| For the fiscal year ended December 31, 2001 | Commission File Number 1-12332 |
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| DELAWARE | 95-2492236 | ||
|---|---|---|---|
| (State or other jurisdiction | (IRS Employer | ||
| incorporation or organization) | Identificiation No.) |
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in the definitive proxy statement or information statements or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 8, 2002: $2,102,188,319
Number of shares of Common Stock, $0.50 Par Value, outstanding as of March 8, 2002:68,643,043
Portions of the Registrant's 2001 Annual Report To Share Owners (the "2001 Annual Report To Share Owners") are incorporated by reference into Parts I, II, and IV of this Report.
Portion of the Registrant's Proxy Statement dated March 30, 2002, are incorporated by reference into Part III of this Report.
PART I
Item 1. Business.............................................................
Item 2. Properties...........................................................
Item 3. Legal Proceedings....................................................
Item 4. Submission of Matters to a Vote of Security Holders..................
PART II
Item 5. Market for the Registrant's Common Equity and
Related Share-Owner Matters........................................
Item 6. Selected Financial Data..............................................
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................
Item 7a. Quantitative and Qualitative Disclosure About Market Risk............
Item 8. Financial Statements and Supplementary Data..........................
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................................
PART III
Item 10. Directors and Executive Officers of the Registrant...................
Item 11. Executive Compensation...............................................
Item 12. Security Ownership of Certain Beneficial Owners and
Management.........................................................
Item 13. Certain Relationships and Related Transactions.......................
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K........................................................
Protective Life Corporation is a holding company, whose subsidiaries provide financial services through the production, distribution, and administration of insurance and investment products. Founded in 1907, Protective Life Insurance Company is the Company’s largest operating subsidiary. Unless the context otherwise requires, the “Company” refers to the consolidated group of Protective Life Corporation and its subsidiaries.
Copies of the Company’s Proxy Statement and 2001 Annual Report to Share Owners will be furnished to anyone who requests such documents from the Company. Requests for copies should be directed to: Share-Owner Relations, Protective Life Corporation, P. O. Box 2606, Birmingham, Alabama 35202, Telephone (205) 868-3573, FAX (205) 868-3541. Copies may also be requested through the Internet from the Company’s Worldwide Web Site (www.protective.com). The information incorporated herein by reference is also electronically accessible through the Internet from the “EDGAR Database of Corporate Information” on the Securities and Exchange Commission’s World Wide Web site (www.sec.gov).
The Company operates business segments each having a strategic focus which can be grouped into three general categories: life insurance, retirement savings and investment products, and specialty insurance products.
The following table shows the percentages of pretax operating income from continuing operations represented by each of the strategic focuses and the Corporate and Other segment.
RETIREMENT
SAVINGS AND SPECIALTY CORPORATE
YEAR ENDED LIFE INVESTMENT INSURANCE AND
DECEMBER 31 INSURANCE PRODUCTS PRODUCTS OTHER
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1997 56.9% 26.6% 9.5% 7.0%
1998 56.6 24.1 10.4 8.9
1999 59.2 20.4 10.7 9.7
2000 66.5 23.8 16.5 (6.8)
2001 68.3 21.7 14.7 (4.7)
Additional information concerning the Company’s divisions may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” and Note 10 to Consolidated Financial Statements in the Company’s 2001 Annual Report to Share Owners, which are incorporated herein by reference.
In the following paragraphs, the Company reports sales and new capital invested. These statistics are used by the Company to measure the relative progress of its marketing and acquisition efforts. These statistics were derived from the Company’s various sales tracking and administrative systems and were not derived from the Company’s financial reporting systems or financial statements. These statistics attempt to measure only one of many factors that may affect future profitability, and therefore are not intended to be predictive of future profitability.
A strategic focus of the Company is to expand its individual life insurance operations through internal growth and acquisitions.
The Individual Life and West Coast Divisions support the Company’s strategy to expand its individual life insurance operations through internal growth.
The Individual Life Division markets level premium term and term-like insurance, universal life and variable universal life products on a national basis primarily through networks of independent insurance agents. The Division has two primary agent networks. The first is based on experienced independent personal producing general agents who are recruited by regional sales managers. The Division also distributes insurance products in the life insurance brokerage market through another wholly-owned subsidiary, Empire General Life Assurance Corporation. The Division also distributes life insurance products through regional stockbrokers and banks, and through direct response and worksite arrangements.
