Exhibit 99.2
 
 
 
 
 
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Supplemental Financial Information
Second Quarter 2012
 
 
 
 
 
 
 
 
 

 
 
 
Table of Contents
PRIMERICA, INC.
Financial Supplement
 
 
 
Page
   
Preface, definition of Non-GAAP financial measures  
3
   
Condensed balance sheets and reconciliation of balance sheet non-GAAP to GAAP financial measures
4
   
Financial results and other statistical data  
5
   
Statements of income  
6
   
Reconciliation of statement of income non-GAAP to GAAP financial measures
7
   
Segment operating results  
8
        Term Life Insurance segment - financial results, key statistics, and financial analysis  
9-10
        Investment and Savings Products segment - financial results, key statistics, and financial analysis  
11
   
Investment portfolio  
12-14
   
Five-year historical key statistics  
15
 
 
This document may contain forward-looking statements and information.  Additional information and factors that could cause actual results to differ materially from any forward-looking statements or information in this document is available in our Form 10-K for the year ended December 31, 2011, as modified and updated by the Form 8-K filed on May 8, 2012 as well as the Form 10-Q for the quarter ended March 31, 2012.
 
 
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Preface
PRIMERICA, INC.
Financial Supplement
 
SECOND QUARTER 2012
 
This document is a financial supplement to our second quarter 2012 earnings release.  It is designed to enable comprehensive analysis of our ongoing business using the same core metrics that our management utilizes in assessing our business and making strategic and operational decisions.  Throughout this document we provide financial information that is derived from our U.S. GAAP financial statements and adjusted for two different purposes, as follows:

  
Operating adjustments exclude the expense associated with equity awards granted in connection with our initial public offering (“IPO”) and the impact of realized investment gains and losses.  For periods which include the first quarter of 2011, operating adjustments exclude the impact of certain reinsurance recoveries which previously had not been recognized due to the uncertain nature of their recovery.

  
Adjusted when used in describing stockholders’ equity refers to the removal of the impact of net unrealized gains and losses on invested assets.

Management utilizes certain non-GAAP financial measures in managing the business and believes they present relevant and meaningful analytical metrics for evaluating the ongoing business.  Reconciliations of non-GAAP to GAAP financial measures are included in this financial supplement.

Effective January 1, 2012, we adopted ASU 2010-26 Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts and no longer defer certain indirect acquisition costs or costs attributable to unsuccessful efforts of acquiring life insurance policies.  We adopted this accounting policy change retrospectively and, accordingly, our historical results have been adjusted to reflect all results on a consistent basis across all periods presented.  See the table below for the impact on key metrics.

During the first quarter 2012, we closed a redundant reserve financing transaction. In connection with this transaction, we formed Peach Re, Inc. (Peach Re), a special purpose financial captive insurance company and indirect wholly owned subsidiary of the company.  In March 2012, Peach Re entered into a letter of credit facility with Deutsche Bank AG New York Branch with a term of approximately 14 years for a maximum amount of $510 million to support certain of its obligations for a portion of the reserves (commonly referred to as Regulation XXX reserves) related to level premium term life insurance policies ceded to Peach Re by Primerica Life under a new coinsurance agreement.  In connection with this transaction, Primerica Life Insurance Company (PLIC) obtained regulatory approval for the March 2012 payment of an extraordinary dividend of $150 million to Primerica, Inc.

Certain items throughout this supplement may not add due to rounding and as such, may not agree to other public reporting of the respective item.  Certain items throughout this supplement are noted as ‘na’ to indicate not applicable.  Certain variances are noted as ‘nm’ to indicate not meaningful.  Certain reclassifications have been made to prior-period amounts to conform to current-period reporting classifications. These reclassifications had no impact on net income or total stockholders’ equity.

