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Protective Life Corp. (PL)

Q1 2010 Earnings Call

May 6, 2010 9:00 am ET


John Johns - Chairman, President and CEO

Eva Robertson – Vice President, Investor Relations

Rich Bielen – Chief Financial Officer

Steven Walker – Senior Vice President, Controller, CAO

Carolyn Johnson - EVP & Chief Operating Officer

Carl Thigpen - EVP & CIO

Ed Berko – EVP, Chief Risk Officer


Steven Schwartz - Raymond James & Associates

Mark Finkelstein - Macquarie

Darin Arita - Deutsche Bank

John Fox - Fenimore Asset Management

Andrew Kligerman - UBS

Ed Spehar – Bank of America/Merrill Lynch

Chris Giovanni – Goldman Sachs

John Nadel – Sterne Agee



Welcome to the first quarter 2010 Protective Life Corporation earnings conference call. (Operator Instructions) I would now like to turn the call over to Mr. John Johns. Chairman, President and Chief Executive Officer. Please proceed.

John Johns

Good morning everyone. This is John Johns of Protective Life Corporation and on behalf of our entire management team who are with me here in our home office in Birmingham we welcome you to the call.

I would like to turn the call for a moment to Eva Robertson who heads our Investor Relations group to read the forward-looking statement.

Eva Robertson

Good morning. Our earnings, press release and supplemental financial information were released last night and are posted on our website. Before we begin I have an important reminder, in addition to the information contained in the press release and supplemental financial information there is also a slide presentation available to accompany this call and help you follow our discussion. This presentation is currently being webcast from a link available on our website at You can advance the slides independently in order to follow along our conversation.

Also this conference call and discuss includes forward-looking statements which may express expectations of future results. Actual events and results may differ materially from these expectations. Please refer to our press release and the risks and uncertainties as well as the risk factor section of the company’s most recent report on form 10-K and the subsequent report on form 10-Q for more information about factors that may affect future results.

This discussion may also contain non-GAAP financial information. Please see our website for additional information and reconciliation to GAAP financial measures. Now I will turn it back over to John Johns.

John Johns

Thanks Eva. We are pleased to report for the quarter on an operating basis $0.78 per share. That compares to $0.86 last year. Realized gains and losses on mark to market derivatives were slightly positive for the quarter $0.02 so our net income number for the quarter is $0.80 and that compares to $0.31 last year.

Overall we thought it was a very good quarter. A very solid quarter and very much in line or perhaps even a bit ahead of our plan for the year. All the kind of basic fundamental metrics seem to be pointing in the right direction. We enjoyed very strong sales momentum in our life marketing group and we were particularly pleased by the fact that our strategy to shift our emphasis more towards UL products and away from the term products is starting to really get some traction for the quarter. Our UL sales exceeded term sales.

In the annuity segment again the results were strong and positive. Very strong sales momentum. Positive fund flows. We achieved a record account balance of about $10 billion in the annuity line during the quarter. In APD again the sales have been soft there because the U.S. economy has been soft and the auto sales and marine sales have been soft. Even though the quarter had a little seasonality and weather related effects the first quarter we still see some growing momentum there as well.

We are really starting to see some pickup in activity and we are encouraged by our direction we are going in APD. We did have a modest amount of sales in staple value and the spreads continue to be very healthy there and very much in line with our plans and expectations. Acquisitions came through in a very steady fashion. That continues to be a great source of strength for our company. Very stable statutory earnings and this continues to chug along.

In the investment portfolio we were pleased to see that as expected impairments are trending down. There is really nothing particularly noteworthy in the investment portfolio from a negative perspective in the quarter. We did report a slight tick up in delinquencies in our commercial real estate portfolio. Some of that is just accounting driven but again as we look at the problems there they seem very manageable and in fact we are hopeful during this quarter we might actually see those numbers start to trend more favorably down.

We haven’t quite finished up all the statutory work but from what we see I think our statutory total adjusted capital will go up again to a new record level at the end of the quarter. Likewise our RBC ratio will improve we think 5-10 points or something like that at the end of the quarter so we are very robustly capitalized at the present time.

I know a question that is always a tough one is $0.78 is a big number, ahead of our expectations and consensus numbers. The question is what is your real core number for the quarter. That is something everybody has to figure out for themselves and it is not real clear how much is one-time and what is not and all that but our best guess is that the core number is in the low $0.60 range. Somewhere from $0.60 to $0.65. Within that range the issue is how you look at favorable mortality.

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