In 1997, the Company acquired West Coast Life Insurance Company (West Coast). The West Coast Division sells universal life and level premium term and term-like insurance products in the life insurance brokerage market and in the “bank owned life insurance” (BOLI) market. The Division primarily utilizes a distribution system comprised of brokerage general agencies who recruit a network of independent life agents. The Division also offers corporate owned life insurance products to the BOLI market through an independent marketing organization which specializes in this market. The products are sold to smaller and regional banks.
A subsidiary of the Company, Matrix Direct, Inc. (Matrix), is a leading direct marketer of life and other insurance products. Matrix offers a full complement of direct marketing services, including market research, media buying, fulfillment, a nationally-licensed sales group and new business processing.
Another subsidiary, ProEquities, Inc. (ProEquities), is a full-service securities broker-dealer. ProEquities primarily recruits financial planners. ProEquities makes available variable insurance products, mutual funds, and other investment products to its licensed representatives to offer to their clients and customers.
The following table shows the Life Marketing business segment’s sales measured by new premium.
YEAR ENDED
DECEMBER 31 SALES
- -------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
1997 $ 78.5
1998 111.8
1999 139.2
2000 161.8
2001 163.4
The Acquisitions Division focuses on acquiring, converting, and servicing policies acquired from other companies. The Division's primary focus is on life insurance policies sold to individuals. These acquisitions may be accomplished through acquisitions of companies or through the reinsurance of blocks of policies from other insurers. Forty-two transactions have been closed by the Division since 1970, including 15 since 1989. Policies acquired through the Division are usually administered as "closed" blocks; i.e., no new policies are being marketed. Therefore, the amount of insurance in force for a particular acquisition is expected to decline with time due to lapses and deaths of the insureds.
Most acquisitions closed by the Acquisitions Division do not include the acquisition of an active sales force. In transactions where some marketing activity was included, the Company generally either ceased future marketing efforts or redirected those efforts to another division of the Company. However, in the case of the acquisition of West Coast which was closed by the Acquisitions Division, the Company elected to continue the marketing of new policies and operate West Coast as a separate division of the Company.
The Company believes that its focused and disciplined approach to the acquisition process and its experience in the assimilation, conservation, and servicing of acquired policies give it a significant competitive advantage over many other companies that attempt to make similar acquisitions. The Company expects acquisition opportunities to continue to be available as the life insurance industry continues to consolidate; however, management believes that the Company may face increased competition for future acquisitions.
Total revenues and income before income tax from the Acquisitions business segment are expected to decline with time unless new acquisitions are made. Therefore, the segment’s revenues and earnings may fluctuate from year to year depending upon the level of acquisition activity.
The following table shows the number of transactions closed by the Acquisitions business segment and the approximate amount of (statutory) capital invested for each year in which an acquisition was made.
NUMBER
YEAR ENDED OF CAPITAL
DECEMBER 31 TRANSACTIONS INVESTED
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
1997 1 (1) $116.8 (1)
1998 1 77.8
2001 2 247.8
___________
(1) West Coast
Although acquisition opportunities were pursued, no transactions were completed in 1999 or 2000. In 2001, the Company coinsured a block of individual life policies from Standard Insurance Company, and acquired the stock of Inter-State Assurance Company and First Variable Life Insurance Company from ILona Financial Group, Inc., the U.S. subsidiary of Irish Life & Permanent plc of Dublin, Ireland.
From time to time other of the Company’s business segments have acquired companies and blocks of policies which are included in their respective results.
A second strategic focus of the Company is to offer products that respond to the shift in consumer preference to savings products brought about by demographic trends as “baby-boomers” move into the saving stage of their life cycle. The products that support this strategy are stable value contracts and annuities.
The Company’s Stable Value Products Division markets guaranteed investment contracts (GICs) to 401(k) and other qualified retirement savings plans. GICs are generally contracts which specify a return on deposits for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan. The demand for GICs is related to the relative attractiveness of the “fixed rate” investment option in a 401(k) plan compared to the equity-based investment options available to plan participants.
The Division also markets fixed and floating rate funding agreements to the trustees of municipal bond proceeds, institutional investors, bank trust departments and money market funds. The Division also sells funding agreements to special purpose entities that in turn issue notes or certificates in smaller, transferable denominations.
