Protective Life Corporation (PL)

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Protective Life Corp. (PL)

Q4 2009 Earnings Call

February 11, 2010 09:00 a.m. ET

Executives

John Johns - Chairman, President and CEO

Rich Bielen - CFO

Carolyn Johnson - EVP & COO

Carl Thigpen - EVP & CIO

Analysts

Andrew Kligerman - UBS

Steven Schwartz - Raymond James & Associates

Mark Finkelstein - Macquarie

Eric Berg - Barclays Capital

John Fox - Fenimore Asset Management

Darin Arita - Deutsche Bank

Mark Finkelstein - Macquarie

Presentation

Operator

Good day ladies and gentlemen and welcome to the fourth quarter 2009 Protective Life Corporation earnings conference call. My name is Katina and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this presentation. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Mr. John Johns. Chairman, President and Chief Executive Officer. Please proceed.

John Johns

Good morning everyone and welcome to the Protective Life Corporation fourth quarter conference call. I am here in Birmingham in our home office and with me is our senior management team. I'll make a brief comments about the quarter and the year then I'll turn the microphone over to Rich Bielen our CFO. Rich will take you through the segment earnings in more detail and I'll come back and make a few comments about our outlook for 2010 and then we'll go to questions-and-answers.

Again we think we finished the year on a strong and positive note. We reported operating of a $51 in the quarter, that compares to $0.80 last year. Net income was about the same $1.50 compared to a loss of $0.22 last year. As I am sure you know, we did enjoy the benefit of a substantial gain resulting from the repurchase of about $800 million of notes that we've used to securitize some redundant preserves. The impact of that in the quarter was about $0.89 per share,

I think one of the hard things we do now with all of the changes in accounting rules including kind a pull through the numbers and come up with a run rate, we think the run rate for the quarter was somewhere in the mid $0.50 range maybe up to about $0.60 somewhere in the $0.55, $0.60 range for the quarter when you work through all of the moving parts.

Want to a couple of other things I think that are worth noting, we did see a continued improvement in our reported work value per common share. We finished the year at $28.96. That compares to a low of $10.89 at year-end last year. I guess needless to say we did see substantial improvement in the mark-to-market in our securities portfolio as the year progressed.

Some other positive news is that we do expect when we close our statutory books to end the year with consolidated statutory capital at a record all-time high level. We think our statutory high capital and surplus will be in excess of $2.7 billion at the end of the year. We also expect that our risk based capital ratio will end the year again at a record high level. Again, we are not exactly sure where it will come out, but we think it will be north of 410% and even if you eliminate the benefit we received from actions taken at the NAIC during the year with respect to RMBS securities and the deferred tax asset, we still think we'd have been north of 375%. We will be north of 375% when we finally close the year stat books.

We also saw some additional positive trends in our investment portfolio impairments in our securities portfolio. We are only $18.3 million in the quarter, again continuing the trend we've seen of the reduction and impairments and we hope that and expect that that trend will continue on in to next year. Our commercial real estate portfolio continued to perform a pretty well in context of a tough market for commercial real estate. Our problem loans were only about 60 basis points of the portfolio and we actually saw just a slight improvement in problem loans when you compare the fourth quarter to the third quarter.

Turning to our segment earnings, we continue to make a lot of progress on meeting funds in our Life Marketing Franchise. Once again we enjoyed a very strong and positive mortality results and like marketing mortality was almost $15 million better than our pricing assumptions for the year. That continues a trend we've seen over the last couple of years. We ended the year with very strong sales momentum in our universal life product line and we continue to execute on our plan to shift our emphasis from term insurance to for profitable universal life products.

In the Annuity segment, it was a terrific year. We had record pre tax operating earnings in the quarter. We had strong earnings for the year. We had strong sales in the quarter. We had positive fund flows for the year in our Annuity account balances top $10 billion. Also we're very pleased by the progress we're making and expanding our distribution footprint in the Annuity area. We continue to expand and upgrade our team of wholesalers and we continue to gain access to larger and ever hotter quality distributor platforms as well.

Once again, the steady-eddie acquisitions line came though for us. We had solid and steady earnings and I guess you would surmise from the very strong report I just gave with respect to our statutory capital. We now believe we're back in a position to be actively looking at acquisitions and we plan to do so and really quite optimistic that in the current environment we will again see some attractive acquisition opportunities out there.

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