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Protective Life Corporation (PL)

Q2 2010 Earnings Conference Call

August 4, 2010 8:00 AM ET


Eva Robertson – VP, IR

John Johns – Chairman, President and CEO

Rich Bielen – CFO

Ed Berko – EVP and Chief Risk Officer

Carl Thigpen – EVP and Chief Investment Officer


Steven Schwartz – Raymond James & Associates

Mark Finkelstein – Macquarie

John Nadel – Sterne Agee

Ed Cia – Bank of America

Tom Gallagher – Credit Suisse

Darin Arita – Deutsche Bank

Andrew Kligerman – UBS

Ian Gutterman – Adage Capital



Good day ladies and gentlemen and welcome to the second quarter 2010 Protective Life Corporation earnings conference call. My name is Mary and I will be your coordinator today. (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 Ms. Eva Robertson, Vice President of Investor Relations. Please proceed.

Eva Robertson

Thank you operator and good morning, welcome to Protective Life Corporation’s second quarter 2010 call. This morning’s call will be hosted by John Johns, Our Chairman, President and CEO along with Rich Bielen, our Vice Chairman and CFO. Late yesterday afternoon, we released our earnings press release along with our supplemental financial information and that can be found on our corporate website at

Before we begin I want to make sure to remind you that in addition to our discussion today we are using a slide deck which can be accessed through the website on the webcast viewer. You may follow along with slide deck advancing the slides on your own.

Also the call today will include some forward-looking statements which express expectations of future events and results. Actual events and results may differ materially from our discussions today. Please refer to our press release and the risks and uncertainties as well as risk factors section of the company’s most recent report on 10-Q and subsequent report on Form 10-K for more information about factors that may affect future results.

The discussion may also contain non-GAAP financial information. Please see our supplemental financial information on the website for a reconciliation of GAAP financial measures. At this time I would like to turn the call over to John Johns.

John Johns

Thank you Eva and good morning everyone and welcome to Protective Life second quarter conference call in which we will discuss the results that we released last night.

I’ll start by saying that from my perspective we thought it was a pretty solid quarter. In general each of our operating segments was on planned for the year, if you exclude some mark-to-market accounting issues. We were a little behind in our corporate and other segment due primarily to the fact that we’re not quite on schedule in terms of investing excess liquidity for our business plan for the year but overall I think we were reasonably satisfied with the results as we reported.

Couple of things to point out. We did continue to enjoy trend of favorable mortality in the quarter. I think it’s worth noting that since 2005, and that’s when we began to securitize, redundant on reserves, we’ve been keeping one of the separate tally on our actual incurred mortality as compared to our expectations at the time of pricing our products and during that period on a cumulative basis, we’re running at about 85% actual to expected and interestingly that’s about where we are in this quarter. so over five year period, we’re about 85% and in this quarter we’re about 85%.

Our net realized losses for the quarter were about in line with our expectations, Rich will give you deeper discussion of that in just a minute but I think in general the trend in impairments and realized losses is tracking about what we expected them to be. We are very pleased that our book value again increased in the as reported, increased in the quarter. It’s up 24% this year and it’s up 89% over the second quarter of ‘09 and obviously what’s going on there is that the mark-to-market on our securities is going up in this environment.

We expect to see some continuing impairments out in the future but at the end our expectation is in line with our plan. Sales in the quarter were pretty good, we bought across the lower flag sales were essentially flat on a sequential basis but for our plan we saw a nice increase in universal life sales as compared to term sales and we do see in our new term UL products are seeing acceptance in the marketplace as we introduce them.

Annuity sales were very strong in the quarter, healthy growth across the board, also very pleased that our variable annuity sales were up actually, I would like to point out that with respect the products, the variable products that we are selling about 40% of our sales this year, products that did not have a roll up feature and then of those who do have a roll-up feature about two-thirds of the sales are of our most conservatively designed products.

So I’m very pleased with that as well. So I think that gives you a quick kind of summary. We – again we reported $0.62 in the quarter that compares to a $1.03 same quarter last year on an operating basis net income which would of course include the affects the realized gains and losses, $0.47 in the quarter that compares to $1.16 last year.

And with that I’m going to turn it over to Rich and Rich will walk you through the details of the quarter.

Rich Bielen

Thank you Johnny. Good morning everyone. We’ll start on slide three of the slide deck and just walk through the earnings per share as Johnny mentioned for the quarter, we report $0.62 of operating and year-to-date we’re at $1.39. On a net income basis for the second quarter, we’re at $0.47 and year-to-date we’re at a $1.27. On a dollar basis after-tax operating income was $54 million and $122 million for year-to-date and net income is $41 million with $111 million year-to-date.

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