The Company’s emphasis is on a consistent and disciplined approach to product pricing and asset/liability management, careful underwriting of early withdrawal risks and maintaining low distribution and administration costs. Most GIC contracts and funding agreements written by the Company have maturities of three to five years.
The following table shows the stable value contracts sales.
YEAR ENDED FUNDING
DECEMBER 31 GICS AGREEMENTS TOTAL
- ----------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
1997 $203 $461 $ 664
1998 488 336 824
1999 584 386 970
2000 418 801 1,219
2001 409 637 1,046
The rate of growth in account balances is affected by the amount of maturing contracts relative to the amount of sales.
The Company’s Investment Products Division manufactures, sells, and supports fixed and variable annuity products. These products are primarily sold through stockbrokers and ProEquities, but are also sold through financial institutions and the Individual Life Division’s sales force.
The Company’s fixed annuities are primarily modified guaranteed annuities which guarantee an interest rate for a fixed period. Because contract values are “market-value adjusted” upon surrender prior to maturity, these products afford the Company a measure of protection from the effects of changes in interest rates. The Company also offers variable annuities which offer the policyholder the opportunity to invest in various investment accounts.
The following table shows fixed and variable annuity sales. The demand for annuity products is related to the general level of interest rates and performance of the equity markets.
YEAR ENDED FIXED VARIABLE TOTAL
DECEMBER 31 ANNUITIES ANNUITIES ANNUITIES
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(DOLLARS IN MILLIONS)
1997 $180 $324 $504
1998 97 472 569
1999 350 361 711
2000 635 257 892
2001 689 263 952
A third strategic focus of the Company is to participate in specialized segments of the insurance industry.
The Financial Institutions Insurance Division markets credit life and disability insurance products through banks, consumer finance companies and automobile dealers and markets vehicle and recreational marine extended service contracts. The Division markets through employee field representatives, independent brokers and wholly-owned subsidiaries.
In 1997, the Company acquired the Western Diversified Group. In 2000, the Company acquired The Lyndon Insurance Group (Lyndon).
The Company is one of the largest independent writers of credit insurance in the United States. These policies cover consumer loans made by financial institutions located primarily in the southeastern United States and automobile dealers throughout the United States.
The following table shows the credit insurance and related product sales measured by new premium including the sales of Western Diversified and Lyndon since the date of acquisition.
YEAR ENDED
DECEMBER 31 SALES
- -------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
1997 $189.3
1998 273.5
1999 283.4
2000 523.6
2001 521.5
In 2001, approximately 60% of the business segment’s sales were through automobile dealers, and approximately 37% of sales were extended service contracts. A portion of the sales are reinsured with producer-owned reinsurers.
The Company has also coinsured closed blocks of credit policies in 1996 and 1997, and in 1999 the Company recaptured a closed block of credit policies that it had previously ceded to another insurer.
The Company has an additional business segment referred to as Corporate and Other. The Corporate and Other segment primarily consists of net investment income and expenses not attributable to the other business segments described above (including net investment income on unallocated capital and interest on substantially all debt). This segment also includes earnings from several small lines of business which the Company is not actively marketing (mostly cancer insurance and group annuities), various investment-related transactions, and the operations of several small subsidiaries. The earnings of this segment may fluctuate from year to year. In 2000, the Company sold its participation in a joint venture which owned a small life insurance company in Hong Kong.
On December 31, 2001, the Company completed the sale to Fortis, Inc. of substantially all of its Dental Benefits Division (Dental Division), and discontinued other remaining Dental Division operations, primarily other health insurance lines.
The types of assets in which the Company may invest are influenced by various state laws which prescribe qualified investment assets. Within the parameters of these laws, the Company invests its assets giving consideration to such factors as liquidity needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure. For further information regarding the Company’s investments, the maturity of and the concentration of risk among the Company’s invested assets, derivative financial instruments, and liquidity, see Notes 1 and 2 to the Consolidated Financial Statements, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2001 Annual Report to Share Owners.
A significant portion of the Company’s bond portfolio is invested in mortgage-backed securities. Mortgage-backed securities are constructed from pools of residential mortgages, and may have cash flow volatility as a result of changes in the rate at which prepayments of principal occur with respect to the underlying loans. Prepayments of principal on the underlying residential loans can be expected to accelerate with decreases in interest rates and diminish with increases in interest rates. The Company has not invested in the higher risk tranches of mortgage-backed securities (except mortgage-backed securities issued in securitization transactions sponsored by the Company). In addition, the Company has entered into hedging transactions to reduce the volatility in market value of its mortgage-backed securities.
