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Section 1: DEF 14A (DEF 14A)

DEF 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                              Filed by a Party other than the Registrant  

Check the appropriate box:

 

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)

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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, 2017

To our fellow stockholders:

Fiscal 2016 was a year of significant accomplishment for Primerica. Our Board of Directors continues to work to create stockholder value and achieve success through effective business strategies, performance-aligned compensation programs and thoughtful risk management. We remain committed to serving middle-income households throughout the United States and Canada and have created a culture that aligns the needs of our clients, our sales force and our employees. Although this letter highlights a few of our company’s accomplishments, we strongly encourage you to review the entire proxy statement for a more comprehensive discussion of our achievements in fiscal 2016.

Financial Accomplishments

We are proud of the results that we delivered in fiscal 2016, including:

 

   

Growth in diluted operating earnings per share of 21.7% compared to fiscal 2015;

 

   

Net operating income return on adjusted stockholders’ equity (ROAE) of 19.0%;

 

   

Return to stockholders in the form of $150 million in share repurchases; and

 

   

Increase in annual stockholder dividends to $0.70 per share.

In addition, our total stockholder return, including dividends, for 2016 and the five-year period of 2011 through 2016 was 48.3% and 215.1%, respectively.

Distribution Accomplishments

We experienced our strongest year of distribution growth since becoming a public company in 2010. Highlights were that:

 

   

Life-licensed sales representatives increased 9.5% to 116,827 at December 31, 2016 compared with 106,710 at December 31, 2015;

 

   

Recruiting of new representatives increased 15.2% to 262,732 compared with 228,115 in fiscal 2015;

 

   

New life insurance licenses increased 12.8% to 44,724 compared with 39,632 in fiscal 2015;

 

   

Issued term life insurance policies increased 14.7% to 298,244 compared with 260,059 in fiscal 2015;

 

   

Term life insurance claims paid to policy beneficiaries was $1.2 billion;

 

   

Record client asset values at December 31, 2016 of $52.3 billion;


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Investment and Savings product sales in fiscal 2016 of $5.6 billion; and

 

   

The number of mutual fund-licensed sales representatives increased to 23,750 at December 31, 2016.

Continued Alignment of Compensation and Performance

Our compensation philosophy includes a strong commitment to provide compensation programs that link executive pay to company and personal performance. The Compensation Committee of our Board of Directors spent significant time and resources in 2016 discussing and reviewing our executive compensation program with independent experts as part of our continuing effort to appropriately align compensation with performance. As part of this effort, the Compensation Committee is focused on ensuring that our key executives are incentivized to execute on the strategic priorities of our company. Please read a message from the Compensation Committee beginning on page 37.

Leading Corporate Governance Practices

Complementing our financial and distribution performance is our company’s commitment to corporate governance, including:

 

   

Implementation in early 2016 of majority voting for directors in uncontested elections;

 

   

Annual election of directors;

 

   

A significant percentage of diversity among our directors;

 

   

An independent Lead Director complemented by a non-executive Chairman of the Board; and

 

   

Annual outreach to stockholders that own in the aggregate in excess of 75% of our outstanding common stock.

We strongly encourage all of our stockholders to convey their views and vote promptly. We look forward to seeing you at the Annual Meeting. If you cannot attend in person, then you may listen to a live webcast of the Annual Meeting at our investor relations website, http://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    GLENN J. WILLIAMS
Non-Executive Chairman of the Board    Chief Executive Officer


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NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS

 

Date and Time

May 17, 2017, at 10:00 a.m., local time

 

Place

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

 

Items of Business

  To elect the eleven directors nominated by our Board of Directors and named in the accompanying Proxy Statement (Proposal 1);

 

   

To approve the Second Amended and Restated Primerica, Inc. 2010 Omnibus Incentive Plan (Proposal 2);

 

    To consider an advisory vote on executive compensation (“Say-on-Pay”) (Proposal 3);

 

   

To consider an advisory vote to determine stockholder preference on the frequency of the Say-on-Pay vote (“Say-When-on-Pay”) (Proposal 4);

 

   

To ratify the appointment of KPMG LLP as our independent registered public accounting firm for the year ending December 31, 2017 (Proposal 5); and

 

   

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

 

Record Date

March 21, 2017. 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 burden 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.

 

  On or about April 5, 2017, we will mail a Notice of Internet Availability of Proxy Materials to stockholders of our common stock as of March 21, 2017, other than those stockholders who previously requested electronic or paper delivery of communications from us. 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 in person.

 

Important Notice Regarding the Availability of Proxy Materials for the 2017 Annual Meeting of Stockholders to be Held on May 17, 2017. The Proxy Statement and the Annual Stockholders Report are available free of charge at www.proxyvote.com.

By Order of Our Board of Directors,

 

LOGO

STACEY K. GEER

Chief Governance Officer and Corporate Secretary

Duluth, Georgia

April 5, 2017


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TABLE OF CONTENTS

 

PROXY SUMMARY

     ii  

2017 Annual Meeting of Stockholders

     ii  

Voting Matters and Voting Recommendations

     ii  

Executive Compensation Matters

     iii  

How to Cast Your Vote

     iv  

MATTERS TO BE VOTED ON

     1  

Proposal 1: Election of Eleven Directors

     1  

Proposal 2: Approval of the Second Amended and Restated Primerica, Inc. 2010 Omnibus Incentive Plan

     2  

Proposal 3: Advisory Vote on Executive Compensation (Say-on-Pay)

     10  

Proposal 4: Advisory Vote on the Frequency of the Say-on-Pay vote (Say-When-on-Pay)

     10  

Proposal 5: Ratification of the Appointment of KPMG LLP as Our Independent Registered Public Accounting Firm

     12  

GOVERNANCE

     13  

Board Structure

     13  

Director Independence

     14  

Board Diversity

     16  

Director Nomination Process

     16  

Board Evaluation Process

     18  

Board’s Role in Risk Oversight

     18  

Communicating with Our Board of Directors

     19  

Stockholder Engagement

     19  

Role of Compensation Consultant

     19  

Code of Conduct

     20  

BOARD OF DIRECTORS

     21  

Board Members

     21  

Director Qualifications

     32  

Board Meetings

     32  

Board Committees

     32  

Director Compensation

     34  

Other Director Matters

     36  

EXECUTIVE COMPENSATION

     37  

Message from the Compensation Committee

     37  

Compensation Discussion and Analysis (“CD&A”)

     39  

Compensation Committee Interlocks and Insider Participation

     56  

Compensation Committee Report

     56  

Compensation Tables

     57  

Potential Payments and Other Benefits Upon Termination or Change of Control

     65  

Employment Agreements with Executive Team Members

     67  

Transition Agreements with Former Co-Chief Executive Officers

        

AUDIT MATTERS

     71  

Audit Committee Report

     71  

Fees and Services of KPMG

     73  

STOCK OWNERSHIP

     74  

Ownership of Our Common Stock

     74  

Section 16(a) Beneficial Ownership Reporting Compliance

     77  

RELATED PARTY TRANSACTIONS

     78  

Policies and Procedures Governing Related Party Transactions

     78  

Transactions with Citigroup

     78  

Other Transactions

     78  

INFORMATION ABOUT VOTING AND THE ANNUAL MEETING

     79  

OTHER STOCKHOLDER INFORMATION

     85  

Other Business for Presentation at the Annual Meeting

     85  

Other Information

     85  

Stockholder Proposals for Inclusion in Our 2018 Proxy Statement

     85  

Procedures for Business Matters and Director Nominations for Consideration at the 2018 Annual Meeting of Stockholders

     85  

EXHIBIT A – SECOND AMENDED AND RESTATED PRIMERICA, INC. 2010 OMNIBUS INCENTIVE PLAN

     A-1  

EXHIBIT B – RECONCILIATION OF GAAP AND NON-GAAP FINANCIAL MEASURES

     B-1  

Location for the 2017 Annual Meeting of Stockholders

     Back Cover  

 

  Primerica 2017 Proxy Statement   i


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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.

2017 Annual Meeting of Stockholders (including any adjournments or postponements thereof, the “Annual Meeting”)

 

     Date and Time

May 17, 2017, at 10:00 a.m., local time

 

     Place

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

 

     Record Date

March 21, 2017 (the “record date”)

 

     Voting

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

 

     Admission

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

On or about April 5, 2017, we will mail a Notice of Internet Availability of Proxy Materials to stockholders of our common stock as of the record date, other than those stockholders who previously requested electronic or paper delivery of communications from us.

Voting Matters and Voting Recommendations

See “Matters To Be Voted On” beginning on page 1 for more information.

 

Proposal    Board Vote Recommendation

1. Election of eleven directors

   “FOR” each director nominee

2.  Approval of the Second Amended and Restated Primerica, Inc. 2010 Omnibus Incentive Plan (the “Amended Plan”)

   “FOR”

3.  Advisory vote on executive compensation (“Say-on-Pay”)

   “FOR”

4.  Advisory vote on the frequency of the Say-on-Pay vote (“Say-When-on-Pay”)

   “FOR” an annual Say-on-Pay vote

5.  Ratification of the appointment of KPMG LLP (“KPMG”) as our independent registered public accounting firm for the year ending December 31, 2017 (“fiscal 2017”)

   “FOR”

 

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PROXY SUMMARY

 

Executive Compensation Matters

See “Executive Compensation” beginning on page 37 for more information.

On April 1, 2015, Mr. Glenn Williams was promoted to Chief Executive Officer (“Chief Executive Officer” or “CEO”) and Mr. Peter Schneider was promoted to President. Also as of that date, former Co-Chief Executive Officer Mr. Rick Williams was appointed non-executive Chairman of the Board and former Co-Chief Executive Officer Mr. John Addison was appointed non-executive Chairman of Primerica Distribution, and both continued to serve as members of our Board of Directors (the “Board” or our “Board of Directors”). As described in this Proxy Statement, these actions impacted executive compensation for the year ended December 31, 2016 (“fiscal 2016”) and the year ended December 31, 2015 (“fiscal 2015”).

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. The Compensation Committee was pleased with management’s achievements and the Company’s performance in fiscal 2016, particularly the following:

 

   

Operating revenues and net operating income in fiscal 2016 improved 7.8% and 13.5%, respectively, compared with fiscal 2015;

 

   

Net operating income return on adjusted stockholders’ equity (“ROAE”) improved to 19.0% for fiscal 2016 compared with 16.9% for fiscal 2015; and

 

   

The size of our life-licensed sales force increased 9.5% to 116,827 at December 31, 2016 compared with 106,710 at December 31, 2015.

Set forth below is a brief description of our executive compensation program.

 

   

Compensation for our executive officers includes base salary, annual cash incentive awards and long-term equity awards.

 

   

Each of our Executive Team members (identified in “Executive Compensation — Compensation Discussion and Analysis (“CD&A”)) has a maximum permissible award that is equal to a designated percentage of operating income before income taxes.

 

   

The Compensation Committee set cash award targets for each Executive Team member at the beginning of 2016.

 

   

Annual cash incentive awards were earned based on the Company’s achievement of pre-determined performance goals related to operating revenues, net operating income, ROAE and size of life-licensed sales force at year end. As a result of these metrics, each of our Executive Team members received a corporate performance award equal to 131.8% of the target award.

 

   

Long-term equity awards granted to our Executive Team members in 2016 consisted of restricted stock units (“RSUs”), non-qualified stock options and, for the first time, performance stock units (“PSUs”). These awards were granted in February 2016 based on personal and team performance versus targets for fiscal 2015. The RSUs and stock options vest in equal installments over three years. The PSUs will be earned based on the Company’s ROAE over a three year performance period of 2016 through 2018, and the executives will receive between 0% and 150% of the awarded shares in March 2019.

 

  Primerica 2017 Proxy Statement   iii


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PROXY SUMMARY

 

   

Based on the achievement of personal performance objectives in fiscal 2015, the Compensation Committee determined to pay each of our Executive Team members 120% of his or her target equity award in fiscal 2016. Mr. William A. Kelly received a payout equal to 120% based on his personal performance.

 

   

Beginning with the February 2017 grant, the dollar value of the equity grants to our Executive Team is fixed. These equity grants were awarded 50% in RSUs and 50% in PSUs. Further, the personal performance factor used to determine the value of equity awards was eliminated. Instead, the short-term incentive plan now includes a personal performance factor that can increase or decrease cash payouts by up to 20%. The core of the short-term incentive plan remains the same, with awards based on performance relative to a set of corporate performance metrics.

 

   

Each of our Executive Team members has an employment agreement that provides severance upon a termination of employment without cause or a resignation for good reason.

How to Cast Your Vote

See “Information About Voting and the Annual Meeting — How Do l Vote?” beginning on page 81 for more information.

Stockholders of record can vote by any of the following methods:

 

   

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;

 

   

By telephone through the number noted on your proxy card (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.

 

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MATTERS TO BE VOTED ON

 

Proposal 1:

Election of Eleven Directors

 

   

What am I voting on? Stockholders are being asked to elect each of the eleven director nominees named in this Proxy Statement to hold office until the annual meeting of stockholders in 2017 and until his or her successor is elected and qualified.

 

   

Voting Recommendation: “FOR” the election of the eleven director nominees.

 

   

Vote Required: A director will be elected if the number of shares voted “FOR” that director exceeds the number of votes “AGAINST” that director.

See “Board of Directors” beginning on page 21 for more information.

We ask that our stockholders elect the eleven director nominees named below to our Board of Directors to serve a one-year term commencing at the Annual Meeting. Our Board of Directors implemented majority voting in uncontested elections in early 2016. As a result, each director will be elected by a majority of the votes cast, meaning that each director nominee must receive a greater number of shares voted “FOR” such director than the shares voted “AGAINST” such director. If an incumbent director does not receive a greater number of shares voted “FOR” such director than shares voted “AGAINST” such director, then such director must tender his or her resignation to the Board. In that situation, the Corporate Governance Committee of our Board (the “Corporate Governance Committee”) would make a recommendation to the Board about whether to accept or reject the resignation, or whether to take other action. Within 90 days from the date the election results are certified, the Board will act on the Corporate Governance Committee’s recommendation and will publicly disclose its decision and rationale behind it. In a contested election – a circumstance we do not anticipate at the Annual Meeting – director nominees are elected by a plurality vote. Any shares that are not voted (whether by abstention or otherwise) will have no impact on the outcome of the vote. The following table provides summary information about each director nominee, all of whom currently serve on our Board.

 

Name   Age     Occupation   Independent   Date Joined Our Board

John A. Addison, Jr.

    59     Non-Executive Chairman of Primerica Distribution   No   October 2009

Joel M. Babbit

    63     Co-Founder and Chief Executive Officer, Narrative Content Group, LLC   Yes   August 2011

P. George Benson

    70     Former President, The College of Charleston   Yes   April 2010

Gary L. Crittenden

    63     Private Investor   Yes   July 2013

Cynthia N. Day

    51     President and Chief Executive Officer, Citizens Bancshares Corporation   Yes   January 2014

Mark Mason

    47     Chief Financial Officer, Institutional Clients Group, Citigroup Inc.   Yes   March 2010

Robert F. McCullough

    74     Private Investor   Yes   March 2010

Beatriz R. Perez

    47     Chief Sustainability Officer and SVP of Partnerships, Innovation, Licensing and Retail, The Coca-Cola Company   Yes   May 2014

D. Richard Williams

    60     Non-Executive Chairman of the Board   No   October 2009

Glenn J. Williams

    57     Chief Executive Officer   No   April 2015

Barbara A. Yastine

    57     Private Investor and Independent Director   Yes   December 2010

 

  Primerica 2017 Proxy Statement   1


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MATTERS TO BE VOTED ON

 

Each director nominee attended at least 80% of the aggregate of all meetings of our Board of Directors and each committee of which he or she was a member during fiscal 2016.

Effective April 1, 2015, our Board of Directors elected Mr. G. Williams to the Board and promoted him to Chief Executive Officer. The remaining ten directors have served at least since the 2014 Annual Meeting of Stockholders. Unless otherwise instructed, the members of the Proxy Committee (as defined in “Information About Voting and the Annual Meeting”) will vote the proxies held by them “FOR” the election to our Board of Directors of the nominees named above.

Proposal 2:

Approval of the Second Amended and Restated Primerica, Inc. 2010 Omnibus Incentive Plan

 

   

What am I voting on? The Board is asking our stockholders to approve the Second Amended and Restated Primerica Inc. 2010 Omnibus Incentive Plan.

