the award’s original vesting schedule, as determined by the Compensation Committee.

Post-Termination Payments

The material terms and conditions of the severance provisions of the employment agreements are set forth below.

For Cause or By the Named Executive Officer Without Good Reason.  If a named executive officer terminates his or her employment without good reason, then the Company shall pay the named executive officer any accrued but unpaid annual base salary, any accrued but unused vacation pay, any accrued but unpaid annual bonus for the fiscal year prior to the year of termination and any amounts or benefits due to the named executive officer as of the date of his or her termination under the Company’s plans or programs (together,

 

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“Accrued Compensation”). If a named executive officer is terminated by the Company for cause, then the named executive officer shall also be entitled to receive from the Company the Accrued Compensation, except that he or she will not be entitled to his or her annual bonus for the previous fiscal year of the Company.

In addition, if a Co-Chief Executive Officer’s employment is terminated for cause or without good reason (other than as a result of the Co-Chief Executive Officer’s nonrenewal of his employment agreement), then the Company shall provide (unless the Co-Chief Executive Officer is terminated for gross misconduct) the Co-Chief Executive Officer, his spouse and his dependents with medical (including vision and dental) benefits under a Company-sponsored plan for a period of 18 months following the date of termination so long as the Co-Chief Executive Officer pays any applicable premiums and is not employed with another employer and covered by an employer-sponsored plan providing substantially equivalent medical benefits. During this 18-month period, the Company will pay to the Co-Chief Executive Officer a monthly amount equal to the premium required to be paid by the Co-Chief Executive Officer for such benefits (the “Co-CEO Extended Benefits”). Furthermore, if a Co-Chief Executive Officer terminates his employment without good reason after the fifth anniversary of his employment agreement, or upon written agreement between the Co-Chief Executive Officer and the Company prior to the fifth anniversary of his employment agreement, then the Co-Chief Executive Officer, his spouse at the time his employment agreement is executed (the “Covered Spouse”) and his dependents from his marriage to the Covered Spouse (collectively, the “Covered Persons”) shall be entitled to participate in the Company’s medical (including vision and dental) plans until the later of the Co-Chief Executive Officer’s death or the death of his Covered Spouse (such coverage, which in all cases is (i) subject to the Co-Chief Executive Officer or his Covered Spouse paying to the Company an amount equal to the fair market value thereof and (ii) secondary to any Medicare benefit for which the Covered Persons are eligible, is hereinafter referred to as the “Ongoing Health Coverage”).

Death or Disability.  If a named executive officer’s employment is terminated as a result of his or her death or disability, then the Company shall pay to the named executive officer or his or her estate (if termination results from the named executive officer’s death) the Accrued Compensation and a pro-rated annual bonus (based on actual performance) for the fiscal year of the termination (the “Pro-Rated Bonus”). In the case of termination of a Co-Chief Executive Officer as a result of death or disability, the Company also (i) shall provide to the Co-Chief Executive Officer the Co-CEO Extended Benefits and (ii) under certain circumstances and subject to certain restrictions, shall provide to the Co-Chief Executive Officer (if termination resulted from his disability) and the other Covered Persons the Ongoing Health Coverage. In the case of termination of any named executive officer, other than a Co-Chief Executive Officer, as a result of death or disability, the Company also shall provide to the named executive officer and his or her dependents for a period of 18 months following the date of such termination medical (including vision and dental) benefits and life insurance coverage equal to those that would have been provided to the named executive officer and to such dependents under a Company-sponsored plan if the named executive officer’s employment had not been terminated (so long as the named executive officer pays any applicable premiums and is not employed with another employer and covered by an employer-sponsored plan providing substantially equivalent medical or life insurance benefits). During this 18-month period, the Company will pay to the named executive officer a monthly amount equal to the premium required to be paid by the named executive officer for such benefits (the “NEO Extended Benefits”).

 

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By Executive For Good Reason or by the Company Without Cause.  If a Co-Chief Executive Officer’s employment is terminated (i) by the Co-Chief Executive Officer for good reason or (ii) by the Company for any reason other than cause, death or disability, or as a result of the Company’s nonrenewal of the employment agreement, then, subject to the Co-Chief Executive Officer’s timely execution and delivery of a release of claims against the Company, the Company shall (a) pay to the Co-Chief Executive Officer the Accrued Compensation and Pro-Rated Bonus; (b) pay to the Co-Chief Executive Officer in a lump sum in cash, no later than the 60th day following his termination, an amount equal to two times the sum of the Co-Chief Executive Officer’s annual base salary and target bonus as of the date of his termination, provided that such amount shall be three times the sum of his annual base salary and target bonus as of the date of his termination in the event that his termination occurs in anticipation of or during the two-year period following a change of control; (c) provide to the Co-Chief Executive Officer the Co-CEO Extended Benefits; and (d) provide to the Co-Chief Executive Officer the Ongoing Health Coverage.