 
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Condensed Balance Sheets and Reconciliation of Balance Sheet Non-GAAP to GAAP Financial Measures
PRIMERICA, INC.
Financial Supplement
 
(Dollars in thousands)
 
Mar 31,
2011
   
Jun 30,
2011
   
Sep 30,
2011
   
Dec 31,
2011
   
Mar 31,
2012
   
Jun 30,
2012
 
Condensed Balance Sheets
                                   
Assets:
                                   
 
Investments and cash
  $ 2,330,098     $ 2,297,013     $ 2,319,873     $ 2,157,582     $ 2,167,231     $ 2,016,842  
 
Due from reinsurers
    3,769,599        3,793,995        3,818,759        3,855,318        3,895,162        3,903,028   
 
Deferred policy acquisition costs
    786,055        833,784        864,623        904,485        948,087        990,558   
 
Other assets
    582,079        567,482        586,647        525,836        522,123        540,010   
 
Separate account assets
    2,582,881        2,544,429        2,276,705        2,408,598        2,541,313        2,500,640   
 
Total assets
  $ 10,050,712     $ 10,036,703     $ 9,866,607     $ 9,851,820     $ 10,073,917     $ 9,951,077  
                                                   
Liabilities:
                                               
 
Future policy benefits
  $ 4,470,185     $ 4,532,615     $ 4,557,535     $ 4,614,860     $ 4,676,374     $ 4,723,359  
 
Other policy liabilities
    604,487        588,202        589,826        589,542        606,793        593,956   
 
Income taxes
    100,666        84,859        87,950        81,316        88,503        82,755   
 
Other liabilities
    396,195        363,181        389,319        381,495        331,112        329,539   
 
Note payable
    300,000        300,000        300,000        300,000        300,000        300,000   
 
Payable under securities lending
    186,089        163,342        185,483        149,358        142,507        143,963   
 
Separate account liabilities
    2,582,881        2,544,429        2,276,705        2,408,598        2,541,313        2,500,640   
 
Total liabilities
    8,640,502        8,576,628        8,386,817        8,525,169        8,686,602        8,674,211   
Stockholders’ equity:
                                               
 
Common stock ($0.01 par value) (1)
    732        736        737        649        653        599   
 
Paid-in capital
    1,016,973        1,021,338        1,026,265        835,232        842,613        693,717   
 
Retained earnings
    240,739        276,089        308,912        344,104        383,847        426,936   
 
Treasury stock
                                   
 
Accumulated other comprehensive income (loss), net:
                                               
 
Net unrealized investment gains (losses) not other-than-temporarily impaired
    96,542        105,646        99,257        97,082        107,598        107,187   
 
Net unrealized investment losses other-than-temporarily impaired
    (2,275 )       (2,275 )       (2,363 )       (1,665 )       (1,981 )       (2,031 )
 
Cumulative translation adjustment
    57,498        58,541        46,982        51,248        54,584        50,457   
 
Total stockholders’ equity
    1,410,210        1,460,076        1,479,790        1,326,650        1,387,314        1,276,866   
 
Total liabilities and stockholders' equity
  $ 10,050,712     $ 10,036,703     $ 9,866,607     $ 9,851,820     $ 10,073,917     $ 9,951,077  
                                                   
Reconciliation of Adjusted Stockholders' Equity to Total
Stockholders' Equity
                                     
Adjusted stockholders' equity
  $ 1,315,943     $ 1,356,704     $ 1,382,895     $ 1,231,233     $ 1,281,697     $ 1,171,709  
Reconciling items:
                                               
 
Net unrealized investment gains (losses) not other-than-temporarily impaired
    96,542        105,646        99,257        97,082        107,598        107,187   
 
Net unrealized investment losses other-than-temporarily impaired
    (2,275 )       (2,275 )       (2,363 )       (1,665 )       (1,981 )       (2,031 )
 
Total reconciling items
    94,268        103,372        96,894        95,417        105,617        105,156   
 
Total stockholders’ equity
  $ 1,410,210     $ 1,460,076     $ 1,479,790     $ 1,326,650     $ 1,387,314     $ 1,276,866  
                                                   
Deferred Policy Acquisition Costs Rollforward
                                               
Balance, beginning of period
  $ 738,946     $ 786,055     $ 833,784     $ 864,623     $ 904,485     $ 948,087  
 
General expenses deferred
    7,381        8,410        7,625        7,754        7,003        7,492   
 
Commission costs deferred
    56,822        62,091        61,785        58,793        60,116        66,540   
 
Amortization of deferred policy acquisition costs
    (23,229 )       (23,975 )       (26,645 )       (30,185 )       (26,531 )       (28,205 )
 
Foreign currency impact and other, net
    6,135        1,203        (11,927 )     3,501        3,015        (3,356 )
Balance, end of period
  $ 786,055     $ 833,784     $ 864,623     $ 904,485     $ 948,087     $ 990,558  
 

(1)
Outstanding common shares exclude restricted stock units.
 