 

   

Voting Recommendation: “FOR” the proposal.

 

   

Vote Required: Approval requires a “FOR” vote by at least a majority of the shares present in person or represented by valid proxy and entitled to vote.

See “Executive Compensation” beginning on page 37 for more information.

Background

On March 31, 2010, our Board of Directors and our then sole stockholder adopted the original Primerica, Inc. 2010 Omnibus Incentive Plan, which was amended and restated by the Compensation Committee in March 2011 and approved by our stockholders in May 2011 (the “Existing Plan”). The Compensation Committee has adopted the Second Amended and Restated Primerica, Inc. 2010 Omnibus Incentive Plan, subject to the approval of our stockholders, and we ask that the stockholders approve the Amended Plan at the Annual Meeting.

The Amended Plan provides for the following key changes to the Existing Plan, among other changes, along with the primary reason(s) for each such change:

 

Summary of Proposed Change    Reason for Proposed Change
Increases the shares of our common stock available for issuance to 12,200,000 from 10,800,000    The Compensation Committee is asking to expand the shares available for issuance under the Amended Plan such that the shares are expected to last for at least three years.
Adds a cap of $400,000 on annual equity awards permitted to be granted to each non-employee director and $200,000 on annual cash fees permitted to be paid to each non-employee director    The Compensation Committee believes it is a best practice for stockholders to approve a cap on director compensation.
Imposes a minimum vesting period of three years on equity awards to executive officers    It has become a best practice for equity awards to executives to include a minimum vesting period.
Clarifies clawback provisions applicable to employees and members of the sales force    The clawback provisions were clarified by separating the provisions that apply to employees from the provisions that apply to members of the sales force.
Permits taxes to be withheld based on the maximum statutory tax rate    The Compensation Committee may decide not to implement this provision, but it is intended to align the Amended Plan with the Internal Revenue Code of 1986, as amended (the “Code”).

 

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MATTERS TO BE VOTED ON

 

The purposes of the Amended Plan are to align the long-term financial interests of employees, directors, members of our sales force and other service providers of Primerica with those of our stockholders, to attract and retain those individuals by providing compensation opportunities that are competitive with other companies, and to provide incentives to those individuals who contribute significantly to the long-term performance and growth of the Company.

The Amended Plan permits the grant of cash awards as well as stock options, stock units including RSUs, restricted stock, deferred stock, stock appreciation rights (“SARs”), performance awards and other stock-based awards (collectively, “stock awards”). Individuals eligible to receive awards under the Amended Plan include employees, directors, consultants and advisors of the Company and its subsidiaries as well as members of our independent contractor sales force. As of December 31, 2016, there were ten non-employee directors, five executive officers, approximately 300 employees (other than executive officers) and approximately 4,700 members of our sales force who were eligible to receive awards under the Existing Plan and who would have been eligible to receive awards under the Amended Plan if then in effect.

Plan Benefits

We expect to issue annual RSUs to our employees, including the executive officers named in this Proxy Statement (referred to as our named executive officers). In addition, members of our Executive Team are expected to receive annual PSU awards. Provided that the recipient of the awards remains employed by us, the RSUs typically vest in equal annual installments over three years, subject to accelerated vesting in the event of the participant’s involuntary termination of employment other than due to disability or for cause. PSUs are paid out after the end of a three-year performance period.

We expect to continue to offer members of our sales force the opportunity to earn deferred stock awards through our quarterly incentive compensation program. Deferred stock awards generally vest immediately but are subject to sale restrictions that lapse over three years. All members of the sales force at the level of regional vice president or above are eligible to participate in the quarterly incentive compensation program.

Future equity grants under the Amended Plan (as well as any performance-based cash bonuses granted under the Amended Plan) will be made to eligible participants (including our named executive officers and other employees, directors, consultants, advisors and members of our sales force) at the discretion of the Compensation Committee and, accordingly, are not yet determinable. In addition, benefits under the Amended Plan will depend on a number of factors, including the fair market value of our common stock on future dates. Consequently, it is not possible to determine the benefits that might be received by participants receiving discretionary cash awards or equity grants under the Amended Plan. The Company is not obligated to make any future grants of awards under the Amended Plan.

Performance Criteria

Awards granted under the Amended Plan may be subject to specified performance criteria (the “Performance Criteria”), which are based on the attainment by the Company, or any subsidiary or business unit of the Company, of performance measures pre-established by the Compensation Committee in its sole discretion, based on one or more of the following:

 

   

Return on total stockholder equity;

 

   

Earnings per share of our common stock;

 

   

Net income (before or after taxes);

 

   

Earnings before any or all of interest, taxes, minority interest, depreciation and amortization;

 

   

Sales or revenues;

 

   

Return on assets, capital or investment;

 

   

Market share;

 

   

Cost reduction goals;

 

  Primerica 2017 Proxy Statement   3


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MATTERS TO BE VOTED ON

 

 

   

Implementation or completion of critical projects or processes;

 

   

Cash flow;

 

   

Gross or net profit margin;

 

   

Achievement of strategic goals;

 

   

Growth and/or performance of the Company’s sales force;

 

   

Operating service levels; and

 

   

Any combination of, or a specified increase in, any of the foregoing.

The Performance Criteria may be based upon the attainment of specified levels of performance under one or more of the measures described above relative to the performance of other entities. To the extent permitted under Section 162(m) of the Code (including, without limitation, compliance with any requirements for stockholder approval) or to the extent that an award is not intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Compensation Committee in its sole discretion may designate additional business criteria on which the Performance Criteria may be based or adjust, modify or amend the aforementioned business criteria. Performance Criteria may include a threshold level of performance below which no award will be earned, a level of performance at which the target amount of an award will be earned and a level of performance at which the maximum amount of the award will be earned. The Compensation Committee, in its sole discretion, shall make equitable adjustments to the Performance Criteria in recognition of unusual or non-recurring events affecting the Company, any subsidiary of the Company or the financial statements of the Company or any such subsidiary, in response to changes in applicable laws or regulations, including changes in U.S. generally accepted accounting principles (“GAAP”), or to account for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to the disposal of a segment of a business or related to a change in accounting principles, as applicable.

A summary of the principal features of the Amended Plan is provided below, but is qualified in its entirety by reference to the full text of the Amended Plan that is included as Exhibit A to this Proxy Statement. Exhibit A has been marked to show changes from the Existing Plan.

Shares Available for Issuance

Under the Existing Plan, the aggregate number of shares of our common stock that may be issued may not exceed 10,800,000 shares. As of February 28, 2017, 748,972 shares were available for future grant under the Existing Plan. Under the Amended Plan, the maximum aggregate number of shares that may be issued would be 12,200,000, and 2,148,972 of those shares would be available for future grant as of February 28, 2017 if the Amended Plan were then in effect. If any stock award granted under the Amended Plan expires or is cancelled, forfeited or otherwise terminated, without having been delivered in full, or if any stock award is reacquired or repurchased by the Company prior to vesting, the shares covered by such stock award would again be available for use under the Amended Plan.

Administration and Eligibility

The Amended Plan is administered by the Compensation Committee. To the extent required for employees subject to Section 162(m) of the Code, the plan administrator consists of an independent committee of the Board that complies with the applicable requirements of Section 162(m) of the Code and Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The Compensation Committee determines which employees, directors, consultants, advisors, and members of our sales force are eligible to receive awards under the Amended Plan. In addition, the Compensation Committee interprets the Amended Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the Amended Plan or any awards granted under the Amended Plan as it deems appropriate.

 

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MATTERS TO BE VOTED ON

 

Award Limits

In any calendar year, no more than one million shares may be granted in stock awards to any one participant. In addition, the Amended Plan establishes a cap of $400,000 on annual equity awards permitted to be granted to each non-employee director and $200,000 on annual cash fees permitted to be paid to each non-employee director.

Types of Awards

All of the awards described below are subject to the conditions, limitations, restrictions, vesting and forfeiture provisions determined by the Compensation Committee, in its sole discretion, subject to such limitations as provided in the Amended Plan. The following types of awards may be made under the Amended Plan:

Restricted Stock.    A restricted stock award is an award of outstanding shares of our common stock that does not vest until after a specified period of time, or satisfaction of other vesting conditions as determined by the Compensation Committee, and which may be forfeited if conditions to vesting are not met. Participants generally receive dividend payments on the shares subject to their award during the vesting period (unless the awards are subject to performance-vesting criteria) and are also generally entitled to indicate a voting preference with respect to the shares underlying their awards.

Deferred Stock.    A deferred stock award is an unfunded, unsecured promise to deliver shares of our common stock to the participant in the future, if the participant satisfies the conditions to vesting, as determined by the Compensation Committee. Participants do not have voting rights, but generally receive dividend equivalent payments during the vesting period (unless the awards are subject to performance-vesting criteria).

Stock Units.    A stock unit is an award denominated in shares of our common stock that may be settled either in shares or cash, subject to terms and conditions determined by the Compensation Committee.

Nonqualified Stock Options.    A nonqualified stock option is a stock option that does not meet the requirements of Section 422 of the Code as described below or with respect to which the grant agreement provides that the stock option is not to be treated as an incentive stock option. A stock option grants a participant the right to purchase, upon satisfaction of the applicable conditions relating to vesting and exercisability determined by the Compensation Committee, a specified number of shares of our common stock at a stated exercise price for a specified period of time.

Incentive Stock Options.    An incentive stock option is a stock option that meets the requirements of Section 422 of the Code, which include (among other requirements) an exercise price of no less than 100% of fair market value of our common stock on the grant date, a term of no more than ten years, and that the grant is from a plan that has been approved by stockholders. A stock option will not constitute an incentive stock option if its terms provide that it will not be treated as an incentive stock option.

Stock Appreciation Rights.    A SAR entitles the participant to receive an amount equal to the difference between the fair market value of a share of our common stock on the exercise date and the exercise price of the SAR (which may not be less than 100% of the fair market value of a share of our common stock on the grant date), multiplied by the number of shares subject to the SAR. A SAR may be granted in substitution for a previously granted option, and if so, the exercise price of any such SAR may not be less than 100% of the fair market value of a share of our common stock as determined at the time the option for which it is being substituted was granted. Payment to a participant upon the exercise of a SAR may be in cash or shares of our common stock.

Stock Payments.    Subject to limits in the Amended Plan, the Compensation Committee may issue unrestricted shares of our common stock, alone or in tandem with other awards, in such amounts and subject to such terms and conditions as the Compensation Committee determines. A stock payment may be granted as, or in payment of, a bonus (including, without limitation, any compensation that is intended to qualify as performance-based compensation for

 

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purposes of Section 162(m) of the Code), or to provide incentives or recognize special achievements or contributions.

Cash Awards.    The Compensation Committee may issue awards that are payable in cash, as deemed by the Compensation Committee to be consistent with the purposes of the Amended Plan. These cash awards will be subject to the terms, conditions, restrictions and limitations determined by the Compensation Committee from time to time. The payment of cash awards may be subject to the achievement of specified performance criteria. The Amended Plan provides that the maximum amount of a cash award that may be granted during any annual performance period to any employee subject to Section 162(m) of the Code may not exceed $10 million.

Reimbursement or Cancellation of Certain Awards

Awards granted under the Amended Plan may be subject to forfeiture if, after termination of employment or service, the participant engages in certain activities that are materially injurious to or in competition with Primerica. Certain awards may be subject to forfeiture or repayment if they were based on: (i) performance metrics that are later determined to be materially inaccurate; or (ii) error, fraud or misconduct by a member of the sales force or his or her sales organization. In addition, 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.

Deferrals

The Compensation Committee may postpone the exercise of awards, or the issuance or delivery of shares or cash pursuant to any award for such periods and upon such terms and conditions as such Committee determines in its sole discretion. In addition, the Compensation Committee may determine that all or a portion of a payment to a participant, whether in cash and/or shares, will be deferred in order to prevent Primerica or any subsidiary from being denied a federal income tax deduction with respect to an award granted under the Amended Plan. Notwithstanding this authority, the Compensation Committee will not postpone the exercise or delivery of shares or cash payable in respect of awards constituting deferred compensation under Section 409A of the Code, where such postponement would cause the imposition of additional taxes under Section 409A of the Code. Section 409A of the Code provides rules that govern the manner in which various types of compensation may be deferred and imposes taxes upon compensation that is improperly deferred or accelerated.

Adjustments

The Amended Plan provides that the Compensation Committee will make appropriate equitable adjustments to the maximum number of shares available for issuance under the Amended Plan and other limits stated in the Amended Plan, the number of shares covered by outstanding awards, and the exercise prices and performance measures applicable to outstanding awards. These changes will be made to reflect changes in our capital structure (including a change in the number of shares of the outstanding common stock) on account of any stock dividend, stock split, reverse stock split or any similar equity restructuring, or any combination or exchange of equity securities, merger, consolidation, recapitalization, reorganization or similar event, or to the extent necessary to prevent the enlargement or diminution of participants’ rights by reason of any such transaction or event or any extraordinary dividend, divestiture or other distribution (other than ordinary cash dividends) of assets to stockholders. These adjustments will be made only to the extent they conform to the requirements of applicable provisions of the Code and other applicable laws and regulations.

 

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The Compensation Committee, in its sole discretion, may decline to adjust an award if it determines that the adjustment would violate applicable law or result in adverse tax consequences to the participant or Primerica.

Change of Control

The Amended Plan provides that, unless otherwise set forth in a participant’s award agreement or employment agreement, all awards that are assumed or substituted in connection with a Change of Control transaction (as defined in the Amended Plan) will become fully vested, exercisable and free of restrictions, and any performance conditions on those awards will be deemed to be achieved if the participant’s employment or service is terminated by the Company without Cause (as defined in the Amended Plan) within 24 months following the Change of Control. In addition, the Amended Plan provides that, unless otherwise set forth in a participant’s award agreement, all awards that are not assumed or substituted in connection with the Change of Control transaction will become fully vested, exercisable and free of restrictions and any performance conditions on those awards will be deemed to be achieved immediately upon the occurrence of the Change of Control transaction.

In addition, in the event of a Change of Control transaction, the Compensation Committee may, in its sole discretion so long as doing so would not result in adverse tax consequences under Section 409A of the Code, provide that each award will, immediately upon the occurrence of the Change of Control, be cancelled in exchange for a payment in an amount equal to the excess of the consideration paid per share of our common stock in the Change of Control over the exercise or purchase price (if any) per share of our common stock subject to the award, multiplied by the number of shares of the our common stock subject to the award.

Amendment and Termination

The Amended Plan may be further amended or terminated by the Board at any time, but no amendment may be made without stockholder approval if it would materially increase the number of shares available under the Amended Plan, materially expand the types of awards available under the Amended Plan or the class of persons eligible to participate in the Amended Plan, materially extend the term of the Amended Plan, materially change the method of determining the exercise price of an option or SAR granted under the Amended Plan, delete or limit the prohibition against repricing, or otherwise require approval by stockholders in order to comply with applicable law or the rules of the New York Stock Exchange (“NYSE”). Notwithstanding the foregoing, with respect to awards subject to Section 409A of the Code, any termination, suspension or amendment of the Amended Plan must conform to the requirements of Section 409A. Except as may be required to comply with applicable tax law, no termination, suspension or amendment of the Amended Plan may adversely affect the right of any participant with respect to a previously granted award without the participant’s written consent.

United States Federal Income Tax Consequences of Plan Awards

The following is a brief summary of the principal United States federal income tax consequences of transactions under the Amended Plan based on current United States federal income tax laws. This summary is not intended to be exhaustive, does not constitute tax advice and, among other things, does not describe state, local or foreign tax consequences, which may be substantially different.

Restricted Stock.    A participant generally will not be taxed at the time of the grant of the restricted stock award but will recognize taxable income when the award vests or otherwise is no longer subject to a substantial risk of forfeiture. The amount of taxable income will be the fair market value of the shares at that time.

Employees may elect to be taxed at the time of grant by making an election under Section 83(b) of the Code within 30 days of the award date. If a restricted stock award subject to the Section 83(b) election is subsequently canceled, no deduction will be allowed for the amount previously recognized as income, and no tax

 

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previously paid will be refunded. Unless a participant makes a Section 83(b) election, dividends paid to a participant on shares of an unvested restricted stock award will be taxable to the participant as ordinary income. If the participant made a Section 83(b) election, the dividends will be taxable to the participant as dividend income.