In the event an excise tax is imposed by Section 4999 of the Code prior to the third anniversary of our IPO in connection with any payment made to a Co-Chief Executive Officer that was contingent upon a change of control and equals or exceeds three times the average base compensation payable to the Co-Chief Executive Officer executive (referred to as a 280G payment), Messrs. R. Williams and Addison were entitled to receive a gross-up payment in order to put them in the same after-tax position that they would have been in had they not been subject to the excise tax. As of April 1, 2013, this provision ceased to apply and neither of Messrs. Williams nor Addison are entitled to a gross-up payment going forward.

If a named executive officer’s, other than the Co-Chief Executive Officer’s, employment is terminated (i) by such named executive officer for good reason or (ii) by the Company for any reason other than cause, death or disability, then, subject to the named executive officer’s timely execution and delivery of a release of claims against the Company, the Company shall (a) pay to such named executive officer Accrued Compensation and the Pro-Rated Bonus; (b) pay to such named executive officer in a lump sum in cash, no later than the 60th day following the named executive officer’s termination, an amount equal to one times the sum of the named executive officer’s annual base salary and target bonus as of the date of the named executive officer’s termination, provided that such amount shall be one and one-half times the sum of his or her annual base salary and target bonus as of the date of termination in the event that his or her termination occurs in anticipation of or during the two-year period following a change of control; and (c) provide to such named executive officer the NEO Extended Benefits.

Restrictive Covenants

Each named executive officer is prohibited from disclosing any confidential information or trade secrets of the Company during the period of his or her employment and for a two-year period following his or her termination, and the Company retains ownership of any work product and inventions developed by the named executive officer during the period of his or her employment (but each Co-Chief Executive Officer retains the right to use speeches, addresses and presentations made during such period). Additionally, during the period of the named executive officer’s employment and for an 18-month period following his or her termination, each named executive officer is prohibited from recruiting, except during the period of his or her employment in connection with satisfying his or her duties to the Company, any person who is or was at any time during the previous six months an employee or representative of the Company or any of its affiliates. Finally, each named executive officer is prohibited from competing with, or soliciting the business of any of the clients or customers (with whom the executive had material contact during the 12 months prior to termination) of, the

 

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Company during the period of his or her employment and for an 18-month period following such termination; provided, however, the 18-month non-competition period shall be reduced to nine months for a named executive officer whose employment agreement is not renewed by the Company. This restriction on competition extends to any business or entity that engages in, or is working to engage in, the network marketing of life, auto or property insurance products, mutual funds, variable annuities or securities similar to those offered by the Company, to the extent operating in the United States, Canada or any other territory in which the Company operates prior to, or on the date of, termination of the named executive officer’s employment. Notwithstanding the foregoing, being employed by, or providing services to, or holding compensatory equity of, an employer with a business that competes with the Company’s business, standing alone, does not constitute competition by a named executive officer for purposes of his or her employment agreement so long as: (i) the employer has more than one discrete and readily distinguishable part of its business and (ii) the named executive officer’s duties are not in a material manner at or involving the part of the business of the employer that competes with the Company’s business.

 

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Potential Payments and Other Benefits Upon Termination or Change of Control

The following table sets forth the potential benefits that each named executive officer would be entitled to receive upon termination of employment in the situations outlined below. These disclosed amounts are estimates only and do not necessarily reflect the actual amounts that would be paid to the named executive officers, which would only be known at the time that they become eligible for payment. The amounts shown in the table are the amounts that could be payable under existing plans and arrangements if the named executive officer’s employment had terminated on December 31, 2012. The table below does not include amounts to which our named executive officers would be entitled that are already described in the compensation tables appearing earlier in this Proxy Statement, including the value of equity awards that have already vested. The definitions of “cause,” “good reason” and “change of control” follow the table.

