(Source: Business Wire)
Protective Life Corporation (NYSE: PL) today reported results for the
third quarter of 2009. Net income for the third quarter of 2009 was
$27.6 million, or $0.32 per average diluted share, compared to a net
loss of $100.0 million, or $1.41 per average diluted share, in the third
quarter of 2008. Operating income, after-tax, for the third quarter of
2009 was $47.9 million, or $0.55 per average diluted share, compared to
$62.5 million, or $0.88 per average diluted share, in the third quarter
of 2008.
Net income for the nine months ended September 30, 2009 was $140.5
million, or $1.77 per average diluted share, compared to a net loss of
$25.9 million, or $0.36 per average diluted share, in the nine months
ended September 30, 2008. Operating income, after tax, for the nine
months ended September 30, 2009 was $190.3 million, or $2.40 per average
diluted share, compared to operating income, after tax, of $183.2
million, or $2.57 per average diluted share, in the nine months ended
September 30, 2008.
Book value per share increased to $26.91 at quarter-end, compared to
$10.89 at December 31, 2008.
John D. Johns, Protective's Chairman, President and Chief Executive
Officer commented:
"We continued to make good progress on many fronts during the third
quarter. Our book value per common share outstanding increased to almost
$27.00 per share at quarter-end, an increase of 147% from the low at
year-end 2008. We continue to expand the breadth and depth of our
annuity distribution platform, and we saw a strong increase in variable
annuity sales and positive fund flows in our major annuity product
lines. We also made some good progress in expanding our capacity to
distribute universal life products. Our universal life sales increased
33% over last year's third quarter in the face of some very difficult
market conditions. Our Asset Protection segment continued to perform in
line with expectations. Asset Protection sales were up about $10 million
during the quarter on a sequential basis. We also continued to execute
on our plan to grow our capital base and maintain solid capital ratios.
Just after the quarter closed, we successfully refinanced surplus notes
supporting one of our securitization structures. We expect that the
transaction will generate a substantial increase in operating earnings
in the fourth quarter and will also further bolster our capital base and
capital ratios at year-end.
"Earnings in the quarter were negatively impacted by the substantial
amounts of excess liquidity that we continued to carry, less favorable
mortality, some consolidation and other unusual expense items and
impairments in the investment portfolio. We are moving cautiously to
deploy excess liquidity and expect earnings to be impacted by lower
yields on short term investments into next year."
Net income for the third quarter of 2009 included:
Net realized investment losses, after tax, of $20.3 million, or $0.23
per average diluted share, compared to net realized investment losses,
after tax, of $162.5 million, or $2.29 per average diluted share, in
the third quarter of 2008
Pre-tax other-than-temporary impairments of $31.0 million, or $0.23
per average diluted share, are included in the $0.23 per share of net
realized investment losses in the third quarter of 2009
Operating income for the third quarter of 2009 included $4.6 million of
net negative items, on a pre-tax basis:
Positive Items:
Positive fair value changes of $14.1 million on a portfolio of
securities designated for trading
Positive prospective unlocking of $10.1 million
Negative Items:
Negative fair value changes of $3.8 million in the Annuities segment
Negative mortality variance to plan in the Life Marketing and
Acquisitions segments of $7.8 million
Negative items of $17.2 million primarily due to higher expenses and
lower Corporate and Other investment income
Business Segment Results
The table below sets forth business segment operating income (loss)
before income tax for the periods shown:
Operating Income (Loss) Before Income Tax
($ in thousands)
3Q2009 3Q2008 $ Chg % Chg
Life Marketing $ 26,544 $ 52,222 $ (25,678 ) -49.2 %
Acquisitions 33,061 33,021 40 0.1 %
Annuities 16,075 556 15,519 n/m
Stable Value Products 14,339 28,184 (13,845 ) -49.1 %
Asset Protection 5,731 8,186 (2,455 ) -30.0 %
Corporate & Other (22,826 ) (32,173 ) 9,347 n/m
$ 72,924 $ 89,996 $ (17,072 ) -19.0 %
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In the Life Marketing and Asset Protection segments, pre-tax operating
income equals segment income before income tax for all periods. In the
Stable Value Products, Annuities, Acquisitions and Corporate & Other
segments, operating income (loss) excludes realized investment gains
(losses), periodic settlements on derivatives, and related amortization
of DAC and VOBA. A reconciliation of operating income before income tax
to income before income tax is included below:
($ in thousands) 3Q2009 3Q2008 $ Chg
Operating income (loss) before income tax $ 72,924 $ 89,996 $ (17,072 )
Realized investment gains (losses)
Stable Value Products (4,949 ) 4,984 (9,933 )
Annuities (482 ) (14,419 ) 13,937
Acquisitions 7,025 (40,002 ) 47,027
Corporate & Other (33,662 ) (199,289 ) 165,627
Less:
Periodic settlements on derivatives
Corporate & Other - 1,915 (1,915 )
Related amortization of deferred policy acquisition costs, value of businesses acquired
Annuities 2,340 1,073 1,267
Acquisitions (3,120 ) (1,776 ) (1,344 )
Income (loss) before income tax $ 41,636 $ (159,942 ) $ 201,578
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Income (loss) before income tax, unlike operating income (loss) before
income tax, does not exclude realized gains (losses), net of the related
amortization of DAC and VOBA, and participating income from real estate
ventures. Income before income tax for the Acquisitions segment was
$43.2 million for the third quarter of 2009 compared to a loss before
income tax of $5.2 million for the third quarter of 2008. Income before
income tax for the Annuities segment was $13.3 million for the third
quarter of 2009 compared to a loss before income tax of $14.9 million
for the third quarter of 2008. Income before income tax for the Stable
Value segment was $9.4 million for the third quarter of 2009 compared to
$33.2 million for the third quarter of 2008. Loss before income tax for
the Corporate & Other segment was $56.5 million for the third quarter of
2009 compared to a loss before income tax of $233.4 million for the
third quarter of 2008.