Primerica will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant. Unless a participant has made a Section 83(b) election, Primerica will also be entitled to a deduction, for federal income tax purposes, for dividends paid on unvested restricted stock awards.

Deferred Stock.    A participant will generally not recognize taxable income on a deferred stock award until shares subject to the award are distributed. Upon distribution, the fair market value of the shares of our common stock will be recognized as ordinary income. Any dividend equivalents paid on unvested deferred stock awards are taxable as ordinary income when paid to the participant.

Primerica will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant, including any dividend equivalent payments made to the participant.

Stock Units.    Awards of stock units are treated, for federal income tax purposes, in substantially the same manner as deferred stock awards.

Nonqualified Stock Options.    Generally, a participant will not recognize taxable income on the grant or vesting of a nonqualified stock option. Upon the exercise of a nonqualified stock option, a participant will recognize ordinary income in an amount equal to the difference between the fair market value of our common stock received on the date of exercise and the option cost (number of shares exercised multiplied by the exercise price per share). Primerica will ordinarily be entitled to a deduction on the exercise date equal to the ordinary income recognized by the participant upon exercise.

Incentive Stock Options.    No taxable income is recognized by a participant on the grant or vesting of an incentive stock option. If a participant exercises an incentive stock option in accordance with its terms and does not dispose of the shares acquired within two years after the date of the grant of the incentive stock option or within one year after the date of exercise, the participant will be entitled to treat any gain related to the exercise of the incentive stock option as capital gain (instead of ordinary income). In this case, Primerica will not be entitled to a deduction by reason of the grant or exercise of the incentive stock option. However, the excess of the fair market value over the exercise price of the shares acquired is an item of adjustment in computing alternative minimum tax of the participant. If a participant holds the shares acquired for at least one year from the exercise date and does not sell or otherwise dispose of the shares for at least two years from the grant date, the participant’s gain or loss upon a subsequent sale will be long-term capital gain or loss equal to the difference between the amount realized on the sale and the participant’s basis in the shares acquired.

If a participant sells or otherwise disposes of the shares acquired without satisfying the required minimum holding period, such disqualifying disposition will give rise to ordinary income equal to the excess of the fair market value of the shares acquired on the exercise date (or, if less, the amount realized upon disqualifying disposition) over the participant’s tax basis in the shares acquired. Primerica will ordinarily be entitled to a deduction equal to the amount of the ordinary income resulting from a disqualifying disposition.

Stock Appreciation Rights.    Generally, a participant will not recognize taxable income upon the grant or vesting of a SAR, but will recognize ordinary income upon the exercise of a SAR in an amount equal to the cash amount received upon exercise (if the SAR is cash -settled) or the difference between the fair market value of our common stock received from the exercise of the SAR and the amount, if any, paid by the participant in connection with the exercise of the SAR. The participant will

 

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recognize ordinary income upon the exercise of a SAR regardless of whether the shares of our common stock acquired upon the exercise of the SAR are subject to further restrictions on sale or transferability. The participant’s basis in the shares will be equal to the ordinary income attributable to the exercise and the amount, if any, paid in connection with the exercise of the SAR. The participant’s holding period for shares acquired pursuant to the exercise of a SAR begins on the exercise date. Upon the exercise of a SAR, Primerica will ordinarily be entitled to a deduction in the amount of the ordinary income recognized by the participant.

Stock Payments.    A participant will generally recognize taxable income on the grant of unrestricted stock in an amount equal to the fair market value of the shares on the grant date. Primerica will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant.

Cash Awards.    A participant will generally recognize taxable income upon the payment of a cash award in an amount equal to the amount of the cash received. Primerica will ordinarily be entitled to a deduction at the same time and in the same amounts as the ordinary income recognized by the participant.

Withholding.    To the extent required by law, Primerica will withhold from any amount paid in settlement of an award amounts of withholding and other taxes due or take other action as Primerica deems advisable to enable Primerica and the participant to satisfy withholding and tax obligations related to any awards. Under the Amended Plan, Primerica may withhold taxes related to awards based on the maximum statutory tax rate.

 

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information relating to our equity compensation plans at December 31, 2016.

 

      Number of
securities
to be issued
upon exercise  of
outstanding
options,
warrants
and rights
    Weighted
average
exercise
price of
outstanding
options,
warrants
and rights
    Number of
securities
remaining
available
for future
issuance
 

Equity compensation plans approved by stockholders:

                        

Primerica, Inc. Amended and Restated 2010 Omnibus Incentive Plan

     601,669 (1)   $ 44.75 (2)     901,122 (3)

Primerica, Inc. Stock Purchase Plan for Agents and Employees

     —         —         1,986,291 (4) 
  

 

 

     

 

 

 
    

 

 

           

 

 

 

Total

     601,669     $ 44.75       2,887,413  
  

 

 

     

 

 

 
    

 

 

           

 

 

 

Equity compensation plans not approved by stockholders

     n/a       n/a       n/a  

 

(1) Consists of 438,265 and 145,019 shares to be issued in connection with unvested RSUs and outstanding stock options, respectively. Also includes 18,385 PSUs of which between zero and 27,577 shares will be earned based on the Company’s ROAE over a three year performance period that commenced on January 1, 2016. Refer to footnotes 12 and 14 in the Company’s audited financial statements for fiscal 2016 included in the Company’s Annual Report on Form 10-K for fiscal 2016 for additional information regarding the Company’s outstanding equity awards.
(2) Represents the weighted average exercise price of 145,019 stock options outstanding.
(3) The number of shares of our common stock available for future issuance under the Existing Plan is 10,800,000 less the cumulative number of awards granted under the plan plus the cumulative number of awards canceled under the plan. If the Amended Plan had been in effect at December 31, 2016, the number of shares available for future issuance under the Amended Plan would have been 2,301,122.
(4) Represents shares of our common stock, which have already been issued and are outstanding, available to be purchased by employees and agents under the plan. The number of outstanding shares available to be purchased is 2,500,000 less the cumulative number of shares purchased to date under the plan.

 

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Proposal 3:

Advisory Vote on Executive Compensation (Say-on-Pay)

 

   

What am I voting on? The Board is asking our stockholders to approve, on an advisory basis, the compensation of the named executive officers in this Proxy Statement.

 

   

Voting Recommendation: “FOR” the proposal.

 

   

Vote Required: Approval requires a “FOR” vote by at least a majority of the shares present in person or represented by valid proxy and entitled to vote.

See “Executive Compensation” beginning on page 37 for more information.

In 2011, our stockholders recommended that we hold a Say-on-Pay vote every three years and our Board of Directors agreed to that recommendation. As a result, we most recently sought stockholder approval of our executive compensation program in conjunction with our 2014 Annual Meeting of Stockholders. At such meeting, approximately 99.5% of votes were cast in favor of our executive compensation program.

This year, we are again providing our stockholders with the opportunity to cast an advisory Say-on-Pay vote. The Say-on-Pay vote is required by Section 14A of the Exchange Act, which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”), and the related rules of the Securities and Exchange Commission (the “SEC”). The Say-on-Pay vote is not binding on the Company, our Board of Directors or the Compensation Committee. Our Board and the Compensation Committee value the opinions of our stockholders and, to the extent there is any significant vote against our executive compensation program as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.

As described in detail under the heading “Executive Compensation — Compensation Discussion and Analysis (“CD&A”)”, our executive compensation program is designed to attract, motivate, and retain our named executive officers, each of whom is critical to our success. Under this program, our named executive officers are rewarded for the achievement of specific annual, long-term, strategic and corporate goals, and the realization of increased stockholder value. The Compensation Committee continually reviews and modifies the compensation program for our named executive officers to ensure that it achieves the desired goals of aligning our executive compensation structure with our stockholders’ interests and current market practices. Please read the CD&A section for additional details about our executive compensation program, including information about the compensation of our named executive officers for fiscal 2016.

The advisory vote on this resolution is not intended to address any specific element of compensation; rather, it relates to the overall compensation of our named executive officers, as well as the philosophy, policies and practices described in this Proxy Statement. Our stockholders have the opportunity to vote for or against, or to abstain from voting on, the following resolution:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s Proxy Statement for the 2017 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, compensation tables and any related material disclosed in such proxy statement.”

Proposal 4:

Advisory Vote on the Frequency of the Say-on-Pay Vote (Say-When-on-Pay)

 

   

What am I voting on? The Board is asking our stockholders to approve, on an advisory basis, the frequency of future advisory votes on executive compensation.

 

   

Voting Recommendation: “FOR” the option of annually.

 

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Vote Required: The option of every “one year,” “two years” or “three years” that receives the highest number of affirmative votes by those shares present in person or represented by proxy and entitled to vote will be the recommendation of the stockholders.

We are providing our stockholders with the opportunity to cast an advisory Say-When-on- Pay vote. Under Section 14A of the Exchange Act, the provisions of the Dodd-Frank Act and related SEC rules, this vote was required to be held at our 2011 Annual Meeting of Stockholders and not less frequently than once every six years thereafter. We are required to give our stockholders the opportunity to express a preference among three options: whether the Say-on-Pay vote will occur every one year, every two years, or every three years. Stockholders may also choose to abstain from voting on the matter. The Say-When-on-Pay vote is not binding on the Company, our Board of Directors or the Compensation Committee.

After careful consideration of this proposal, our Board of Directors has determined that an advisory vote on executive compensation that occurs every year is the most appropriate alternative for Primerica and, therefore, our Board recommends that you vote in favor of an annual advisory vote on executive compensation. In formulating its recommendation, our Board considered the importance of receiving regular input from our stockholders on important issues, such as our compensation policies and procedures. In addition, our executive compensation program has become more sophisticated since we became an independent public company in April 2010; therefore, we believe it would be most useful to enhance transparency for stockholders and to provide them with the opportunity to provide more direct annual feedback on the program to the Compensation Committee. Further, an annual Say-on-Pay vote has become viewed as the best practice in corporate governance.

The proxy card and voting instruction form give you four options: you can choose whether the Say-on-Pay vote should be conducted every year, every other year, or every three years, or you can abstain. Stockholders will not be voting to approve or disapprove the recommendation of the Board of Directors.

Although the Say-When-on-Pay vote is non-binding, the Board and the Compensation Committee will consider the results of the Say-When-on-Pay vote, as well as other communications from stockholders in determining the frequency of future Say-on-Pay votes. The Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the non-binding option recommended by our stockholders. Unless otherwise instructed, the Proxy Committee will vote proxies held by them in favor of an annual Say-on-Pay vote as described above.

In accordance with SEC rules, our stockholders may vote, on an advisory basis, on how frequently they would like to cast an advisory vote on the compensation of our named executive officers. The Board believes conducting an advisory vote on executive compensation on an annual basis is currently appropriate for us and our stockholders.

Our stockholders may cast a vote on the preferred voting frequency by selecting the option of one year, two years or three years, or they may abstain from voting in response to the following resolution:

RESOLVED, that the Company’s stockholders wish the Company to include an advisory vote on the compensation of the Company’s named executive officers pursuant to Section 14A of the Exchange Act every:

 

   

one year

 

   

two years or

 

   

three years.

 

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Proposal 5:

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

 

   

What am I voting on? The Board is asking our stockholders to ratify the selection by the Audit Committee of our Board (the “Audit Committee”) of KPMG as our independent registered public accounting firm for fiscal 2017.

 

   

Voting Recommendation: “FOR” the ratification of our independent registered public accounting firm.

 

   

Vote Required: Approval requires a “FOR” vote by at least a majority of the shares present in person or represented by valid proxy and entitled to vote.

See “Audit Matters” beginning on page 71 for more information.

We ask that our stockholders ratify the selection of KPMG as our independent registered public accounting firm for fiscal 2017.

The Audit Committee has authority to retain and terminate the Company’s independent registered public accounting firm. The Audit Committee has appointed KPMG as our independent registered public accounting firm to audit the consolidated financial statements of the Company and its subsidiaries for fiscal 2017, as well as the Company’s internal control over financial reporting. Although stockholder ratification of the appointment of KPMG is not required, our Board of Directors believes that submitting the appointment to our stockholders for ratification is a matter of good corporate governance. If our stockholders do not ratify the appointment of KPMG, then the Audit Committee will reconsider the appointment. We paid KPMG an aggregate of $2.7 million in fiscal 2016 and $2.6 million in fiscal 2015.

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.

 

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GOVERNANCE

 

Our Board oversees the business and affairs of the Company, and our directors believe that good corporate governance is a critical factor in our continued success and also aligns management and stockholder interests. Through the corporate governance page of our investor relations website at http://investors.primerica.com, our stockholders have access to key governing documents such as our Code of Conduct, Corporate Governance Guidelines and charters of each committee of the Board.

The highlights of our corporate governance program are set forth below:

 

Board Structure

   

72.7% of the Board Consists of Independent Directors

 

   

Independent Lead Director of the Board

 

   

Separate Non-Executive Chairman of the Board and CEO roles

 

   

Independent Audit, Compensation and Corporate Governance Committees

 

   

Regular Executive Sessions of Independent Directors

 

   

Annual Board and Committee Self-Assessments

 

   

Periodic Director Peer Reviews

 

   

Significant Number of Directors that Demonstrate Racial and Gender Diversity

Stockholder Rights

   

Annual Election of Directors

 

   

Majority Voting for Directors in Uncontested Elections

 

   

No Poison Pill in Effect

 

   

Annual Stockholder Engagement to Discuss Corporate Governance and Executive Compensation

 

   

Multiple Avenues for Stockholders to Communicate with the Board

Other Highlights

   

Stock Ownership Guidelines

 

   

Pay for Performance Philosophy

 

   

Broad Clawback Provisions in the Existing Plan and the Amended Plan

 

   

Policies Prohibiting Hedging, Pledging and Short Sales

 

   

No Excise Tax Gross-Ups

 

Board Structure

Our Board currently consists of eleven directors. The Company’s governance documents provide our Board with flexibility to select the appropriate leadership structure for the Company. Currently, the Company has a non-executive Chairman of the Board and a Lead Director. Our Board believes that this structure 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 and, 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.

Mr. R. Williams has served as non-executive Chairman of the Board since April 2015. He previously served as Chairman of the Board and

 

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Co-Chief Executive Officer. Mr. G. Williams has served as Chief Executive Officer since April 2015. He previously served as President since 2005. Mr. Benson, one of our independent directors and Chairman of the Corporate Governance Committee, has served as the Lead Director of our Board since February 2014 and joined our Board in April 2010. As the primary interface between management and our independent directors, the Lead Director provides a valuable supplement to the non-executive Chairman and the Chief Executive Officer roles and serves as a key contact for the non-employee directors, thereby enhancing our Board’s independence from management. The responsibilities of our Chairman of the Board and our Lead Director are set forth below.

 

Duties and Responsibilities of Chairman of the Board      Duties and Responsibilities of Lead Director

•    Preside over Board meetings and meetings of non-employee directors

 

•    Call special meetings of our Board

 

•    Approve agendas for Board meetings

 

•    Review advance copies of Board meeting materials

 

•    Preside over stockholder meetings

 

•    Facilitate and participate in formal and informal communications with and among directors

 

•    Review interested party communications directed to our Board and take appropriate action

  

•    Preside at all Board meetings at which the Chairman of the Board is not present

 

•    Call meetings of independent directors and set the agenda for such meetings

  

•    Preside at all meetings of independent directors and at all executive sessions of independent directors

 

•    Review Board meeting agendas and provide input to the Chairman of the Board

 

•    Communicate with management on behalf of the independent directors when appropriate

 

•    Act as liaison between the Chairman of the Board, the CEO and members of the Board on sensitive issues

 

•    Lead the annual Board self-assessment periodic peer review

 

•    Lead the annual CEO evaluation

 

•    Lead the CEO succession process

 

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 our Board and each committee has authority to retain independent financial, legal or other advisors as they deem necessary without consulting, or obtaining the approval of, any member of management. Our Board holds separate executive sessions of its non-employee directors and of its independent directors at least annually.

Director Independence

Independence Determinations

Mr. R. Williams, Chairman of the Board, and Mr. Addison, Chairman of Primerica Distribution, are not independent because they were employed by the Company within the past three years. Mr. G. Williams, Chief Executive Officer, is not independent because he is a member of management and an employee of the Company.