A = Severance arrangement for termination

without cause or for good reason

B = Termination for cause

C = Termination without good reason

D = Termination without cause after a change of

control

E = Death or disability

 

Name            Cash
Severance
    Bonus
Earned as
of Event
Date (1)
     Sec 280G
Excise Tax
and Related
Gross-Up (2)
     Total Cash
Payments
     Vesting of
Unvested
Long-Term
Awards (3)
     Health and
Welfare
Continuation (4)
 

D. Richard Williams

     A       $ 4,500,000 (5)    $ 1,549,500         —         $ 6,049,500       $ 7,608,075       $ 29,123   
     B         —          —           —         $ 0         —         $ 29,123 (9) 
     C         —        $ 1,549,500         —         $ 1,549,500         —         $ 29,123   
     D       $ 6,750,000 (6)    $ 1,549,500       $ 4,482,482       $ 12,781,982       $ 7,608,075       $ 29,123   
       E         —        $ 1,549,500         —         $ 1,549,500       $ 7,608,075       $ 29,123   

John A. Addison, Jr.

     A       $ 4,500,000 (5)    $ 1,549,500         —         $ 6,049,500       $ 7,608,075       $ 29,123   
     B         —          —           —         $ 0         —         $ 29,123 (9) 
     C         —        $ 1,549,500         —         $ 1,549,500         —         $ 29,123   
     D       $ 6,750,000 (6)    $ 1,549,500       $ 4,359,110       $ 12,658,610       $ 7,608,075       $ 29,123   
       E         —        $ 1,549,500         —         $ 1,549,500       $ 7,608,075       $ 29,123   

Gregory C. Pitts

     A       $ 700,000 (7)    $ 308,211         —         $ 1,008,211       $ 1,680,710       $ 24,768   
     B         —          —           —         $ 0         —           —     
     C         —        $ 308,211         —         $ 308,211         —           —     
     D       $ 1,137,317 (8)    $ 308,211         —         $ 1,445,528       $ 1,680,710       $ 24,768   
       E         —        $ 308,211         —         $ 308,211       $ 1,680,710       $ 24,768   

Alison S. Rand

     A       $ 750,000 (7)    $ 319,920         —         $ 1,069,920       $ 1,780,763       $ 16,441   
     B         —          —           —         $ 0         —           —     
     C         —        $ 319,920         —         $ 319,920         —           —     
     D       $ 1,154,880 (8)    $ 319,920         —         $ 1,474,800       $ 1,780,763       $ 16,441   
       E         —        $ 319,920         —         $ 319,920       $ 1,780,763       $ 16,441   

Peter W. Schneider

     A       $ 1,050,000 (7)    $ 639,840         —         $ 1,689,840       $ 2,028,376       $ 17,178   
     B         —          —           —         $ 0         —           —     
     C         —        $ 639,840         —         $ 639,840         —           —     
     D       $ 1,634,760 (8)    $ 639,840         —         $ 2,274,600       $ 2,028,376       $ 17,178   
       E         —        $ 639,840         —         $ 639,840       $ 2,028,376       $ 17,178   

Glenn J. Williams

     A       $ 1,050,000 (7)    $ 639,840         —         $ 1,689,840       $ 2,028,376       $ 24,768   
     B         —          —           —         $ 0         —           —     
     C         —        $ 639,840         —         $ 639,840         —           —     
     D       $ 1,634,760 (8)    $ 639,840         —         $ 2,274,600       $ 2,028,376       $ 24,768   
       E         —        $ 639,840         —         $ 639,840       $ 2,028,376       $ 24,768   

 

(1) Our named executive officers are entitled to a pro rata share of the current fiscal year bonus in the event of termination without cause or after a change of control. Amounts in this table assume a termination date of December 31, 2012 and reflect cash incentive compensation earned for fiscal 2012 performance.