Sales
The Company uses sales statistics to measure the relative progress of
its marketing efforts. The Company derives these statistics from various
sales tracking and administrative systems and not from its financial
reporting systems or financial statements. These statistics measure only
one of many factors that may affect future profitability of the business
segments and therefore, are not intended to be predictive of future
profitability.
The table below sets forth business segment sales for the periods shown:
($ in millions)
3Q2009 3Q2008 $ Chg % Chg
Life Marketing $ 41.9 $ 35.4 $ 6.5 18.4 %
Annuities 452.6 472.2 (19.6 ) -4.2 %
Stable Value Products - 685.0 (685.0 ) n/m
Asset Protection 86.2 104.2 (18.0 ) -17.3 %
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Review of Business Segment Results
Life Marketing
Life Marketing segment pre-tax operating income was $26.5 million in the
third quarter of 2009 compared to $52.2 million in the third quarter of
2008. The decrease was primarily due to unfavorable mortality, lower
investment income on the traditional life block, and an elevated level
of expenses. Negative traditional life mortality of $4.9 million is
included in the third quarter of 2009 results and is $7.9 million
unfavorable to plan. Positive prospective unlocking of $1.5 million was
recorded in the third quarter of 2009, compared to $8.8 million of
positive prospective unlocking recorded in the third quarter of 2008.
Sales were $41.9 million in the third quarter of 2009, an increase of
18.5% compared to $35.4 million in the third quarter of 2008. Term
insurance sales in the current quarter were $25.6 million compared to
$23.0 million in the prior year's quarter. Universal life insurance
sales (including variable universal life) in the current quarter were
$16.3 million compared to $12.3 million in the third quarter of 2008.
Acquisitions
Acquisitions segment pre-tax operating income was $33.1 million in the
third quarter of 2009 compared to $33.0 million in the third quarter of
2008, primarily due to lower operating expenses, partially offset by
expected runoff of the blocks of business.
Annuities
Annuities segment pre-tax operating income was $16.1 million in the
third quarter of 2009 compared to $556 thousand in the third quarter of
2008. The current quarter included $3.8 million of negative fair value
changes, representing a positive variance of $1.1 million compared to
the prior year's quarter. This variance includes a $1.0 million
favorable variance on embedded derivatives associated with the variable
annuity guaranteed minimum withdrawal benefit ("GMWB") rider and a $0.1
million favorable variance on the equity indexed annuity product line,
which is no longer marketed. Positive prospective unlocking improved
earnings by $6.9 million in the current quarter. The segment experienced
wider interest spreads and continued growth in the single premium
deferred annuity and market value adjusted annuity lines during the
third quarter. Annuity account values were $9.9 billion as of September
30, 2009, an increase of 20.6% over the prior year. Net cash flows for
the segment remained positive during the quarter.
Sales in the third quarter of 2009 were $452.6 million compared to
$472.2 million in the third quarter of 2008. The decrease was primarily
due to lower fixed annuity sales, partially offset by record variable
annuity sales. Variable annuity sales were $194.4 million in the third
quarter of 2009, an increase of approximately 47%, compared to $132.4
million in the third quarter of 2008. Fixed annuity sales were $258.1
million in the third quarter of 2009 compared to $339.8 million in the
prior year's quarter.
Stable Value Products
Stable Value Products segment pre-tax operating income was $14.3 million
in the third quarter of 2009 compared to $28.2 million in the third
quarter of 2008. The decrease was a result of a decline in average
account values and a decline in operating spreads. Included in the
operating income during the third quarter of 2008 was $3.0 million of
other income resulting from the early retirement of funding agreements.
There were no early funding agreement retirements in the third quarter
of 2009. Excluding the effect of this gain, the spread decreased 28
basis points to 140 basis points for the three months ended September
30, 2009, compared to the prior year's quarter. Deposit balances as of
September 30, 2009 were $3.9 billion.
There were no sales during the three months ended September 30, 2009
compared to $685.0 million in the previous year's quarter.
Asset Protection
Asset Protection segment pre-tax operating income was $5.7 million in
the third quarter of 2009 compared to $8.2 million in the third quarter
of 2008. The decrease was primarily the result of lower service contract
income due to significantly lower sales volume and modestly higher loss
ratios.
Sales in the third quarter of 2009 were $86.2 million, down $18.0
million, or 17.2%, compared to the third quarter of 2008, driven by the
negative impact in all product lines of lower volume of automobile and
marine units sold. Sales increased $10.0 million in the third quarter of
2009, as compared to the second quarter of 2009.