Our Board annually assesses the outside affiliations of each director to determine if any of these affiliations could cause a potential conflict

 

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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 outside directors who served on our Board during fiscal 2016 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.

Independence of Committee Members

Throughout fiscal 2016, the Audit, Compensation and Corporate Governance Committees have been fully independent in accordance with the NYSE Listed Company Manual and our Board’s director independence standards described above. In fiscal 2016, no member of these committees 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 of 2002 (the “Sarbanes-Oxley Act”). Members of the Compensation Committee meet the additional standards applicable to outside directors under Section 162(m) of the Code, and qualify as non-employee directors as defined in Rule 16b-3 under the Exchange Act.

Categorical Standards of Independence

The Company has established categorical standards of independence for our Board, which are described in our Corporate Governance Guidelines. To be considered independent for purposes of the director qualification standards, (i) the director must meet 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 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;

 

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(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 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.

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. 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 review. 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. 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.

Director Nomination Process

In discharging its responsibility for director nominations, 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

 

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considers and evaluates any candidates recommended by our 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.

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, if applicable, reviews 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, which would include a thorough reference check, interviews, and discussions about the candidate’s qualifications, availability and commitment. The Corporate Governance Committee reviews the results of all interviews and makes a recommendation to our 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 “Other Stockholder Information — Procedures for Business Matters and Director Nominations for Consideration at the 2018 Annual Meeting of Stockholders — Notice Requirements for Nomination of Directors.” A proposed nomination that does not comply with these

 

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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 Evaluation Process

The Company’s Corporate Governance Guidelines require that the Corporate Governance Committee conduct an annual review of Board performance and further requires that each standing committee conduct an annual evaluation of its own performance. To facilitate those evaluations, each independent committee prepares a written self-assessment questionnaire that is completed by the members of the committee. In addition, the Corporate Governance Committee prepares a written Board-assessment questionnaire that is completed by all of the members the Board. The questions are designed to gather suggestions to improve Board and committee effectiveness and solicit additional feedback. The Board self-assessment is conducted at a different time during the year than the committee self-assessments, so that the directors have more time to reflect on the functioning of the Board as a whole. The Corporate Secretary compiles the results of each self-assessment and shares those results with all directors. The committee chairs lead discussions during their committee meetings of the results of the self-assessments, highlighting areas that require additional attention. The Corporate Governance Committee discusses the Board self-assessment and the Lead Director leads a discussion of the self-assessment among the full Board. Management then discusses with the Lead Director specific items that require additional attention and a plan is developed to address the key takeaways. For fiscal 2017, the Corporate Governance Committee has retained a third party to facilitate the Board and Committee assessments, which will include interviews as well as director peer reviews.

Board’s Role in Risk Oversight

Our Board is ultimately responsible for the 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 former Co-Chief Executive Officer serve as non-executive Chairman of the Board provides our Board with a unique perspective on risk oversight. Our senior executives are responsible for collaborating with the Audit Committee to provide oversight with respect to the risk management process, as well as to prioritize and validate key risks. Management is 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:

 

Board Committee    Risk Management Oversight
Audit Committee    Responsible for the oversight of our accounting and financial reporting processes, the integrity of our financial statements, and potential conflicts of interest
Compensation Committee    Responsible for the oversight of risks associated with our compensation practices
Corporate Governance Committee    Responsible for the oversight of our corporate governance risks, including director independence and succession planning

 

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

In fiscal 2016, management’s Business Risk and Control Committee regularly monitored the major risks facing the Company and presented a risk profile and quarterly status updates to the Audit Committee. The Company’s General Counsel regularly briefs our Board, and the Company’s Chief Internal Auditor regularly briefs, and meets in executive session with, the Audit Committee. The Audit Committee uses the results of its discussions with the Company’s Chief Internal Auditor to monitor the audit schedule for the internal audit group.

Communicating with Our Board of Directors

Our stockholders and other interested persons may communicate with our directors by addressing such communications to them in care of the Company’s Corporate Secretary, at the Company’s principal executive office located at One Primerica Parkway, Duluth, Georgia 30099. Our stockholders and other interested persons may also communicate with our directors 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-employee directors, to nonemployeedirectors@primerica.com; or

 

   

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

In accordance with a policy approved by the Audit Committee, the Company’s Chief Governance Officer (or, solely with respect to matters that are not reasonably likely to have legal implications for the Company, the Company’s Chief Compliance and Risk 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 certain communications received.

If the correspondence is specifically marked as a private communication to our Board (or a specific member or members of our Board), then 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.

Stockholder Engagement

Consistent with the process we have followed since 2013, in late fiscal 2016 we invited the Company’s top stockholders, which together represented over 75% of our outstanding shares, to speak with management about topics important to them. We were pleased with the stockholder feedback, which indicated that our stockholders are generally satisfied with the Company’s corporate governance and executive compensation practices as well as the format and content of the proxy statement. This feedback was reviewed by our Board of Directors and the relevant committees.

Role of Compensation Consultant

The Compensation Committee retained Pearl Meyer & Partners (“Pearl Meyer”) as its independent consultant for fiscal 2016 and

 

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determined that the Company would not retain Pearl Meyer for any projects without the prior consideration and consent of the Compensation Committee. Pearl Meyer’s responsibilities for fiscal 2016 included:

 

   

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

 

   

Reviewing major management proposals;

 

   

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

 

   

Evaluating the competitiveness of executive and director pay;

 

   

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;

 

   

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 2016 Executive Compensation — The Compensation Setting Process — Compensation Consultant.”

Code of Conduct

The Company’s 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 http://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 investor relations website.

 

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BOARD OF DIRECTORS

Board Members

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, and the experiences, qualifications attributes or skills that caused the Corporate Governance Committee and our Board of Directors to determine that each individual should be nominated to serve as one of our directors.

 

 

JOHN A. ADDISON, JR.

 

LOGO   

Board Committees:

 

None

  

Public Directorships:

 

None

Chairman of Primerica Distribution

 

Age: 59

 

Director Since October 2009

 

Mr. Addison has served as the non-executive Chairman of Primerica Distribution since April 2015 and as Chairman of Primerica Distribution from March 2010 through March 2015. He served as the Company’s Co-Chief Executive Officer from 1999 through March 2015 and served the Company in various capacities since 1982 when he joined us as a business systems analyst. He has served in numerous officer roles with Primerica Life Insurance Company (“Primerica Life”), a life insurance underwriter, and Primerica Financial Services, Inc., a general agent, both of which are subsidiaries of Primerica. He served as Vice President and Senior Vice President of Primerica Life, as well as Executive Vice President and Group Executive Vice President of Marketing. In 1995, he became President of the Primerica operating unit of Citigroup Inc. (“Citigroup”) and was promoted to Co-Chief Executive Officer in 1999. Mr. Addison is President and Chief Executive Officer of Addison Leadership Group LLC, is Leadership Editor of Success Magazine, and serves on the Board of the National Monuments Foundation. Mr. Addison received 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 15 years of experience as our Co-Chief Executive Officer and over 30 years of understanding the Company and our business, along with general management and marketing expertise.

 

 

 

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BOARD OF DIRECTORS

 

 

JOEL M. BABBIT

 

LOGO   

Board Committees:

 

Corporate Governance

  

Public Directorships:

 

None

Co-Founder and Chief Executive Officer
of Narrative Content Group, LLC
(formerly MNN Holding Company, LLC))

 

Age: 63

 

Director Since August 2011

 

Mr. Babbit is the Co-Founder and Chief Executive Officer of Narrative Content Group, LLC (formerly MNN Holding Company, LLC) (“NCG”), one of the leading resources for the production and distribution of digital content. Prior to launching NCG 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. 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 of Atlanta and as a member of the Mayor’s cabinet. He received an A.B.J. degree from the University of Georgia.

 

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

 

 

 

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BOARD OF DIRECTORS

 

 

P. GEORGE BENSON

 

LOGO   

Lead Director

 

Board Committees:

 

Corporate Governance (Chair)

 

Audit

  

Public Directorships:

 

AGCO Corporation

 

Crawford & Company

 

Former Public Directorships:

 

Nutrition 21, Inc.

Former President of the College of
Charleston

 

Age: 70

 

Director Since April 2010

  

Since July 2014, Mr. Benson has been Professor of Decision Sciences at the College of Charleston. Mr. Benson served as the President of the College of Charleston from February 2007 through June 2014. 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 Chairman 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. Mr. Benson also serves on the Board of Directors of AGCO Corporation and Crawford & Company. 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, and risk and asset management. In particular, our Board considered his experience managing the College of Charleston’s staff of more than 2,000, budget of more than $250 million and endowment of more than $80 million, as well as his service on the boards of directors of other public companies and as a member of their audit committees.

 

 

 

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BOARD OF DIRECTORS

 

 

GARY L. CRITTENDEN

 

LOGO   

Board Committees:

 

Audit

  

Public Directorships

 

Zions Bancorporation

 

Former Public Directorships:

 

Staples Inc.

 

Ryerson Inc.

 

TJX Companies

Private Investor

 

Age: 63

 

Director Since July 2013

 

     

Mr. Crittenden has been a private investor, and has served as a non-employee Executive Director of HGGC, LLC (“HGGC”), a California-based middle market private equity firm, since January 2017. He previously served as a Managing Partner of HGGC from July 2009 to January 2017, Chairman from August 2013 to January 2017 and Chief Executive Officer from April 2012 to August 2013. From March 2009 to July 2009, Mr. Crittenden was Chairman 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, and from March 2007 to March 2009 he served as Chief Financial Officer of Citigroup. He served as the Chief Financial Officer of the American Express Company from 2000 to 2007. Prior to American Express, he was the Chief Financial Officer of Monsanto, Sears Roebuck and Company, Melville Corporation and Filene’s Basement. On three separate occasions, the readers of Institutional Investor Magazine named Mr. Crittenden one of the “Best CFOs in America.” Mr. Crittenden spent the first twelve years of his career at Bain & Company, an international management consulting firm, where he became a partner. Mr. Crittenden also serves on the Board of Directors of Zions Bancorporation. He received a B.S. Degree from Brigham Young University and an M.B.A. from Harvard Business School.

 

Mr. Crittenden brings to our Board expertise in general management, finance and accounting, strategic planning, risk and asset management, investment banking and capital markets, as well as experience serving on the boards of directors of several large public companies.

 

 

 

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BOARD OF DIRECTORS

 

 

CYNTHIA N. DAY

 

LOGO   

Board Committees:

 

Audit

 

Corporate Governance

  

Former Public Directorships:

 

Aaron’s, Inc.

President and Chief Executive Officer

of Citizens Bancshares Corporation

and Citizens Trust Bank

 

Age: 51

 

Director Since January 2014

 

Ms. Day has been the President and Chief Executive Officer of Citizens Bancshares Corporation and Citizens Trust Bank since February 2012. Citizens Bancshares Corporation was a publicly held corporation until January 2017. She served as Chief Operating Officer and Senior Executive Vice President of Citizens Trust Bank from February 2003 to January 2012 and served as its acting President and Chief Executive Officer from January 2012 to February 2012. She previously served as the Executive Vice President and Chief Operating Officer and in other capacities of Citizens Federal Savings Bank of Birmingham from 1993 until its acquisition by Citizens Trust Bank in 2003. Before joining Citizens Trust Bank, she served as an audit manager for KPMG. Ms. Day also serves on the Board of Directors of Aaron’s. Inc., the National Banker’s Association, and the Atlanta Area Council of Boy Scouts of America. She is a member of the Georgia Society of CPAs, and a member of the Rotary Club of Atlanta. Ms. Day received a B.S. degree from the University of Alabama.

 

Ms. Day brings to our Board experience as the chief executive officer of a publicly held company as well as expertise in general management, mergers and acquisitions (“M&A”), government and regulatory affairs, finance and accounting, strategic planning, risk and asset management and corporate governance. She also has experience serving on the boards of directors of several public companies. In addition, the customer base served by Citizens Bancshares is very similar to that served by the Company, giving her a great understanding of their buying habits, the products they purchase and effective marketing and communication methods.

 

 

 

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BOARD OF DIRECTORS

 

 

MARK MASON

 

LOGO   

Board Committees:

 

Compensation

  

Public Directorships:

 

None

Chief Financial Officer of the

Institutional Clients Group of Citigroup

 

Age: 47

 

Director Since March 2010

 

Mr. Mason has been the Chief Financial Officer of the Institutional Clients Group of Citigroup since September 2014. He previously served as Chief Executive Officer of Citi Private Bank, a division of Citigroup’s Institutional Clients Group, from May 2013 to September 2014; as Chief Executive Officer of Citi Holdings, an operating segment of Citigroup that comprises Citi Brokerage and Asset Management, Global Consumer Finance and Special Assets Portfolios, from January 2012 to May 2013; and as Chief Operating Officer of Citi Holdings from January 2009 to December 2011. 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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BOARD OF DIRECTORS

 

 

ROBERT F. MCCULLOUGH

 

LOGO   

Board Committees:

 

Audit (Chair)

 

Compensation

  

Public Directorships:

 

Acuity Brands, Inc.

 

Former Public Directorships:

 

Schweitzer-Mauduit International, Inc.

 

Comverge, Inc.

 

Mirant Corporation

Private Investor

 

Age: 74

 

Director Since March 2010

 

  

Mr. 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 Board of Directors of Acuity Brands. He received his B.B.A. in Accounting from the University of Texas at Austin.

 

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.

 

 

 

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BOARD OF DIRECTORS

 

 

BEATRIZ R. PEREZ

 

LOGO   

Board Committees:

 

Compensation

  

Former Public Directorships:

 

HSBC Finance Corporation

 

Chief Sustainability Officer and SVP of

Partnerships, Innovation, Licensing and Retail

for The Coca-Cola Company

 

Age: 47

 

Director Since May 2014

  

 

Ms. Perez has been employed by The Coca-Cola Company (“Coca-Cola”) since 1994. She has been Chief Sustainability Officer for Coca-Cola since July 2011 and has been SVP of Partnerships, Innovation, Licensing and Retail since January 2017. Prior to her current position, Ms. Perez held the positions of Chief Marketing Officer from April 2010 to July 2011; Senior Vice President, Integrated Marketing for the North America Division of Coca Cola from May 2007 to April 2010; and Vice President, Media, Sports and Entertainment Marketing from 2005 to May 2007. From 1996 to 2005, she held the positions of Associate Brand Manager, Classic Coke; Sports Marketing and NASCAR Manager; Vice President of Sports; and Vice President of the Victory Junction Group board. Ms. Perez is also the Chair Emeritus of the Grammy Foundation. Ms. Perez received a B.S. degree from the University of Maryland.

 

Ms. Perez brings to our Board expertise in corporate governance and experience sitting on the Board of Directors of HSBC Finance Corporation and its related entities. In particular, our Board considered her significant current and past experience serving in several senior management positions at Coca-Cola.

 

 

 

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BOARD OF DIRECTORS

 

 

D. RICHARD WILLIAMS

 

LOGO   

Board Committees:

 

None

   Public Directorships:

 

Crawford & Company

 

Usana Health Sciences, Inc.

Chairman of the Board

 

Age: 60

 

Director Since October 2009

     

 

Mr. Williams has served as non-executive Chairman of since April 2015 and as Chairman from October 2009 through March 2015. He served as our Co-Chief Executive Officer from 1999 through March 2015 and has served the 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 also serves on the Board of Directors of Crawford & Company, Usana Health Sciences, Inc., the Anti-Defamation League Southeast Region, the Atlanta Area Council of the Boy Scouts of America, the Board of Trustees of The Woodruff Arts Center and the Carter Center Board of Councilors. Mr. Williams received both his B.S. degree and his M.B.A. from the Wharton School of the University of Pennsylvania.

 

Mr. Williams led the Company as Co-Chief Executive Officer for 15 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.

 

 

 

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BOARD OF DIRECTORS

 

 

GLENN J. WILLIAMS

 

LOGO   

Board Committees:

 

None

  

Public Directorships:

 

None

Chief Executive Officer

 

Age: 57

 

Director Since April 2015

 

     

Mr. Williams has served as our Chief Executive Officer since April 2015. He served as the Company’s President from 2005 through March 2015. Previously, he served as Executive Vice President of Field and Product Marketing for international operations from 2000 to 2005; as President and Chief Executive Officer of Primerica Canada from 1996 to 2000; and in roles of increasing responsibility as part of Primerica’s international expansion team in Canada from 1985 to 2000. He began his career with Primerica in 1981 as a member of the Company’s sales force and joined the Home Office team in 1983. Mr. Williams received his B.S. degree in Education from Baptist University of America.