 

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(2) Section 4999 of the Code imposes a nondeductible excise tax on the recipient of certain compensation payments defined in Section 280G of the Code that are made to an executive contingent upon a change of control and equal or exceeds three times the average base compensation payable to the executive. In the event an excise tax is imposed by Section 4999 of the Code in connection with a payment made prior to the third anniversary of our IPO, Messrs. R. Williams and Addison would be entitled to receive a gross-up payment in order to put them in the same after-tax position that they would have been in had they not been subject to the excise tax. As of April 1, 2013, this provision ceased to apply and neither of Messrs. Williams nor Addison are entitled to a gross-up payment going forward.
(3) The value of restricted shares is the closing price of our common stock on December 31, 2012 multiplied by the number of restricted shares. The closing price of our common stock on December 31, 2012 on the NYSE was $30.01 per share. Upon termination without cause, due to death or disability, or for good reason, the equity awards automatically vest in accordance with their terms.
(4) Health and welfare benefits are continued for up to 18 months from the separation date based on current elections and plan premiums.
(5) Cash severance is equal to 200% of the sum of current annual base salary and target bonus.
(6) Cash severance is equal to 300% of the sum of current annual base salary and target bonus.
(7) Cash severance is equal to 100% of the sum of current annual base salary and target bonus.
(8) Cash severance is equal to 150% of the sum of current annual base salary and target bonus.
(9) Health and welfare would not be paid in the event the named executive officer was terminated for gross misconduct.

 

A named executive officer’s rights upon the termination of his or her employment will depend upon the circumstances of the termination. Central to an understanding of the rights of each named executive officer under the employment agreements is an understanding of the definitions of “cause,” “good reason” and “change of control” that are used in those agreements.

Cause means: (i) the named executive officer’s willful misconduct or gross negligence that causes material harm to the Company; (ii) the named executive officer’s habitual substance abuse; (iii) the named executive officer’s willful and continued failure (other than as a result of physical or mental incapacity) to perform the duties of the named executive officer’s position or to follow the legal direction of our Board following written notice from our Board specifying such failure; (iv) the named executive officer’s being convicted of, or pleading guilty or nolo contendere to a felony or a crime involving moral turpitude; (v) the named executive officer’s willful theft, embezzlement or act of comparable dishonesty against the Company; or (vi) a material breach by the named executive officer of his or her employment agreement, which breach is not (if curable) cured by the executive within 30 days following his receipt of written notice thereof.

For purposes of the definition of “cause,” no act or failure to act by the named executive officer shall be considered willful unless it is done, or omitted to be done, in bad faith and without reasonable belief that the named executive officer’s action or omission was in the best interests of the Company.

Good Reason means: in the absence of the named executive officer’s written consent, (i) a material diminution by the Company in the named executive officer’s annual base salary or a material diminution in the named executive officer’s target bonus opportunity as a percentage of the named executive officer’s annual base salary (as determined by the terms of the named executive officer’s employment agreement); (ii) a material diminution in the named executive officer’s authority, duties or responsibilities, provided that a change in the named executive officer’s reporting relationship shall not constitute “good reason”; (iii) the Company requiring the named executive officer’s principal business location to be at any office or location more than 50 miles from the named executive officer’s principal business location as of immediately prior to such relocation (other than to an office or location closer to the named executive officer’s home residence); or (iv) any material breach of the named executive officer’s employment agreement by the Company.

Change of Control means: (i) any person, other than Citigroup or Warburg Pincus, is or becomes a beneficial owner of securities of the Company

 

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representing 35 percent or more of the combined voting power of the Company’s then outstanding securities (other than through acquisitions from Citigroup or the Company); (ii) any plan or proposal for the dissolution or liquidation of the Company is adopted by the stockholders of the Company; (iii) individuals who constitute our Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of our Board; provided, however, that any individual becoming a director whose election, or nomination for election by our stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding for this purpose any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than our Board; (iv) all or substantially all of the assets of the Company are sold, transferred or distributed; or (v) there occurs a reorganization, merger, consolidation or other corporate transaction involving the Company, in each case, with respect to which the stockholders of the Company immediately prior to such transaction do not, immediately after the transaction, own more than 50 percent of the combined voting power of the Company or other entity resulting from such transaction (disregarding, in each case, Citigroup) in substantially the same respective proportions as such stockholders’ ownership of the voting power of the Company immediately before such transaction.

 

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AUDIT COMMITTEE MATTERS

 

Audit Committee Report

The Audit Committee reports as follows with respect to the audit of the Company’s consolidated financial statements for the year ended December 31, 2012:

The Audit Committee’s responsibility is to monitor and oversee the Company’s financial reporting, internal controls and audit functions, and it operates under a written charter adopted by our Board. The Audit Committee has reviewed and discussed the consolidated financial statements for fiscal 2012 with management and KPMG, the Company’s independent registered public accounting firm for fiscal 2012. Management is responsible for the presentation and integrity of the Company’s consolidated financial statements; selecting accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act); establishing and maintaining internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting for fiscal 2012; and evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

KPMG was responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with GAAP. The Audit Committee reviewed KPMG’s Report of Independent Registered Public Accounting Firm included in the Company’s Annual Report on Form 10-K for fiscal 2012 related to its audit of the consolidated financial statements.

