Protective Life Corporation (PL)

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Protective Life Corporation (PL)

Q3 2010 Earnings Call Transcript

November 4, 2010 9:00 am ET

Executives

Eva Robertson – VP, IR

John Johns – Chairman, President and CEO

Rich Bielen – Vice Chairman and CFO

Carl Thigpen – EVP and Chief Investment Officer

Analysts

John Nadel – Sterne, Agee & Leach

Mark Finkelstein – Macquarie

Darin Arita – Deutsche Bank

Eric Berg – Barclays Capital

Alex [ph] – Credit Suisse

Chris Giovanni – Goldman Sachs

Vlad Artamonov – Coastal Investment Management

John Nadel – Sterne Agee

Presentation

Operator

Good day, ladies and gentlemen and welcome to the third quarter 2010 Protective Life Corporation earnings conference call. My name is Shawnell and I will be your operator for today. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to Ms. Eva Robertson, Vice President, Investor Relations. Please proceed.

Eva Robertson

Thank you, operator and good morning, everyone. Welcome to Protective Life Corporation’s 2010 Third Quarter Earnings Call. Our call will be hosted by John Johns, Protective’s Chairman, President and CEO; and Rich Bielen, Our Vice Chairman and CFO. But also here with us today, we have got Carl Thigpen, Chief Investment Officer; Carolyn Johnson, our Chief Operating Officer; Steve Walker, our Chief Accounting Officer and Ed Berko, our Chief Risk Officer.

Yesterday, we released our earnings press release and the supplemental financial information and those are posted on our website at Protective.com. I want to remind you that in addition to our press release and the supplemental financial information, there is a slide presentation we are using with today's call and that slide presentation is available there on the website on a web cast link.

And finally, today's discussion does include some forward looking statements, which express our expectations about future events and results. The actual events and results may differ materially from what we’ll be talking about today. You can refer to our press release and the risk and uncertainties as well as our risk factor section of the company's most recent form 10-K and subsequent form 10-Q for information about the factors that can affect the future events. This discussion may also contain non-GAAP financial information and you can review the supplemental financial information on our website for reconciliation to GAAP measures.

At this time, I’d like to turn the call over to John Johns.

John Johns

Thank you and good morning everyone. We are very pleased to report another solid quarter this morning. Net income was $0.80 cents per share, up materially from the same quarter last year. Operating earnings for the quarter were $0.71 per share, up 29% from the same quarter last year. Our book value per share excluding unrealized gains and losses was up 11% from a year ago. Sequentially, we had strong sales of variable annuities, Universal Life and asset protection products.

Our investment portfolio has also performed very well in the quarter. Our impairments are down. Our problem commercial real estate loans are also down. Our capital position remains very strong. We estimate that our RBC ratio at quarter end will be in the range of 435% to 440%. We’ve also made good strides here in the last several quarters in enhancing our enterprise risk management capabilities as evidenced by the fact that we’ve just completed our annual top to bottom review of our debt calculations for our Universal Life and annuity products. And as you can see in the numbers are a result of all that, it was slightly positive but pretty much a push or a wash.

In addition, there is a very little noise this quarter from our variable annuity fair value calculations due to the implementation of our hedging program. Of great importance, we announced in the quarter two very significant acquisition transactions, United Investors and the life business of Liberty Life of Greenville, South Carolina, which affect both transactions to be strongly accretive to earnings and return on equity in 2011 and for years beyond.

Both transactions bring to us a very seasoned, solid and predictable source of GAAP and stat earnings. We believe we have acquisition capabilities that are unmatched in the life insurance industry based on, among other things, our experience and know how. We have now completed more than 40 successful block of businesses or small company acquisitions.

Number two, our operational and transition capabilities. As you know, these transactions can offer some challenges in that respect. And we think we do that as well better than anyone. Number three, our capacity for structuring innovative transactions and doing it in conjunction with other parties as was the case of the Liberty Life transaction where that transaction was structured in conjunction with a Athene Reagan [ph] affiliate of the Apollo Group.

And lastly and probably most importantly, our reputation in the industry for following through on what we said we were going to do in closing. Needless to say, we are very excited about these two transactions.

Overall, we think we are well on our way to executing successfully the business plan we laid out for investors for the year at our March investors meeting. And we do believe we are well on our way to regaining the solid momentum for the future that was the theme of that presentation.

With that, I'm now going to turn it over to Rich Bielen, our Chief Financial Officer. And he will walk you through our segments and give you more details about the quarter. Rich?

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