 

Mr. Williams brings to our Board more than 30 years of experience with the Company, including time in the field as a sales representative, as well as expertise in general management, sales and marketing.

 

 

 

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BOARD OF DIRECTORS

 

 

BARBARA A. YASTINE

 

LOGO   

Board Committees:

 

Compensation (Chair)

  

Public Directorships:

 

First Data Corporation

Private Investor and Independent Director

 

Age: 57

 

Director Since December 2010

 

  

Ms. Yastine served as Co-Chief Executive Officer of Lebenthal Holdings from September 2015 to June 2016. She previously served as Chair, President and Chief Executive Officer of Ally Bank from March 2012 to September 2015 and as Chief Administrative Officer of Ally Financial, overseeing the risk, compliance, legal and technology areas from May 2010 to March 2012. 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. She served as 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. Ms. Yastine also serves on the Board of Directors of First Data Corporation. She received a B.A. in Journalism and an M.B.A. from New York University.

 

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

 

 

 

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BOARD OF DIRECTORS

 

Director Qualifications

Set forth below is a chart that highlights certain skills, qualifications and characteristics of the members of our Board.

 

    Leadership   Financial   Diversity Factors
     CEO
Experience
  CFO
Experience
  Regulated
Industry
  Sales &
Marketing
  Financial
Literacy
  Eligible for
Audit
Committee
Financial
Expert
  Gender   Ethnicity

John A. Addison, Jr.

                       

Joel M. Babbit

                         

P. George Benson

                         

Gary L. Crittenden

                       

Cynthia N. Day

                   

Mark Mason

                       

Robert F. McCullough

                       

Beatriz R. Perez

                     

Glenn J. Williams

                       

D. Richard Williams

                       

Barbara A. Yastine

                     

 

Board Meetings

During fiscal 2016, our Board held five meetings. Each director attended more than 80%, collectively, of the meetings of our Board and its committees on which he or she served during fiscal 2016. We expect our directors to attend the Annual Meeting of Stockholders absent extraordinary circumstances, and, each director attended the 2016 Annual Meeting of Stockholders.

Board Committees

Our Board has four standing committees that assist it in carrying out its duties – the Audit Committee, the Compensation Committee, the Corporate Governance Committee and the Executive Committee (which was created in February 2015). The charter of each committee is available on our investor relations website at http://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 the membership of each of our Board’s standing committees as of December 31, 2016.

 

Name            Audit                   Compensation          

Corporate

        Governance        

          Executive        

John A. Addison, Jr.

                

Joel M. Babbit (I)

              

P. George Benson (LD) (I)

         Chair  

Gary L. Crittenden (I)

   (F)            

Cynthia N. Day (I)

   (F)          

Mark Mason (I)

              

Robert F. McCullough (I)

   Chair (F)        

Beatriz R. Perez (I)

              

D. Richard Williams (*)

               Chair

Glenn J. Williams

              

Barbara A. Yastine (I)

       Chair      

Number of meetings in fiscal 2016

   10   6   5   0

*- Chairman of the Board

LD – Lead Director

I – Independent Director

F – Audit Committee Financial Expert

 

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The key responsibilities of each of the Board’s standing committees are described below:

 

Committee    Key Responsibilities
Audit Committee   

•    Retains and terminates the Company’s independent registered public accounting firm and approves its services and fees

 

•    Assists our Board in fulfilling its responsibility to our stockholders relating to the financial reporting process and systems of internal control

 

•    Determines whether the Company’s financial systems and reporting practices were established in accordance with applicable requirements

 

•    Oversees the Company’s internal audit and risk functions

 

See “Audit Matters – Audit Committee Report.”

Compensation Committee   

•    Oversees the Company’s overall human resources compensation program

 

•    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

 

•    Reviews and approves principal elements of total compensation for certain of the Company’s executive officers and approves employment agreements, as applicable

 

•    Reviews and recommends the compensation of non-employee directors to the full Board

 

•    Reviews and recommends directors’ and officers’ indemnification and insurance matters

 

•    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

 

•    Delegates to the Chief Executive Officer and President the authority to issue equity awards to the sales force and certain employees, subject to applicable limits

 

See “Executive Compensation.”

Corporate Governance Committee   

•    Shapes 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

 

•    Identifies individuals qualified to become Board members and recommends to our Board the director nominees to be considered for election at the next annual meeting of stockholders

 

•    Leads our Board and all committees in their annual self-assessments of their performance and oversees third party director peer reviews

 

•    Oversees executive succession planning and talent development, our political action committee, and our government relations strategy

 

See “Governance.”

Executive Committee   

•    Exercises all powers and authority of the Board during the intervals between regularly scheduled Board meetings on matters that do not merit the calling of a special meeting of the Board

 

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Director Compensation

The Compensation Committee is responsible for reviewing and considering any revisions to director compensation. The Compensation Committee reviews director compensation paid by peer companies at least biannually as part of its process of evaluating and setting compensation for non-employee directors. The Compensation Committee does not seek to benchmark or set compensation at any specific level relative to the peer data. Instead, the Compensation Committee uses this information primarily as background with respect to compensation plan design decisions and as a general reference point for pay levels. For a list of the peers and a description of how they were selected, see “Executive Compensation – Compensation Discussion and Analysis (“CD&A”) — Fiscal 2016 Executive Compensation – The Compensation Setting Process – Use of a Peer Group.”

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 has determined that compensation for non-employee directors should be a mix of cash and equity-based compensation. Directors who are employees of Primerica do not receive any fees or additional compensation for their service on our Board. The interests of our non-employee directors are aligned with the interests of our stockholders by linking a portion of their compensation to stock performance.

The Board has approved the following compensation program for directors in fiscal 2016:

 

Board/Committee    2016 Non-Employee Director Compensation (1)  

Board

   Annual Cash Retainer      $75,000     Annual RSU Award  (2)     $100,000  

Audit

   Annual Chair Cash Fee      $25,000     Annual Member Cash Fee     $10,000  

Compensation

   Annual Chair Cash Fee      $15,000     Annual Member Cash Fee     $10,000  

Corporate Governance

   Annual Chair Cash Fee      $15,000     Annual Member Cash Fee     $10,000  

 

(1) All cash retainers and cash fees are paid in quarterly installments.
(2) The RSUs vest in four quarterly installments. Delivery of the shares underlying the RSUs are deferred until such date as the director no longer serves as a member of our Board. Beginning with the fiscal 2017 grant, delivery of the shares underlying the RSUs will instead be made on the quarterly vesting dates.

 

In addition, the Lead Director receives a cash fee of $25,000 and the Chairman of the Board and the Chairman of Primerica Distribution each receive a cash fee of $100,000. The Company reimburses all directors for travel and other related expenses in connection with attending Board and committee meetings and Board-related activities.

 

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Director Compensation Table

The following table shows fiscal 2016 compensation for our non-employee directors.

 

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

John A. Addison, Jr.

   $ 175,000     $ 99,955     $ 824      $ 275,779  

Joel M. Babbit

   $ 85,000     $ 99,955 (4)   $ 824      $ 185,779  

P. George Benson

   $ 125,000     $ 99,955 (4)   $ 824      $ 225,779  

Gary L. Crittenden

   $ 85,000 (5)   $ 99,955 (4)   $ 824      $ 185,779  

Cynthia N. Day

   $ 95,000     $ 99,955 (4)   $ 824      $ 195,779  

Mark Mason

   $ 85,000     $ 99,955     $ 824      $ 185,779  

Robert F. McCullough

   $ 110,000     $ 99,955 (4)   $ 824      $ 210,779  

Beatriz R. Perez

   $ 85,000     $ 99,955 (4)   $ 824      $ 185,779  

D. Rick Williams

   $ 175,000     $ 99,955     $ 824      $ 275,779  

Barbara A. Yastine

   $ 90,000 (5)   $ 99,955 (4)   $ 824      $ 190,779  

 

(1) Includes the cash portion of the annual retainer as well as fees for Lead Director, Chairman roles and committee service.
(2) Each non-employee director was granted 1,909 RSUs, representing the number of whole shares of our common stock (or, at the director’s election, deferred stock units) equal to $100,000 divided by $52.36 (the closing market price per share of our common stock on the NYSE on the trading day immediately preceding the grant date of May 20, 2016). At December 31, 2016, each director had 955 unvested RSUs. For valuation assumptions underlying the awards, see the Company’s audited financial statements for fiscal 2016 included in the 2016 Annual Report.
(3) Represents dividends paid on unvested equity awards.
(4) Elected to receive equity compensation in the form of deferred stock units under the Nonemployee Directors’ Deferred Compensation Plan. See “— Deferred Compensation.”
(5) Elected to receive cash compensation in the form of deferred stock units under the Nonemployee Directors’ Deferred Compensation Plan. See “— Deferred Compensation.”

 

All directors own shares of our common stock. At December 31, 2016, our non-employee directors each held 955 unvested equity awards that had been granted on May 20, 2016 and, as of December 31, 2016, had a market value of $66,038 based on the closing price per share of our common stock on the NYSE on that date of $69.15. All RSUs and deferred stock units granted in fiscal 2016 vest in equal installments on the three month, six month, nine month and twelve month anniversary of the grant date (or, if earlier, the final tranche vests on the date of the annual meeting of stockholders in the year following the year of grant).

Deferred Compensation

Our Board adopted the Primerica, Inc. Nonemployee Directors’ Deferred Compensation Plan in November 2010, under which non-employee directors may elect to defer all or a portion of their directors’ fees. At the director’s option, we 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 last trading day of the 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 equity awards to which the director was otherwise entitled. Any deferred stock units that are issued upon deferral of equity awards are subject to the same vesting provisions as the equity

 

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BOARD OF DIRECTORS

 

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 equity awards are fully vested on the dividend payment date.

We pay all deferred compensation in the form of our common stock, 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 2016, Messrs. Babbit, Benson, Crittenden and McCullough, and Ms. Day Ms. Perez and Ms. Yastine, participated in the Nonemployee Directors’ Deferred Compensation Plan.

Director Stock Ownership Guidelines

Our non-employee directors are required to own shares with a value at least equal to four times their annual cash retainer. This requirement was increased from three times their annual cash retainer in December 2016. In determining compliance with these guidelines, stock ownership includes shares beneficially owned by the director (or by immediate family members) and unvested RSUs 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.

Other Director Matters

Mr. Crittenden served as the Chief Financial Officer of Citigroup from March 2007 to March 2009. In July 2010, Mr. Crittenden entered into an order with the SEC in which it found that he should have known that certain statements made by Citigroup, while he was the Chief Financial Officer of Citigroup, were materially misleading and he paid a civil monetary penalty of $100,000. Mr. Crittenden did not admit any wrongdoing in connection with the matter or disgorge any amount to Citigroup, and he did not face a ban from any future activities. In considering Mr. Crittenden’s nomination to our Board, our Corporate Governance Committee reviewed the SEC Order and related matters and concluded that they do not raise any concerns about his qualification to serve on our Board.

 

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EXECUTIVE COMPENSATION

 

Compensation Committee Message

To Our Fellow Stockholders,

The Compensation Committee takes seriously its responsibility to oversee the Company’s executive compensation programs and to ensure they are structured to incent sustained stockholder value creation. This letter is intended to provide you with additional insights into the actions we have taken.

CEO Compensation.    In the year leading up to Mr. G. Williams’ elevation to CEO in April 2015, the Compensation Committee engaged in lengthy discussions and extensive market research and peer review to determine the appropriate compensation roadmap. While the Board of Directors had full confidence in Mr. G. Williams as the Company’s CEO, the Compensation Committee believed the transition challenges were substantial. The Compensation Committee therefore set his first-year (2015) compensation as CEO below market comparables, to provide for a potential future increase upon a successful transition as well as Mr. G. Williams’ seasoning as a CEO.

The full Board conducts a robust annual performance review of the CEO under the leadership of the Corporate Governance Committee. The Compensation Committee uses those results to inform its recommendations about both the amount and structure of the CEO’s compensation. These recommendations are then vetted with the full Board.

In the view of the Board, the transition has been highly successful across all dimensions: financial performance, sales force recruiting and productivity, the expanded responsibilities and cohesion of his executive team and Mr. Williams’ general leadership of the Company. The Committee recognized this strong performance by increasing Mr. Williams’ long-term equity incentive awarded in February 2017, bringing his total compensation package in line with market comparables.

Executive Team Compensation.    The compensation structure for our Executive Team has evolved over the past several years, in response to emerging best practices, to improve alignment with stockholder value creation and to motivate and reward longer-term financial and strategic performance. PSUs were introduced as part of our Executive Team’s long-term equity grants in February 2016, at 17% of the total equity grant value, with RSUs and stock options representing 56% and 27% of the grant, respectively. At the time, the Compensation Committee determined that for the long-term equity incentive grant to our Executive Team in 2017, 50% would be awarded in PSUs and 50% in RSUs. Options will no longer be granted. While the RSUs vest ratably over three years, the PSUs vest 100% after three years, and the number of shares ultimately delivered will vary up or down depending on performance relative to the metrics established at the time of grant. The value of both RSUs and PSUs fluctuates with stock price, but the cliff vesting and performance requirements of PSUs link our Executive Team’s compensation more tightly to the Company’s future performance.

The Compensation Committee made two other changes to the long-term equity incentive plan for our Executive Team, both related to the introduction of PSUs. The changes were effective beginning with the 2017 equity grant. First, the dollar value of the equity grants to our Executive Team are now fixed. Second, the personal performance factor used to determine the value of equity awards was eliminated. Instead, the short-term incentive plan now includes a personal performance factor that can increase or decrease cash payouts by up to 20%. The core of the short-term incentive plan remains the same, with awards based on performance relative to a set of corporate performance metrics.

Overall, the Compensation Committee believes these changes will more effectively incent sustained future performance and stockholder value creation. During 2017, the Compensation Committee will continue to assess the degree to which our compensation plan designs are producing the desired outcomes. In particular, we will focus on the performance metric(s) related to PSUs, which we expect to evolve over time in response to the Company’s strategy.

 

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EXECUTIVE COMPENSATION

 

Increase of Shares Authorized for Grant Under Equity Compensation Plan.    At this year’s Annual Meeting, we are recommending that the Company’s stockholders approve an increase of 1.4 million in the shares authorized for issuance under the Existing Plan. The Existing Plan was last amended in May 2011, when the Company’s stockholders approved an increase of 2 million shares. We expect the Amended Plan to enable the Company to continue its equity compensation programs for management, directors and the sales force for at least three years. The Compensation Committee believes strongly that these programs have been effective in aligning interests with those of all stockholders, and that the management and Board equity programs are in line with peer practices.

We believe our sales force equity compensation program is unique in the insurance industry, granting members of our independent contractor sales force equity upon achieving certain production levels as part of their overall compensation package. While the equity granted to our sales force has been significant, representing approximately half of the stock awards (excluding options) granted under the Existing Plan in 2016, management and the Compensation Committee believe it has been very valuable in increasing our sales force’s alignment with our goals of strong financial and stock performance.

Executive compensation is not an exact science. We welcome the feedback and observations of our fellow stockholders.

COMPENSATION COMMITTEE:

 

LOGO

LOGO

LOGO

LOGO

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 — Board Committees — Compensation Committee.”

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

 

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EXECUTIVE COMPENSATION

 

Compensation Discussion and Analysis (“CD&A”)

2016 Highlights

Named Executive Officers

Our named executive officers during fiscal 2016 were:

 

      Name    Title   

Company

Tenure

LOGO

   Glenn J. Williams    Chief Executive Officer    35 years

LOGO

   Peter W. Schneider    President    16 years

LOGO

   Alison S. Rand    Executive Vice President and Chief Financial Officer    21 years

LOGO

   Gregory C. Pitts    Executive Vice President and Chief Operating Officer    31 years

LOGO

   William A. Kelly    President of PFS Investments    31 years

 

Messrs. G. Williams, Schneider and Pitts and Ms. Rand are collectively referred to as the “Executive Team,” a management committee that consists of our four highest ranking executives. Mr. Kelly is a member of the Operating Team, a management committee that consists of our next most senior executives. The Chief Executive Officer, and not the Compensation Committee, sets the compensation for the non-Executive Team members of the Operating Team.