 
 
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Financial Results and Other Statistical Data
PRIMERICA, INC.
Financial Supplement
 
(Dollars in thousands, except per-share data)
    Q1 2011       Q2 2011       Q3 2011       Q4 2011       Q1 2012       Q2 2012      YOY Q2                  YOY YTD
 
Change
   
%
Change
   
YTD
2011
   
YTD
2012
   
$
Change
   
%
Change
 
Earnings per Share
                                                                                 
Basic earnings per share:
                                                                                   
Weighted-average common shares and fully vested equity awards
    72,671,481       73,457,333       73,658,253       69,366,432       65,133,035       61,530,879       (11,926,454 )      -16.2 %     73,066,578       63,331,957       (9,734,621 )      -13.3 %
                                                                                                 
Net income
  $ 47,272     $ 37,620     $ 35,096     $ 37,204     $ 41,756     $ 46,179     $ 8,559       22.8 %   $ 84,892     $ 87,936     $ 3,044       3.6 %
Less income attributable to unvested participating securities
    (1,895 )       (1,097 )       (988 )       (1,111 )       (1,357 )       (1,110 )       (13 )       -1.2 %     (2,837 )       (2,498 )       339       12.0 %
Net income used in computing basic EPS
  $ 45,377     $ 36,523     $ 34,108     $ 36,094     $ 40,400     $ 45,069     $ 8,546       23.4 %   $ 82,055     $ 85,438     $ 3,383       4.1 %
Basic earnings per share
  $ 0.62     $ 0.50     $ 0.46     $ 0.52     $ 0.62     $ 0.73     $ 0.24       47.3 %   $ 1.12     $ 1.35     $ 0.23       20.1 %
                                                                                                 
Net operating income
  $ 43,441     $ 38,592     $ 37,301     $ 36,652     $ 42,377     $ 45,455     $ 6,863       17.8 %   $ 82,034     $ 87,832     $ 5,798       7.1 %
Less operating income attributable to unvested participating securities
    (1,741 )       (1,126 )       (1,051 )       (1,094 )       (1,377 )       (1,093 )       33        2.9 %     (2,741 )       (2,495 )       246        9.0 %
Net operating income used in computing basic operating EPS
  $ 41,700     $ 37,467     $ 36,250     $ 35,558     $ 41,000     $ 44,362     $ 6,896       18.4 %   $ 79,293     $ 85,337     $ 6,045       7.6 %
Basic operating income per share
  $ 0.57     $ 0.51     $ 0.49     $ 0.51     $ 0.63     $ 0.72     $ 0.21       41.4 %   $ 1.09     $ 1.35     $ 0.26       24.2 %
                                                                                                 
Diluted earnings per share:
                                                                                               
Weighted-average common shares and fully vested equity awards
    72,671,481       73,457,333       73,658,253       69,366,432       65,133,035       61,530,879       (11,926,454 )      -16.2 %     73,066,578       63,331,957       (9,734,621 )      -13.3 %
Dilutive impact of warrants
    1,154,597       743,814       541,184       802,787       1,141,687       1,155,701       411,887       55.4 %     960,944       1,148,767       187,823        19.5 %
Shares used to calculate diluted EPS
    73,826,078       74,201,147       74,199,437       70,169,219       66,274,722       62,686,580       (11,514,567 )      -15.5 %     74,027,522       64,480,724       (9,546,798 )      -12.9 %
                                                                                                 