The Audit Committee has discussed with KPMG the matters required to be discussed by Statement on Auditing Standards No. 61, “Communication with Audit Committees,” As amended (AICPA, Professional Standards Vol. 1, AU Section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. In addition, KPMG has provided the Audit Committee with the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and the Audit Committee has discussed with KPMG the firm’s independence.

Based on the foregoing discussions with and reports of management and the independent auditors of the Company and the Audit Committee’s review of the representations of management, the Audit Committee recommended to our Board that the audited consolidated financial statements for fiscal 2012 be included in the Company’s Annual Report on Form 10-K for fiscal 2012 for filing with the SEC.

AUDIT COMMITTEE:

Robert F. McCullough, Chair

P. George Benson

Barbara A. Yastine

 

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Fees and Services of Our Independent Registered Public Accounting Firm

Pursuant to an appointment by the Audit Committee, KPMG has served as the Company’s independent registered public accounting firm for fiscal 2012 and has audited the accounts of the Company and its subsidiaries for such year.

Fees Paid to Our Independent Registered Public Accounting Firm

The following table sets forth the aggregate fees that KPMG billed to the Company for fiscal 2012 and fiscal 2011. All of the fees were approved by the Audit Committee in accordance with its policies and procedures. See “— Pre-Approval of Services Performed by Our Independent Registered Public Accounting Firm.”

 

      Fiscal
2012
       Fiscal
2011
 
     (In thousands)  

Audit fees (1)

   $ 3,520         $ 3,434   

Audit-related fees (2)

     103           88  

Tax fees (3)

     100           117   

All other fees

     —            —    
  

 

 

      

 

 

 
    

 

 

      

 

 

 

Total fees

   $ 3,723         $ 3,639   
  

 

 

      

 

 

 
    

 

 

      

 

 

 

 

(1) Reflects fees for professional services performed for the annual audit, quarterly reviews of the Company’s consolidated and condensed financial statements, statutory audits of the Company’s subsidiaries and other regulatory filings or engagements, such as the issuance of comfort letters.
(2) Reflects fees for an annual Canadian benefit plan audit and an annual Service Organization Control Report issued on behalf of a subsidiary of the Company. For fiscal 2011, also includes expenses related to the New York State Regulatory Examination.
(3) Reflects fees for tax compliance services.

Non-audit fees (consisting of tax fees and all other fees) represented 2.7% of total fees in fiscal 2012.

Pre-Approval of Services Performed by Our Independent Registered Public Accounting Firm

The Company has adopted a policy regarding pre-approval of non-audit services to be performed by our independent registered public accounting firm. Specifically, non-audit fees to be incurred by our independent registered public accounting firm for services permitted by the Sarbanes-Oxley Act to be performed by such firm must be approved in advance by the Audit Committee Chair (for individual projects in amounts up to $100,000) or the Audit Committee.

 

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RELATED PARTY TRANSACTIONS

 

Policies and Procedures Governing Related Party Transactions

Our Board has adopted a written policy with respect to related party transactions. This policy provides procedures for the review, and approval or ratification, of certain transactions involving related parties required to be reported under applicable rules of the SEC. The policy, which is administered by the Audit Committee, applies to any transaction or series of transactions in which we or one of our subsidiaries is a participant, the amount involved exceeds or may be expected to exceed $120,000 in any fiscal year and a related party has a direct or indirect material interest. Certain transactions, including those contemplated by the intercompany agreement described under “— Transactions with Citigroup — Intercompany Agreement”, are excluded from the definition of related party transactions. Under the policy, a related party includes (i) any person who is or was, since the beginning of the last fiscal year, a director, executive officer or nominee for election as a director, (ii) a greater than 5% beneficial owner of any class of our voting securities, (iii) an immediate family member of either of the foregoing persons or (iv) any entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position in which such person has a 5% or greater beneficial ownership interest. Related party transactions are referred to the Audit Committee for approval, ratification or other action. Based on its consideration of all of the relevant facts and circumstances, the Audit Committee will approve or ratify a related party transaction only if it determines the transaction is in, or is not inconsistent with, the best interests of the Company