 

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EXECUTIVE COMPENSATION

 

Compensation Program Enhancements

The Compensation Committee approved the following program enhancements in fiscal 2016:

 

   

Determined that, beginning with fiscal 2016, individual performance by Executive Team members would result in a potential increase or decrease in the short-term incentive award of up to 20%, all of which will be paid in cash;

 

   

Determined that long-term equity grant values for Executive Team members beginning in fiscal 2017 would represent fixed amounts and would not reflect personal performance during the prior year;

 

   

Determined that (a) equity awards to Executive Team members beginning in February 2017 would consist of time-based RSUs (50% of total award value) and PSUs (50% of total award value) that would be delivered only if pre-established performance goals are satisfied over a three year performance period and (b) the award of stock options would be discontinued; and

 

   

Increased the short-term target incentive compensation for the President and the long-term target incentive compensation of all Executive Team members to more closely align our executive compensation with that of the peer group, following the successful leadership transition that broadened each of their responsibilities:

 

 

Name    2016 Short-
Term Target
     2015 Short-
Term Target
    

Long-Term
Fixed Incentive

Compensation (1)

    

2015 Target

Long-Term
Incentive

Compensation (2)

 

Glenn J. Williams

   $ 1,500,000      $ 1,500,000      $ 2,750,000      $ 1,750,000  

Peter W. Schneider

   $ 850,000      $ 700,000      $ 1,150,000      $ 850,000  

Alison S. Rand

   $ 400,000      $ 400,000      $ 1,000,000      $ 650,000  

Gregory C. Pitts

   $ 400,000      $ 400,000      $ 900,000      $ 600,000  

William A. Kelly

     (3)        (3)        N/A        (3)  

 

(1) Fixed value set in February 2016 and awarded in February 2017.
(2) Awarded in February 2016 based on prior year performance.
(3) Mr. Kelly’s total incentive compensation target for both 2015 and 2016 was $675,000, and the actual awards were paid 50% in cash and 50% in RSUs.

 

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EXECUTIVE COMPENSATION

 

Total Stockholder Return

As described in the tables below, the Company has delivered positive return to stockholders and has consistently paid stockholder dividends and repurchased our common stock.

 

 

LOGO

 

LOGO

(1)

Excludes $257 million in private share repurchases.

(2)

Excludes $155 million in private share repurchases.

 

The following graph compares the performance of our common stock to the Standard & Poor’s (“S&P”) MidCap 400 Index and the S&P 500 Insurance Index by assuming $100 was invested in each investment option as of December 31, 2011. The S&P MidCap 400 Index measures the performance of the United States middle market capitalization (“mid-cap”) equities sector. The S&P 500 Insurance Index is a capitalization-weighted index of domestic equities of insurance companies traded on the NYSE and NASDAQ. The common stock is included in the S&P MidCap 400 index.

 

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EXECUTIVE COMPENSATION

 

Fiscal 2016 Operating and Financial Results (1)

During fiscal 2016, the Company’s operating results were marked by strong performance as well as a record 9.5% increase in the size of our life-licensed sales force year-over-year. Further, the Company devoted time and energy to adapting our business to the fiduciary duty rule adopted by the Department of Labor and it created a new internal function devoted to corporate development and strategy. In addition, in line with the Company’s ongoing strategy, management has continued to work closely with field leaders to develop new technological tools and incentive programs intended to increase the size of our life-licensed sales force, resulting in an increase in new life insurance policies.

The following table illustrates the Company’s performance in fiscal 2016 relative to its performance in fiscal 2015.

 

      Fiscal 2016        Fiscal 2015      Change  

Operating Revenues (1)

   $ 1,515.0 million        $ 1,405.9 million      7.8 %

Net Operating Income (1)

   $ 216.8 million        $ 191.1 million        13.5 %

Net Operating Income Return on Adjusted Stockholders’ Equity (ROAE) (1)

     19.0 %        16.9 %      *  

Diluted Operating Earnings Per Share (1)

   $ 4.53        $ 3.72        21.7 %

Size of Life-Licensed Sales Force at Fiscal Year End

     116,827          106,710        9.5 %

Market Price Per Share at Fiscal Year End

   $ 69.15        $ 47.23        46.4 %

Total Stockholder Return

     48.3        -11.8 %         

 

* Not applicable
(1) Includes financial results that were not prepared in accordance with GAAP. See “Reconciliation of GAAP and Non-GAAP Financial Measures” in Exhibit B to this Proxy Statement for a reconciliation to GAAP results.

 

The bar graphs below depict our performance over the past five fiscal years measured by net operating income and size of life-licensed sales force at year end, two of the performance measures used to measure corporate performance under our incentive compensation plan.

 

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EXECUTIVE COMPENSATION

 

Fiscal 2016 Executive Compensation

The total compensation paid to our named executive officers for fiscal 2016, as set forth under the heading “— Compensation Tables – Summary Compensation Table”, is shown below.

 

Name    Title    Total Fiscal 2016
Compensation
 

Glenn J. Williams

   Chief Executive Officer      $4,587,495  

Peter W. Schneider

   President      $2,641,768  

Alison S. Rand

   Executive Vice President and Chief Financial Officer      $1,765,331  

Gregory C. Pitts

   Executive Vice President and Chief Operating Officer      $1,709,995  

William A. Kelly

   President of PFS Investments      $1,311,147  

Executive Compensation Practices

 

We Do    We Do Not

Base a majority of total compensation on performance

 

Set annual corporate performance targets based on objective performance measures

 

Vest equity awards over time to promote retention

 

Vest certain equity awards only upon the achievement of objective performance measures

 

Require Executive Team members and non-employee directors to hold our common stock through published stock ownership guidelines

 

Provide only double trigger change-of-control equity acceleration to executives who have change-of-control provisions

 

Prohibit pledging of our common stock

 

Make equity awards broadly throughout the organization, including on a performance basis to members of our independent contractor sales force

 

Mitigate potential dilutive effect of equity awards through a corporate share repurchase program

  

Ò     Permit hedging transactions or short sales by executive officers or directors

 

Ò     Provide significant perquisites

 

Ò     Provide tax gross-ups for perquisites

 

Ò     Offer a pension or supplemental executive retirement plan (SERP)

 

Ò     Provide single trigger payments upon change of control

 

Ò     Provide excise tax gross-ups upon change of control

 

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Pay-for-Performance

The Compensation Committee structured our 2016 executive compensation program so that a meaningful percentage of compensation is tied to the achievement of challenging levels of corporate performance as well as meeting strategic objectives. When our Chief Executive Officer was elected in early 2015, the Compensation Committee determined to increase his total compensation over time as he became more experienced in his new role. Most of this increase was in the form of long-term incentive equity compensation. As a result, and because our Chief Executive Officer has greater responsibilities than our other named executive officers, and is ultimately responsible for the Company’s strategic direction and overall results, our pay-for-performance approach provides for a larger portion of the Chief Executive Officers’ total compensation to be “at-risk” in the form of performance-based awards.

The following chart reflects the mix of fixed versus performance-based compensation for the Chief Executive Officer and our other Executive Team members for fiscal 2016:

 

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EXECUTIVE COMPENSATION

 

Corporate Performance Objectives

 

For purposes of short-term incentive compensation, corporate performance for fiscal 2016 was measured based on four separate objectives, which were derived from the Company’s 2016 business plan and strategic objectives. The Compensation Committee intended for all of the corporate target goals to be challenging but achievable, and the maximum goals were intended to be reachable only as a result of exceptional performance. The weighting of each objective was intended to emphasize areas on which our Board wanted the management team to focus its attention. Specifically, the size of the life-licensed sales force was given the highest weighting because the Compensation Committee believes that this metric has historically driven the success of the business and it wanted to incentivize management to focus on initiatives to grow the sales force.

 

Corporate Objective   Rationale   Weighting   Performance Level
Range (1)
  Fiscal 2016 Result

Operating Revenues

  Reflects life and securities sales as well as the performance of our insurance in force and assets under management   20%  

Threshold: 85% of the target level

 

Target: 100%

 

Maximum: 115% of the target level

  $1,515.0 million, representing a 104.8% payout based on a target of $1,504.3 million

Net Operating Income

  Reflects the overall success of the Company. Unlike earnings per share, which can be affected by management decisions on share repurchases, this measure of earnings is relevant for all of our employees who participate in the incentive plan.   25%  

Threshold: 85% of the target level

 

Target: 100%

 

Maximum: 115% of the target level

  $216.8 million, representing a 134.4% payout based on a target of $206.1 million

Net Operating Income Return on Adjusted Stockholders’ Equity (ROAE)

  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

  19.0%, representing a 129.3% payout based on a target of 18.2%

Size of Life-Licensed Sales Force at Fiscal Year End

  Represents recruiting, licensing efficiency, turnover rates and long-term sustainability   30%  

Threshold: 90% of the target level

 

Target: 100%

 

Maximum: 110% of the target level

  116,827, representing a 149.7% payout based on a target of 111,300

Total 2016 Payout Factor

  131.8%

 

(1) For all corporate performance metrics, performance at target pays out at 100% of target levels, a threshold level of performance pays out at 50% of target levels and a maximum level of performance pays out at 200% of target levels. For results between threshold and maximum levels, the actual payout factor is extrapolated. No payout is made for any metric for which performance is lower than the threshold level. The Compensation Committee intentionally narrowed the payout band for the size of the life-licensed sales force metric compared to the other metrics because it believes that performance in only the narrower band would justify an incentive payout.

 

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Personal Performance Objectives

Each member of our Executive Team had personal performance objectives for fiscal 2016 that were approved by our Board of Directors, and Mr. Kelly had personal performance objectives that were approved by the Chief Executive Officer. These goals support the Company’s strategic objectives and included matters such as management of key regulatory matters, the introduction of new products and technology initiatives, growth of the sales force and capital deployment. For fiscal 2016, the Compensation Committee did not make any personal performance adjustments to the cash incentive award for any Executive Team member. The payout factor for Mr. Kelly based on his personal performance was set at 120%.

Say-on-Pay

In 2011, our stockholders approved a triennial Say-on-Pay vote. The Company’s most recent advisory vote on executive compensation occurred at the 2014 Annual Meeting of Stockholders. Approximately 99.5% of votes cast approved our executive compensation program as described in our 2014 proxy statement, and the Compensation Committee has not taken any action in response to that Say-on-Pay vote.

Tax Implications

The Compensation Committee typically structures incentive compensation in order to comply with the provisions of Section 162(m) of the Code. Compliance with Section 162(m) allows incentive awards to qualify as “performance-based” compensation and allows the awards granted to our executives (other than Ms. Rand, the Chief Financial Officer, whose compensation is not subject to the deduction limitations of Section 162(m)) to be tax deductible by us if the compensation to any executive exceeds $1 million for any fiscal year. 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, to maintain flexibility to compensate our executives in a manner designed to promote long-term corporate goals and objectives, the Compensation Committee has not adopted a policy that all compensation must be deductible or have the most favorable accounting treatment to the Company.

 

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Fiscal 2016 Executive Compensation

Compensation Program Objectives

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

 

Compensation Program Objective    How Objective is Achieved
Motivate and reward executives when they deliver desired business results and stockholder value    Incentive compensation is tied directly to corporate performance and the achievement of strategic objectives.
Align executive and stockholder interests over the long-term    Equity-based incentive awards are tied to performance and their value increases with stock price appreciation. All named executive officers receive time-based RSUs. For Executive Team members, beginning in fiscal 2016, a significant portion of the value of equity grants is awarded in the form of PSUs, which will be delivered following completion of the three-year performance period only upon achievement of one or more performance goals and 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    Executive pay is designed to be competitive and performance-based. Executives are held accountable for results and rewarded above target levels when goals are exceeded. When goals are not met, compensation awards are below target levels.

 

Company Tenure

Most of the members of the Company’s management team have been with the Company for many years, and the tenure of the Company’s named executive officers ranges from 16 years to 36 years, with an average tenure of over 27 years. The Company’s management and the Compensation Committee both believe that the long tenure of a talented executive management team has been an important element in the Company consistently achieving its production and financial goals. In addition, long tenure has enabled the Company to avoid the costs of turnover. Further, we believe that tenure is an important factor in the Company’s successful execution of its business strategies. The Company’s distribution model is unique and understanding the nuances of our large and diverse sales force can take many years. The Company’s compensation policies are designed to promote this long tenure, which the Committee believes benefits the interests of the Company’s stockholders.

 

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Compensation Elements

The elements of the fiscal 2016 executive compensation program for our named executive officers are described below.

 

Pay Element   Base Salary   Bonus    RSUs    Options   PSUs
               
Type of Performance   Short-term emphasis   

Hybrid of short-term and

long-term emphasis

  Long-term emphasis
                       
               
Who Receives  

 

All executives

  

 

Executive Team

members

                       
               
When Granted   Reviewed annually  

February 2017

for 2016 performance

   February 2016
                       
               

How Grant Determined

  N/A  

• Operating revenues

• Net operating income

• ROAE

• Life sales force

  

For Executive Team members: personal performance

For executives other than Executive Team members:

• Operating revenues

• Net operating income

• ROAE

• Life sales force

  

Personal

Performance

                       
               
Performance Period   Ongoing   One year    Vest over three years   2016-2018
                       
               
How Payout Determined   Judgment  

N/A

   N/A   ROAE
                       
               
When Delivered   Bi-monthly   March 2017    Annually on March 1   In March 2019 after completion of the three-year performance period
                       
               
Form of Delivery  

 

Cash

  

 

Equity

                       

 

Compensation Elements: Base Salary

Base salary is a fixed amount based on an individual’s skills, responsibilities and experience. The Compensation Committee generally reviews these amounts in February of each year and intends for them to provide a competitive fixed rate of pay recognizing different levels of responsibility. The annual salaries of our named executive officers were increased as of April 1, 2015 to reflect their increasing responsibilities as a result of the Company’s leadership transition; they were unchanged for fiscal 2016. See “— Fiscal 2016 Executive Compensation.”

 

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Compensation Elements: Performance Based Awards

Incentive awards are granted to reward executives for achieving critical corporate and strategic goals. A portion of the incentive awards are equity-based to motivate executives to create long-term stockholder value. Cash and equity incentive awards combined represent the majority of the compensation paid to our named executive officers.

The Company utilizes a “plan within a plan” structure for Executive Team members. The Compensation Committee established a maximum permissible award for each Executive Team member that is equal to a designated percentage of operating income before income taxes1. The program is divided into a short-term cash incentive program and a long-term equity incentive program. For our Executive Team, cash incentive targets for fiscal 2016 performance were set by the Compensation Committee in February 2016. In February 2017, the Compensation Committee determined the cash incentive award to each Executive Team member based on the achievement of the Company’s previously established fiscal 2016 corporate performance objectives, with an adjustment of up to 20% based on personal performance. For fiscal 2016, the Compensation Committee did not make any personal performance adjustments to the cash incentive award for any Executive Team member.

 

The value of the long-term equity incentive award granted to each member of our Executive Team in February 2016 was determined based on the achievement of personal performance objectives and the performance of our Executive Team working together, which had a long-term strategic component and was limited to a payout range of between 90% and 125% of the target level. The Compensation Committee further determined to grant the award in restricted stock units and options, consistent with prior years, but to pay the value of the award, if any, in excess of 100% of the target level in the form of PSUs. The value of the PSUs will only be recognized if the Company achieves specified levels of ROAE over the years 2016 through 2018. The Compensation Committee selected ROAE as the performance metric because it incorporates both earnings performance and the effective use of capital, and management believes it is the single measure by which the Company is most assessed by major investors. The Committee intends to reevaluate the performance metric(s) used for PSUs every grant year and expects the measure(s) to change over time. The use of this metric allows our stockholders to evaluate our financial achievements relative to other organizations. We believe this metric has a significant influence on the value our stockholders place on the Company.

For Mr. Kelly, 55% of incentive compensation was tied to corporate performance and 45% of incentive compensation was tied to personal performance, and the award is delivered 50% in cash and 50% in RSUs.

In February 2016, the Compensation Committee determined that beginning in February 2017 the long-term equity award for Executive Team members would represent a fixed value that would be awarded 50% in the form of restricted stock units and 50% in the form of PSUs. Each year, the Compensation Committee will determine specific corporate objectives for the three year performance period of the PSUs.