Net income
  $ 47,272     $ 37,620     $ 35,096     $ 37,204     $ 41,756     $ 46,179     $ 8,559       22.8 %   $ 84,892     $ 87,936     $ 3,044       3.6 %
Less income attributable to unvested participating securities
    (1,867 )       (1,087 )       (982 )       (1,099 )       (1,335 )       (1,092 )       (4 )       -0.4 %     (2,802 )       (2,457 )       346       12.3 %
Net income used in computing diluted EPS
  $ 45,405     $ 36,533     $ 34,115     $ 36,105     $ 40,421     $ 45,088     $ 8,555       23.4 %   $ 82,090     $ 85,479     $ 3,389       4.1 %
Diluted earnings per share
  $ 0.62     $ 0.49     $ 0.46     $ 0.51     $ 0.61     $ 0.72     $ 0.23       46.1 %   $ 1.11     $ 1.33     $ 0.22       19.5 %
                                                                                                 
Net operating income
  $ 43,441     $ 38,592     $ 37,301     $ 36,652     $ 42,377     $ 45,455     $ 6,863       17.8 %   $ 82,034     $ 87,832     $ 5,798       7.1 %
Less operating income attributable to unvested participating securities
    (1,715 )       (1,115 )       (1,044 )       (1,083 )       (1,355 )       (1,074 )       41        3.7 %     (2,708 )       (2,454 )       254        9.4 %
Net operating income used in computing diluted operating EPS
  $ 41,726     $ 37,477     $ 36,257     $ 35,570     $ 41,022     $ 44,381     $ 6,904       18.4 %   $ 79,326     $ 85,378     $ 6,052       7.6 %
Diluted operating income per share
  $ 0.57     $ 0.51     $ 0.49     $ 0.51     $ 0.62     $ 0.71     $ 0.20       40.2 %   $ 1.07     $ 1.32     $ 0.25       23.6 %
                                                                                                 
                                                                                                 
                                                                                                 
      Q1 2011       Q2 2011       Q3 2011       Q4 2011       Q1 2012       Q2 2012    
YOY Q2
                   
YOY YTD
 
   
Change
   
%
Change
   
YTD
2011
   
YTD
2012
   
$
Change
   
%
Change
 
Annualized Return on Equity
                                                                                             
Average stockholders' equity
  $ 1,383,369     $ 1,435,143     $ 1,469,933     $ 1,403,220     $ 1,356,982     $ 1,332,090     $ (103,053 )       -7.2 %   $ 1,409,256     $ 1,344,536     $ (64,720 )       -4.6 %
Average adjusted stockholders' equity
  $ 1,288,212     $ 1,336,324     $ 1,369,800     $ 1,307,064     $ 1,256,465     $ 1,226,703     $ (109,620 )       -8.2 %   $ 1,312,268     $ 1,241,584     $ (70,683 )       -5.4 %
                                                                                                 
Net income return on stockholders' equity
    13.7 %     10.5 %     9.6 %     10.6 %     12.3 %     13.9 %     3.4 %  
nm
      12.0 %     13.1 %     1.0 %  
nm
 
Net income return on adjusted stockholders' equity
    14.7 %     11.3 %     10.2 %     11.4 %     13.3 %     15.1 %     3.8 %  
nm
      12.9 %     14.2 %     1.2 %  
nm
 
                                                                                                 
Net operating income return on adjusted stockholders' equity
    13.5 %     11.6 %     10.9 %     11.2 %     13.5 %     14.8 %     3.3 %  
nm
      12.5 %     14.1 %     1.6 %  
nm
 
                                                                                                 
Capital Structure
                                                                                             
Debt-to-capital (1)
    17.5 %     17.0 %     16.9 %     18.4 %     17.8 %     19.0 %     2.0 %  
nm
      17.0 %     19.0 %     2.0 %  
nm
 
                                                                                                 
Cash and invested assets to stockholders' equity
    1.7 x     1.6 x     1.6 x     1.6 x     1.6 x     1.6 x     0.0 x  
nm
      1.6 x     1.6 x     0.0 x  
nm
 
Cash and invested assets to adjusted stockholders' equity
    1.8 x     1.7 x     1.7 x     1.8 x     1.7 x     1.7 x     0.0 x  
nm
      1.7 x     1.7 x     0.0 x  
nm
 