 

1  Operating income before income taxes equals income from continuing operations before income taxes, adjusted to exclude the impact of realized investment gains and losses.

 

 

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A visual depiction of our new Executive Team incentive award formula is set forth below (with the Chief Executive Officer’s short-term award for fiscal 2016 performance and fixed long-term award in February 2017 in italics as an example):

 

                                 

SHORT-TERM

           

Target Cash Award

 

$1,500,000

  x   % Achievement
of Corporate Performance
Objectives
131.8%
  =  

Preliminary Cash Payout

 

$1,977,000

  x   +/- 20% adjustment for personal performance 0%   =  

Final Cash Payout

 

$1,977,000

 

               
LONG-TERM              
  x   50% of award
value granted in the form of RSUs
  /   Closing price on date of grant     =     # of RSUs Granted      
    $1,375,000     $80.45     17,091      
                 

Fixed Equity Award

  x   50% of award
value granted in the form of RSUs
  /   Closing price on date of grant     =     # of RSUs Granted      

$2,750,000

    $1,375,000     $80.45     17,091      
                                         

The table below sets forth the fiscal 2016 target awards or, for members of the Executive Team, the February 2017 fixed equity awards, as well as each executive’s total target/fixed incentive award as a percentage of salary.

 

Name    Annual
Salary (1)
     Target Cash
Award
    
Equity
Award
    Total Target
Incentive
Award
     Total Target
Incentive Award
as a Percentage
of Salary
 

Glenn J. Williams

   $ 750,000      $ 1,500,000      $ 2,750,000 (2)    $ 4,250,000        566.7

Peter W. Schneider

   $ 550,000      $ 850,000      $ 1,150,000 (2)    $ 2,000,000        363.6

Alison S. Rand

   $ 500,000      $ 400,000      $ 1,000,000 (2)    $ 1,400,000        280.0

Gregory C. Pitts

   $ 500,000      $ 400,000      $ 900,000 (2)    $ 1,300,000        260.0

William A. Kelly

   $ 450,000      $ 337,500      $ 337,500 (3)    $ 675,000        150.0
(1) Reflects annual base salary as of April 1, 2016.
(2) 50% of the equity award was granted in PSUs, of which between 0 and 150% will be delivered to the named executive officer after the completion of the 2017-2019 performance period.
(3) Reflects the target equity value of the February 2017 award.

 

The grant date of each stock award is the date the award is 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. All incentive compensation awards were made under the Existing Plan, which was approved by our stockholders on May 18, 2011.

Compensation Elements: 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 regular employees, including our named executive officers, receive dividends on unvested RSUs and are entitled to a Company match of employee contributions to our 401(k) plan.

 

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Compensation Elements: Perquisites

The Compensation Committee provides only limited perquisites to our executive officers. In fiscal 2016, those perquisites consisted of executive physicals, spousal travel and legal costs associated with the amendment of employment agreements.

The Compensation Setting Process

Tally Sheets

The Compensation Committee reviews tally sheets for the named executive officers at least annually. These tally sheets set forth all components of compensation, a summary of the equity granted to each named executive officer since our initial public offering in April 2010 (the “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 from the Company under various scenarios. The Compensation Committee uses the tally sheet information as a basis for understanding the potential impact of recommended changes to the elements of our executive compensation program and to evaluate the degree by which unvested shares held by a named executive officer encouraged retention.

Insurance Survey

The Compensation Committee annually reviews an aggregated insurance industry compensation survey that shows compensation levels for insurance companies of various sizes.

Use of a Peer Group

The Compensation Committee reviews executive compensation at peer companies as part of its process of evaluating and setting compensation for members of our Executive Team. The Compensation Committee does not seek to benchmark or set compensation at any specific level relative to the peer data. Instead, the Compensation Committee uses 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), with a similar business model (target customer, independent sales force and profitability) and similar size (revenue and market capitalization) as well as the marketplace for certain skills needed by our executives (direct marketing). 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, and it enables the Compensation Committee to make judgments based on the type of business in which the Company is engaged. Because of the unique nature of our business model, not all selected peer companies fit all identified criteria. The peer group for fiscal 2016 executive compensation was unchanged from that used in fiscal 2015 except that StanCorp Financial Group Inc. (Life and Health Insurance) and Symetra Financial Corporation (Life and Health Insurance) were removed after they were sold in 2016.

 

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Compensation Peer Group

 

Life and Health Insurance    Investment Banking and
Brokerage
   Asset Management and
Custody Banks
   Direct Marketing
American Equity Investment Life Holding Co.    LPL Financial Holdings Inc.    Ameriprise Financial,
Inc.
   Nu Skin Enterprises
Inc.
FBL Financial Group Inc.    Raymond James Financial, Inc.    Eaton Vance Corp.    Tupperware Brands
Corporation
Torchmark Corporation    Stifel Financial Corp.    Waddell & Reed
Financial, Inc.
    
     TD Ameritrade Holding Corporation          

 

In fiscal 2016, the Compensation Committee completed a peer group compensation analysis based on individual executive comparisons. The Compensation Committee considered these analyses and findings as part of its overall decision-making process regarding fiscal 2016 executive compensation.

Compensation Consultant

The Compensation Committee retained Pearl Meyer as its independent compensation consultant for fiscal 2016. 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 accordance with the requirements of Item 407(e)(3)(iv) of Regulation S-K, the Company has affirmatively determined that no conflicts of interest exist between the Company and Pearl Meyer (or any individuals working on the Company’s account on Pearl Meyer’s behalf). In reaching such determination, the Company considered the following enumerated factors, all of which were attested to or affirmed by Pearl Meyer:

 

   

During fiscal 2016, Pearl Meyer provided no services to, and received no fees from, the Company other than in connection with the engagement;

 

   

The amount of fees paid or payable by the Company to Pearl Meyer in respect of the engagement represented (or are reasonably certain to represent) less than 0.5% of Pearl Meyer’s total revenue for fiscal 2016;

 

   

Pearl Meyer has adopted and put in place adequate policies and procedures designed to prevent conflicts of interest, which policies and procedures were provided to the Company;

 

   

There are no business or personal relationships between Pearl Meyer or any of the individuals on the team working with the Company, on the one hand, and any member of the Compensation Committee other than in respect of the engagement, on the other;

 

   

There are no business or personal relationships between Pearl Meyer or any of the individuals on the team working with the Company, on the one hand, and any executive officer of the Company other than in respect of the engagement, on the other; and

 

   

Neither Pearl Meyer nor any of the individuals on the team working with the Company owns our common stock.

 

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Management’s Role in Setting Executive Compensation

Our Chief Executive Officer participated in setting the compensation of our other Executive Team members for fiscal 2016 by providing detailed reports on personal performance and making recommendations to the Compensation Committee and he set the compensation for Mr. Kelly. Our named executive officers do not directly participate in determining their compensation, although they provide the Compensation Committee, and the Chief Executive Officer, as appropriate, with detailed reports on their personal achievements during the year. In making his recommendations, our Chief Executive Officer considered the individual’s performance and past contributions to the Company and the achievement of the Company’s strategic objectives, 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 recruited by a competitor, and market compensation data. With respect to our Executive Team members, the Compensation Committee discussed these recommendations with our Chief Executive Officer and in executive session with its independent compensation consultant.

Post-Employment 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 member of our Executive Team that provide for severance and, in some cases, change of control benefits if the officer’s employment terminates upon a qualifying event or circumstance, such as being terminated without cause or leaving employment for good reason. Additional information regarding the employment agreements is found under “— Employment Agreements with Executive Team Members” below, and a quantification of benefits that would have been received by our named executive officers had termination occurred on December 31, 2016 is found under “— Potential Payments and Other Benefits Upon Termination or Change of Control.”

The Compensation Committee believes that severance benefits are an important part of a competitive overall compensation arrangement for our Executive Team members and are consistent with the objective of attracting, motivating and retaining highly talented executives. The Compensation Committee also believes that such benefits will help to secure the continued employment and dedication of our Executive Team members, 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 termination of their employment. Finally, the Compensation Committee believes that post-employment non-disclosure, non-competition and non-solicitation covenants to which our Executive Team members have agreed in consideration for the Company providing these severance benefits are highly beneficial to the Company.

Compensation Policies

Compensation Clawbacks

The Existing Plan and the Amended Plan both provide 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 that would not have 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 Company will adopt a clawback policy as required by the SEC in a

 

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manner consistent with final rules expected to be adopted in connection with the Dodd-Frank Act.

Stock Ownership

Stock Ownership Guidelines

The Compensation Committee recognizes the critical role that executive stock ownership has in aligning the interests of management with those of our stockholders. As such, we maintain stock ownership guidelines under which our Executive Team members are required to acquire and hold our common stock in an amount representing a multiple of base salary. In determining compliance with these guidelines, stock ownership includes shares beneficially owned by the participant (or by immediate family members) as well as unvested RSUs. Until the ownership guidelines are satisfied, our Executive Team members are required to hold 75% of the net shares received under the Company’s equity-based incentive compensation program (after having shares withheld to satisfy taxes associated with the exercise of options and the vesting of restricted stock units). To monitor compliance with these guidelines, the Compensation Committee reviews the stock ownership of our Executive Team members at least annually. During 2016, the Compensation Committee amended the Company’s stock ownership guidelines to increase the ownership level required by our President to 3.5 times base salary.

Stock options and PSUs, which represent a significant portion of the annual equity award to members of our Executive Team, do not count towards satisfaction of the guidelines. The Committee believes that it is general industry practice to exclude stock options and PSUs from the calculation of stock ownership for purposes of the guidelines, since their dependency on stock price and/or future performance makes their realization, and the amount that may be realized, highly uncertain. Beginning in 2017, PSU awards will represent 50% of the equity award value. As a result, the current holdings reflected below do not represent the actual interests of our Executive Team members in our common stock.

The following table sets forth the minimum stock ownership requirements and current holdings as of March 1, 2017.

 

      Ownership
Guideline
(as a multiple
of base salary)
   Status as of
March 1, 2017

Glenn J. Williams

   5.0x    11.8x
           

Peter W. Schneider

   3.5x      7.5x
           

Alison S. Rand

   2.5x      8.1x
           

Gregory C. Pitts

   2.5x      5.8x
           

Hedging, Pledging and Insider Trading Policy

Our insider trading policy expressly bars ownership of financial instruments or participation in investment strategies that hedge the economic risk of owning our common stock. We also prohibit officers and directors from pledging Primerica securities as collateral for loans. In addition, we prohibit our officers, directors and employees from purchasing or selling Primerica securities while in possession of material, non-public information, or otherwise using such information for their personal benefit.

Pre-Set Trading Plans

Our executives and directors are permitted to enter into trading plans that are intended to comply with the requirements of Rule 10b5-1 of the Exchange Act so that they can prudently diversify their asset portfolios and exercise their stock options before their scheduled expiration dates. During fiscal 2016, three of our named executive officers were parties to Rule 10b5-1 trading plans that provided for the sale of shares at certain designated prices or on certain designated dates. The purpose of such plans was to enable our executive officers to recognize the value of their 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.

 

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Equity Awards to Sales Representatives

The Compensation Committee approves widespread performance-based grants to members of the sales force, who are independent contractors of the Company. The sales force awards are determined based on specific formulas that are intended to motivate performance. The following chart details all equity awards, including awards to our sales force, granted by the Compensation Committee in fiscal 2016.

 

Number of Equity

Awards

 

Type of Equity

Award

  Recipient Group

235,735

  RSUs   Sales Force

132,724

  RSUs   Management Employees, Other Than Named Executive Officers

71,834

  RSUs   Named Executive Officers

18,385

  PSUs   Executive Team Members

89,540

  Non-Qualified Stock Options   Executive Team Members

19,090(1)

  RSUs (or Deferred Stock Units in lieu thereof)   Board of Directors

 

(1) Excludes deferred stock units granted in lieu of cash payments or pursuant to dividend reinvestment.

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 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 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 Executive Team members;

 

   

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

 

   

Time-based and, with respect to Executive Team members, performance-based vesting conditions with respect to equity awards;

 

   

Clawback provisions in the Existing Plan and the Amended Plan; and

 

   

The 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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Compensation Committee Interlocks and Insider Participation

Each of Messrs. Mason and McCullough, Ms. Perez and Ms. Yastine has served as a member of the Compensation Committee during all of fiscal 2016. 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 Committee Report1

The Compensation Committee participated in the preparation of the CD&A and reviewed and discussed successive drafts with management. Following completion of this process, the Compensation Committee recommended to our Board of Directors that the CD&A be included in the Annual Report on Form 10-K for fiscal 2016 (the “2016 Annual Report”) and this Proxy Statement.

COMPENSATION COMMITTEE:

Barbara A. Yastine, Chair

Mark Mason

Robert F. McCullough

Beatriz R. Perez

 

(1) The material in the 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, 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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Compensation Tables

Summary Compensation Table

 

The following table describes total compensation earned during fiscal 2016, fiscal 2015 and the year ended December 31, 2014 (“fiscal 2014”) 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)  

Glenn J. Williams

    2016     $ 750,000       —       $ 1,399,965 (1)    $ 411,674 (2)    $ 1,977,000 (3)    $ 2,893 (4)    $ 45,963 (5)    $ 4,587,495  

Chief Executive Officer

    2015     $ 700,000       —       $ 517,452 (6)    $ 214,149 (7)    $ 1,828,500 (8)    $ 3,131 (4)    $ 40,529     $ 3,303,761  
      2014     $ 550,000       —       $ 492,546 (9)    $ 299,844 (10)    $ 648,600 (11)    $ 3,348 (4)    $ 51,320     $ 2,045,658  

Peter W. Schneider

    2016     $ 550,000       —       $ 807,488 (1)    $ 124,973 (2)    $ 1,120,300 (3)    $ 3,681 (4)    $ 35,326 (5)    $ 2,641,768  

President

    2015     $ 525,000       —       $ 517,452 (6)    $ 107,069 (7)    $ 853,300 (8)    $ 3,776 (4)    $ 34,359     $ 2,040,956  
      2014     $ 450,000       —       $ 483,564 (9)    $ 147,182 (10)    $ 648,600 (11)    $ 4,176 (4)    $ 27,859     $ 1,761,381  

Alison S. Rand

    2016     $ 500,000       —       $ 604,455 (1)    $ 103,208 (2)    $ 527,200 (3)      —       $ 30,468 (5)    $ 1,765,331  

Executive Vice President and
Chief Financial Officer

    2015     $ 487,500       —       $ 421,634 (6)    $ 95,180 (7)    $ 487,600 (8)      —       $ 30,283     $ 1,522,197  
    2014     $ 450,000       —       $ 379,328 (9)    $ 125,952 (10)    $ 324,300 (11)      —       $ 27,381     $ 1,306,961  

Gregory C. Pitts

    2016     $ 500,000       —       $ 557,967 (1)    $ 95,269 (2)    $ 527,200 (3)      —       $ 29,559 (5)    $ 1,709,995  

Executive Vice President and
Chief Operating Officer

    2015     $ 487,500       —       $ 421,634 (6)    $ 95,180 (7)    $ 487,600 (8)      —       $ 28,210     $ 1,520,124  
    2014     $ 450,000       —       $ 379,328 (9)    $ 125,952 (10)    $ 324,300 (11)      —       $ 28,006     $ 1,307,586  

William A. Kelly

    2016     $ 450,000       $ 408,498 (1)      —       $ 426,904 (3)      —       $ 25,745 (5)    $ 1,311,147  

President, PFS Investments

    2015     $ 428,708     $ 25,000 (12)    $ 285,048 (6)      —       $ 408,527 (8)      —       $ 23,302     $ 1,170,585  
      2014     $ 362,160       —       $ 248,807 (9)      —       $ 285,091 (11)      —       $ 4,561     $ 900,619  

 

(1) Represents time-based RSUs and PSUs granted in February 2016 for performance in fiscal 2015. For the valuation assumptions underlying the awards, see the Company’s audited financial statements for fiscal 2016 included in the 2016 Annual Report.
(2) Represents time-based non-qualified stock options granted in February 2016 for performance in fiscal 2015. For the valuation assumptions underlying the awards, see the Company’s audited financial statements for fiscal 2016 included in the 2016 Annual Report.
(3) Represents incentive awards paid in cash in March 2017 for performance in fiscal 2016.
(4) Represents the positive changes in the present value of the pension benefits for each named executive officer under The Citigroup Pension Plan and The Travelers Retirement Benefits Equalization Plan (the “Travelers Nonqualified 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.