                                                                                                 
Share count, end of period (2)
    73,187,837       73,603,111       73,740,120        64,882,643        65,303,547       59,868,486        (13,734,625 )      -18.7 %     73,603,111        59,868,486        (13,734,625 )      -18.7 %
Adjusted stockholders' equity per share
  $ 17.98     $ 18.43     $ 18.75     $ 18.98     $ 19.63     $ 19.57     $ 1.14       6.2 %   $ 18.43     $ 19.57     $ 1.14       6.2 %
                                                                                                 
Financial Strength Ratings - Primerica Life Insurance Company
                                                                                             
Moody's
 
na
     A2      A2      A2      A2      A2    
nm
   
nm
   
nm
   
nm
   
nm
   
nm
 
S&P
 
AA-
   
AA-
   
AA-
   
AA-
   
AA-
   
AA-
   
nm
   
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nm
   
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A.M. Best
   A+      A+      A+      A+      A+      A+    
nm
   
nm
   
nm
   
nm
   
nm
   
nm
 
Fitch
   A+      A+      A+      A+      A+      A+    
nm
   
nm
   
nm
   
nm
   
nm
   
nm
 
                                                                                               
Holding Company Senior Debt Ratings
                                                                                             
Moody's
 
na
   
Baa2
   
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Baa2
   
Baa2
   
Baa2
   
nm
   
nm
   
nm
   
nm
   
nm
   
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S&P
 
na
     A-      A-      A-      A-      A-    
nm
   
nm
   
nm
   
nm
   
nm
   
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A.M. Best
 
na
     a-      a-      a-      a-      a-    
nm
   
nm
   
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(1)
Capital in the debt-to-capital ratio includes stockholders' equity and the note payable.
(2)
Share count reflects outstanding common shares, including restricted shares, but excludes restricted stock units (RSUs).
 
 
5 of 15

 
 
Statements of Income
PRIMERICA, INC.
Financial Supplement
 
                                       
YOY Q2
               
YOY YTD
 
(Dollars in thousands)
    Q1 2011       Q2 2011       Q3 2011       Q4 2011       Q1 2012       Q2 2012    
$
Change
   
%
Change
   
YTD
2011
   
YTD
2012
   
$
Change
   
%
Change
 
Statement of Income
                                                                                 
Revenues:
                                                                                   
Direct premiums
  $ 552,069     $ 560,881     $ 560,739     $ 555,778     $ 561,037     $ 570,073     $ 9,192       1.6 %   $ 1,112,950     $ 1,131,110     $ 18,160       1.6 %
Ceded premiums
    (422,238 )       (435,564 )       (425,643 )       (419,630 )       (418,163 )       (415,814 )       19,750        4.5 %     (857,802 )       (833,978 )       23,824        2.8 %
Net premiums
    129,831        125,317        135,096        136,148        142,874        154,259        28,942        23.1 %     255,148        297,132        41,984        16.5 %
Net investment income
    28,626        27,229        27,103        25,644        26,097        23,605        (3,624 )       -13.3 %     55,855        49,702        (6,153 )       -11.0 %
Commissions and fees:
                                                                                               
Sales-based (1)
    43,128        44,904        42,244        40,086        44,467        47,269        2,364        5.3 %     88,032        91,736        3,704        4.2 %
Asset-based (2)
    44,825        45,348        41,996        40,889        43,722        43,751        (1,598 )       -3.5 %     90,174        87,472        (2,701 )       -3.0 %
Account-based (3)
    10,432        11,811        10,140        9,615        9,373        9,494        (2,317 )       -19.6 %     22,242        18,867        (3,375 )       -15.2 %
Other commissions and fees
    7,731        6,635        6,502        6,693        6,343        6,248        (386 )       -5.8 %     14,366        12,591        (1,774 )       -12.4 %
Realized investment (losses) gains
    327        2,035        (178 )       4,256        2,132        4,320        2,285        112.3 %     2,362        6,452        4,090     
nm
 
Other, net
    11,452        11,816        12,887        12,526        11,594        11,581        (236 )       -2.0 %     23,268        23,174        (94 )       -0.4 %
Total revenues
    276,352        275,095        275,790        275,855        286,601        300,525        25,430        9.2 %     551,447        587,127        35,680        6.5 %
Benefits and expenses:
                                                                                               
Benefits and claims
    57,635        57,272        64,101        63,688        67,933        68,925        11,652        20.3 %     114,907        136,858        21,951        19.1 %
Amortization of DAC
    23,229        23,975        26,645        30,185        26,531        28,205        4,231        17.6 %     47,203        54,736        7,533        16.0 %
Insurance commissions
    8,998        9,532        10,536        9,553        8,496        6,457        (3,075 )       -32.3 %     18,530        14,954        (3,576 )       -19.3 %
Insurance expenses
    15,798        26,988        22,133        24,273        22,444        24,589        (2,399 )       -8.9 %     42,786        47,033        4,247        9.9 %
Sales commissions:
                                                                                               
Sales-based (1)
    30,553        31,389        29,640        26,805        31,600        33,285        1,895        6.0 %     61,942        64,885        2,943        4.8 %
Asset-based (2)
    15,451        15,111        13,805        13,534        14,745        15,031        (80 )       -0.5 %     30,562        29,777        (786 )       -2.6 %
Other sales commissions
    4,434        3,774        3,692        3,534        3,371        3,159        (615 )       -16.3 %     8,208        6,531        (1,678 )       -20.4 %
Interest expense
    6,997        6,998        7,000        6,973        6,910        8,505        1,508        21.5 %     13,995        15,416        1,421        10.2 %
Other operating expenses
    40,001        41,590        42,732        40,630        41,104        40,447        (1,142 )       -2.7 %     81,591        81,551        (40 )    
nm
 
Total benefits and expenses
    203,095        216,630        220,285        219,175        223,135        228,605        11,975        5.5 %     419,725        451,740        32,015        7.6 %
Income before income taxes
    73,256        58,465        55,505        56,681        63,466        71,921        13,455        23.0 %     131,722        135,386        3,665        2.8 %
Income taxes
    25,985        20,845        20,409        19,477        21,709        25,741        4,896        23.5 %     46,830        47,451        621        1.3 %
Net income
  $ 47,272     $ 37,620     $ 35,096     $ 37,204     $ 41,756     $ 46,179     $ 8,559       22.8 %   $ 84,892     $ 87,936     $ 3,044       3.6 %
                                                                                                 
Income Before Income Taxes by Segment
                                                                                             
Term Life
  $ 49,716     $ 36,027     $ 39,663     $ 37,045     $ 44,283     $ 51,722     $ 15,696       43.6 %   $ 85,743     $ 96,006     $ 10,263       12.0 %
Investment & Savings Products
    31,039        30,470        26,746        28,821        28,869        29,444        (1,026 )       -3.4 %     61,509        58,314        (3,195 )       -5.2 %
Corporate & Other Distributed Products
    (7,498 )       (8,032 )       (10,903 )       (9,185 )       (9,687 )       (9,246 )       (1,214 )       -15.1 %     (15,530 )       (18,933 )       (3,403 )       -21.9 %
Income before income taxes
  $ 73,256     $ 58,465     $ 55,505     $ 56,681     $ 63,466     $ 71,921     $ 13,455       23.0 %   $ 131,722     $ 135,386     $ 3,665       2.8 %
 

(1)
Sales-based - revenues or commission expenses relating to the sales of mutual funds and variable annuities
(2)
Asset-based - revenues or commission expenses relating to the value of assets in client accounts for which we earn ongoing service, distribution, and other fees
(3)
Account-based  - revenues relating to the fee generating client accounts we administer
 
 
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Reconciliation of Statement of Income Non-GAAP to GAAP Financial Measures
PRIMERICA, INC.
 
Financial Supplement
 
                                       
YOY Q2
               
YOY YTD
 
      Q1 2011       Q2 2011       Q3 2011       Q4 2011       Q1 2012       Q2 2012    
$
Change
   
%
Change
   
YTD
2011
   
YTD
2012
   
$
Change
   
%
Change
 
(Dollars in thousands)
Reconciliation from Operating Revenues to Total Revenues
                                                                                 
Operating revenues
  $ 267,296     $ 273,060     $ 275,968     $ 271,600     $ 284,469     $ 296,206     $ 23,145       8.5 %   $ 540,356     $ 580,675     $ 40,319       7.5 %
                                                                                                 
Operating revenues reconci