 

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(5) Perquisites and personal benefits included executive healthcare benefits and spousal travel, neither of which exceeded the greater of $25,000 or 10% of the total. All Other Compensation also includes dividends paid on unvested equity awards and the 401(k) plan matching contribution for the 2016 plan year as set forth below:

 

Name    Dividends on
Unvested
Equity Awards
     401(k)
Match
 

Glenn J. Williams

   $ 22,372       $ 13,250   

Peter W. Schneider

   $ 17,089       $ 13,250   

Alison S. Rand

   $ 13,293       $ 13,250   

Gregory C. Pitts

   $ 12,813       $ 13,250   

William A. Kelly

   $ 10,126       $ 13,250   
(6) Represents time-based RSUs granted in February 2015 for performance in fiscal 2014. For the valuation assumptions underlying the awards, see the Company’s audited financial statements for fiscal 2015 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 (“2015 Annual Report”).
(7) Represents time-based non-qualified stock options granted in February 2015 for performance in fiscal 2014. For the valuation assumptions underlying the awards, see the Company’s audited financial statements for fiscal 2015 included in the 2015 Annual Report.
(8) Represents incentive awards paid in cash in March 2016 for performance in fiscal 2015.
(9) Represents time-based RSUs granted in February 2014 for performance in fiscal 2013. For the valuation assumptions underlying the awards, see the Company’s audited financial statements for fiscal 2014 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014 (the “2014 Annual Report”).
(10) Represents time-based non-qualified stock options granted in February 2013 for performance in fiscal 2012. For the valuation assumptions underlying the awards, see the Company’s audited financial statements for fiscal 2013 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.
(11) Represents incentive awards paid in cash in March 2015 for performance in fiscal 2014.
(12) Mr. Kelly was awarded a discretionary bonus for his work preparing the business to make adjustments as a result of the fiduciary rule that during fiscal 2015 was expected to be finalized by the Department of Labor in 2016.

 

Salary (Column C)

Reflects base salary earned by our named executive officers.

Bonus (Column D)

Primerica did not award any non-incentive cash compensation (other than salary) to our named executive officers in fiscal 2016, fiscal 2015 or fiscal 2014, except that in fiscal 2015 Mr. Kelly was awarded a discretionary cash award for his work preparing the business to make adjustments as a result of the Department of Labor’s fiduciary duty rule.

 

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. We are required by the SEC to disclose this amount; it is not the value that the Compensation Committee considered when they determined the size of the awards. 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 2016 awards are included in the “Fiscal 2016 Grant of Plan-Based Awards Table”. All time-based RSUs are scheduled to vest in equal annual installments over three years.

 

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Option Awards (Column F)

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. We are required by the SEC to disclose this amount; it is not the value that the Compensation Committee considered when they determined the size of the awards. All stock options are scheduled to vest in equal annual installments over three years.

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 Existing Plan based on corporate and personal performance during fiscal 2016, fiscal 2015 and fiscal 2014; and (ii) were approved by the Compensation Committee (or, for Mr. Kelly, our Chief Executive Officer) in February 2017, February 2016 and February 2015, 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, which the executives participated in prior to the IPO. 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.

 

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Fiscal 2016 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 2016. Each of the incentive awards granted by Primerica during fiscal 2016 and reported in the below table was granted under, and is subject to the terms of, the Existing Plan. Awards granted under the Existing Plan are transferable only 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.

 

    Grant
Date
  Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards (1)
    Estimated Future Payouts Under
Equity Incentive
Plan Awards (2)
    Maximum
Based

on 162(m)
Bonus

Pool (3)
    All
Other
Stock
Awards:
Number
of
Shares
of

Stock
or Units
(#) (4)
    All
Other
Option
Awards:
Number of
Securities
Underlying
Options
(#) (5)
    Exercise
of Base
Price of
Option
Awards
($/Sh)
    Grant
Date
Fair
Value
of Stock
and

Option
Awards
 
Name     Threshold
($)
   

Target

($)

    Maximum
($)
    Threshold
(#)
   

Target

(#)

    Maximum
(#)
           
(A)   (B)   (C)     (D)     (E)     (F)     (G)     (H)     (I)     (J)     (K)     (L)     (M)  

Glenn J. Williams

                       

• Short-Term Incentive Plan

• PSUs

• Time-Based RSUs

• Stock Options

  (6)     N/A     $ 1,500,000     $ 3,000,000           $ 8,337,700          
  02/24/16           4,178       8,357       12,535             $ 349,991  
  02/24/16                   25,071         $ 1,049,973  
  02/24/16                                                                     50,143     $ 41.88     $ 411,674  

Peter W. Schneider

                       

• Short-Term Incentive Plan

• PSUs

• Time-Based RSUs

• Stock Options

  (6)     N/A     $ 850,000     $ 1,700,000           $ 5,002,620          
  02/24/16           2,029       4,059       6,088             $ 169,991  
  02/24/16                   15,222         $ 637,497  
  02/24/16                                                                     15,222     $ 41.88     $ 124,973  

Alison S. Rand

                       

• Short-Term Incentive Plan

• PSUs

• Time-Based RSUs

• Stock Options

  (6)     N/A     $ 400,000     $ 800,000           $ 5,002,620          
  02/24/16           1,552       3,104       4,656             $ 129,996  
  02/24/16                   11,329         $ 474,459  
  02/24/16                                                                     12,571     $ 41.88     $ 103,208  

Gregory C. Pitts

                       

• Short-Term Incentive Plan

• PSUs

• Time-Based RSUs

• Stock Options

  (6)     N/A     $ 400,000     $ 800,000           $ 5,002,620          
  02/24/16           1,432       2,865       4,297             $ 119,986  
  02/24/16                   10,458         $ 437,981  
  02/24/16                                                                     11,604     $ 41.88     $ 95,269  

William A. Kelly

  (6)     N/A     $ 337,500     $ 576,281       N/A     $ 337,500     $ 576,281       N/A          

• Time Based RSUs

  02/24/16                   9,754         $ 408,498  
                                                                                             

 

(1) Represents cash incentive award amounts for each named executive officer for performance in fiscal 2016, which were paid in March 2017.
(2) For members of our Executive Team, represents PSUs that will be paid out in 2019 based on the Company’s ROAE for the performance period of 2016 through 2018. For Mr. Kelly, represents RSUs awarded in February 2017 for performance in fiscal 2016.
(3) Represents a designated percentage of operating income before income taxes for fiscal 2016, which was equal to $333.5 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. The maximum permissible award was determined in the aggregate only and it is not broken down between the cash and equity components.
(4) Represents time-based RSUs granted under the incentive compensation plan in February 2016 for performance in fiscal 2015. The right to receive these shares was disclosed as an estimated future payout in the 2016 proxy statement.
(5) Represents time-based non-qualified stock options granted under the incentive compensation plan in February 2016 for performance in fiscal 2015. The right to receive these options was disclosed as an estimated future payout in the 2016 proxy statement.
(6) The Compensation Committee approved the 2016 incentive compensation program on February 23, 2016. Grants under the program were made on February 16, 2017.

 

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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 under the Existing Plan during fiscal 2016 based upon the achievement of performance goals. The threshold and target levels for our Chief Executive Officer represent 100% and 200% of annual base salary, respectively. For our other Executive Team members, these amounts are set annually by the Compensation Committee and for Mr. Kelly these amounts are set annually by the Chief Executive Officer. Although the maximum permissible incentive compensation award was equal to a designated percentage of operating income before income taxes for our Executive Team members (see Column I), the Compensation Committee determined the actual cash award based on the achievement of corporate performance objectives. The 2016 incentive program for our Executive Team members provided for a maximum payout of 200% of target. For Mr. Kelly, the incentive program provides for a maximum payout of 200% of target for corporate performance and 135% of target for individual performance. The annual cash incentive compensation earned in fiscal 2016 by our Executive Team members was approved by the Compensation Committee in February 2017 and paid in March 2017. These amounts are reflected in column (G) of the “Summary Compensation Table”.

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

For our Executive Team members, these amounts reflect the PSUs that were awarded in February 2016. Shares of common stock underlying those awards will be delivered in March 2019 only if pre-established performance goals are satisfied over the three year performance period of 2016 through 2018. The number of shares of common stock ultimately delivered will range from 50% to 150% of the number of PSUs, depending on performance. For Mr. Kelly, the incentive award is paid 50% in cash and 50% in equity so these amounts are identical to those disclosed under Columns C, D and E.

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

The overall maximum incentive award for each Executive Team member, 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 time-based RSUs granted in February 2016 for fiscal 2015 performance. The restrictions on these RSUs lapse in equal installments on March 1 of each of the subsequent three years. Further, the restrictions on the RSUs lapse automatically upon the death of the grantee and upon the retirement of any employee so long as he or she is at least 55 years of age and his or her age plus years of service equals at least 75. Upon disability of the grantee, the RSU 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 RSUs do not have the right to vote or dispose of their RSUs, but the awards do receive dividend equivalents.

All Other Option Awards (Column K)

This column represents stock options granted in February 2016 for fiscal 2015 performance. The restrictions on all non-qualified stock options lapse in equal installments on March 1 of the subsequent three years. Further, the restrictions on the options lapse automatically upon the death of the grantee and upon the retirement of any employee so long as he or she is at least 55 years of age and his or her age plus years of service equals at least 75. Upon disability of the grantee, the options continue to vest for

 

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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.

Exercise or Base Price of Option Awards (Column L)

The exercise price is equal to the closing price of our common stock on the trading day immediately preceding the grant date.

Grant Date Fair Value of Stock and Option Awards (Column M)

The grant date fair value of RSUs in this table is equal to the number of time-based RSUs awarded multiplied by the closing price of our common stock on the trading day immediately preceding the grant date. The grant date fair value of stock options in the table was estimated on the date of grant using the Black-Scholes option-pricing model. All inputs into the Black-Scholes model were estimates made at the time of grant and determined in accordance with the guidance prescribed by Accounting Standards Codification paragraphs 718-55-21 through 718-55-26.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth information regarding Primerica equity awards outstanding as of December 31, 2016, based on the closing price of our common stock on that date of $69.15 per share.

 

          Option Awards     Stock Awards  
          Number of Securities
Underlying Unexercised
Options (#)
    Option
Exercise
Price

($)
    Option
Expiration
Date
    Number of
Shares or

Units of
Stock That

Have Not
Vested (#)
    Market
Value of

Shares or
Units of

Stock That
Have Not

Vested ($)
    Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,

Units or
Other

Rights That
Have Not
Vested (#)
    Equity
Incentive
Plan Awards:
Market or

Payout
Value of

Unearned
Shares,

Units or
Other
Rights That
Have Not

Vested ($)
 
               
               
               
               
               
Name   Grant Date     Exercisable     Unexercisable              

Glenn J. Williams

    02/11/14       —         7,971 (1)    $ 41.20       2/11/2024       3,985 (1)    $ 275,563       —         —    
    02/23/15       —         12,897 (2)    $ 53.50       2/23/2025       6,448 (2)    $ 445,879       —         —    
    02/24/16       —         50,143 (3)    $ 41.88       2/24/2026       25,071 (3)    $ 1,733,660       8,357 (4)    $ 577,887 (5) 
           

 

 

   

 

 

   

 

 

   

 

 

 
                                              35,504     $ 2,455,102       8,357     $ 577,887  

Peter W. Schneider

    02/11/14       —         3,913 (1)    $ 41.20       2/11/2024       3,913 (1)    $ 270,584       —         —    
    02/23/15       3,224       6,448 (2)    $ 53.50       2/23/2025       6,448 (2)    $ 445,879       —         —    
    02/24/16       —         15,222 (3)    $ 41.88       2/24/2026       15,222 (3)    $ 1,052,601       4,059 (4)    $ 280,680 (5) 
           

 

 

   

 

 

   

 

 

   

 

 

 
                                              25,583     $ 1,769,064       4,059     $ 280,680  

Alison S. Rand

    02/11/14       —         3,348 (1)    $ 41.20       2/11/2024       3,069 (1)    $ 212,221       —         —    
    02/23/15       —         5,732 (2)    $ 53.50       2/23/2025       5,254 (2)    $ 363,314       —         —    
    02/24/16       —         12,571 (3)    $ 41.88       2/24/2026       11,329 (3)    $ 783,400       3,104 (4)    $ 214,642 (5) 
           

 

 

   

 

 

   

 

 

   

 

 

 
                                              19,652     $ 1,358,935       3,104     $ 214,642  

Gregory C. Pitts

    02/11/14       —         3,348 (1)    $ 41.20       2/11/2024       3,069 (1)    $ 212,221       —         —    
    02/23/15       2,866       5,732 (2)    $ 53.50       2/23/2025       5,254 (2)    $ 363,314       —         —    
    02/24/16         11,604 (3)    $ 41.88       2/24/2026       10,458 (3)    $ 723,171       2,865 (4)    $ 198,115 (5) 
           

 

 

   

 

 

   

 

 

   

 

 

 
                                              18,781     $ 1,298,706       2,865     $ 198,115  

William A. Kelly

    02/11/14       —         —         —         —         2,013 (1)    $ 139,199       —         —    
    02/23/15       —         —         —         —         3,552 (2)    $ 245,621       —         —    
    02/24/16       —         —         —         —         9,754 (3)    $ 674,489       —         —    
           

 

 

   

 

 

     
                                              15,319     $ 1,059,309                  

 

(1) Scheduled to vest on March 1, 2017.
(2) Scheduled to vest in equal installments on March 1, 2017, and March 1, 2018, and automatically vests on the date that a recipient retires from the Company so long as he or she is at least 55 years of age and his or her age plus years of service equals at least 75.

 

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(3) Scheduled to vest in equal annual installments on March 1, 2017, March 1, 2018 and March 1, 2019, and automatically vests on the date that a recipient retires from the Company so long as he or she is at least 55 years of age and his or her age plus years of service equals at least 75.
(4) Represents PSUs that vest at the end of the three year performance period of January 1, 2016 through December 31, 2018. The number of shares of common stock earned will be between 0 and 150% of the number of PSUs awarded.
(5) Assumes shares of common stock are earned based on target performance.

 

Fiscal 2016 Option Exercises and Stock Vested Table

This table shows options that were exercised during fiscal 2016 as well as RSUs held by our named executive officers for which restrictions lapsed during fiscal 2016. 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.

 

     Option Awards          Stock Awards  
Name   

Number of

Shares

Acquired on
Exercise (#)

         Realized on
Exercise ($)  (1)
         Number of
Shares Acquired
on Vesting (#) (2)
         Value Realized
on Vesting ($) (3)
 

Glenn J. Williams

     37,094          $ 914,337            10,477          $ 442,025  

Peter W. Schneider

     22,530          $ 620,630            10,404          $ 438,945  

Alison S. Rand

     10,572          $ 151,477            8,601          $ 362,876  

Gregory C. Pitts

     10,894          $ 231,204            8,495          $ 358,404  

William A. Kelly

     —            —            6,242          $ 263,350  

 

(1) Represents the number of options exercised multiplied by the difference between the market price of the underlying securities at exercise and the option exercise price.
(2) Includes shares that were withheld for the payment of taxes due upon the vesting of the restricted stock awards.
(3) Represents the number of shares of our common stock acquired on March 1, 2016 multiplied by the closing stock price of our common stock of $42.19 on the next trading day prior to those dates.

 

Pension Plan Table

The following table sets forth information for each of our named executive officers who participates in a 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. The named executive officers who are not listed did not participate in the Citigroup plans in fiscal 2016.

 

Name    Plan Name     

Number of

Years Credited

Service (#)

    

Present Value of

Accumulated

Benefit ($) (1)

    

Payments

During Last

Fiscal Year ($)

 

Glenn J. Williams

     The Citigroup Pension Plan        8.00      $ 72,594      $
       Travelers Nonqualified Plan        2.00      $ 6,400      $

Peter W. Schneider

     The Citigroup Pension Plan        7.50      $ 85,263      $
       Travelers Nonqualified Plan        1.50      $ 12,661      $

 

(1) The material assumptions used in determining the present value of the plan benefits are (a) a discount rate of 4.10% for the Citigroup Pension Plan and 4.00% for the Travelers Nonqualified Plan, and (b) an interest credit rate on cash balance plan benefits of 3.10%.

 

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The Citigroup Pension Plan