The table below shows a breakdown of the Company’s mortgage-backed securities portfolio by type at December 31, 2001. Planned amortization class securities (PACs) pay down according to a schedule. Targeted amortization class securities (TACs) pay down in amounts approximating a targeted schedule. Non-Accelerated Security (NAS) receive no principal payments in the first five years, after which NAS receive an increasing percentage of pro rata principal payments until the tenth year, after which NAS receive principal as principal of the underlying mortgages is received. All of these types of structured mortgage-backed securities give the Company some measure of protection against both prepayment and extension risk.
Accretion directed securities have a stated maturity but may repay more quickly. Sequentials receive scheduled payments with any “excess” cash flow going to repay the earliest maturing tranches first. Pass through securities receive principal as principal of the underlying mortgages is received. Support tranches are designed to receive cash after the more stable tranches (i.e., PACs and TACs) are satisfied. The CMBS are commercial mortgage-backed securities issued in securitization transactions sponsored by the Company, in which the Company securitized portions of its mortgage loan portfolio.
PERCENTAGE OF
MORTGAGE-BACKED
TYPE SECURITIES
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PAC 7.3%
TAC 3.7
NAS 10.5
Accretion Directed 4.0
Sequential 14.4
Pass Through 49.9
Support 1.1
CMBS 9.1
------
100.0%
======
The Company obtains ratings of its fixed maturities from Moody's Investors Service, Inc. (Moody's) and Standard & Poor's Corporation (S&P). If a bond is not rated by Moody's or S&P, the Company uses ratings from the Securities Valuation Office of the National Association of Insurance Commissioners (NAIC), or the Company rates the bond based upon a comparison of the unrated issue to rated issues of the same issuer or rated issues of other issuers with similar risk characteristics. At December 31, 2001, approximately 99.7% of bonds were rated by Moody's, S&P, or the NAIC.
The approximate percentage distribution of the Company's fixed maturity investments by quality rating at December 31, 2001, is as follows:
RATING PERCENTAGE OF FIXED
MATURITY INVESTMENTS
- ------------------------------------------------------------------------
AAA 38.4%
AA 6.3
A 24.3
BBB 26.7
BB or less 4.2
Redeemable preferred stocks 0.1
------
100.0%
======
At December 31, 2001, approximately $9,390.8 million of the Company’s $9,838.1 million bond portfolio was invested in U.S. Government or agency-backed securities or investment grade bonds and approximately $447.3 million of its bond portfolio was rated less than investment grade, of which $63.3 million were securities issued in Company-sponsored commercial mortgage loan securitizations.
Risks associated with investments in less than investment grade debt obligations may be significantly higher than risks associated with investments in debt securities rated investment grade. Risk of loss upon default by the borrower is significantly greater with respect to such debt obligations than with other debt securities because these obligations may be unsecured or subordinated to other creditors. Additionally, there is often a thinly traded market for such securities and current market quotations are frequently not available for some of these securities. Issuers of less than investment grade debt obligations usually have higher levels of indebtedness and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than investment-grade issuers.
The Company also invests a significant portion of its portfolio in mortgage loans. Results for these investments have been excellent due to careful management and a focus on a specialized segment of the market. The Company generally does not lend on speculative properties and has specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers. The average size of loans made during 2001 was $3.5 million. The average size mortgage loan in the Company’s portfolio is approximately $2.1 million. The largest single loan amount is $18.8 million.
The following table shows a breakdown of the Company’s mortgage loan portfolio by property type at December 31, 2001:
PERCENTAGE OF
MORTGAGE LOANS
PROPERTY TYPE ON REAL ESTATE
- ---------------------------------------------------------------------------
Retail 74.9%
Apartments 9.9
Office Buildings 7.0
Warehouses 7.0
Other 1.2
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Total 100.0%
=====
Retail loans are generally on strip shopping centers located in smaller towns and anchored by one or more regional or national retail stores. The anchor tenants enter into long-term leases with the Company's borrowers. These centers provide the basic necessities of life, such as food, pharmaceuticals, and clothing, and have been relatively insensitive to changes in economic conditions. The following are the largest anchor tenants (measured by the Company's exposure) at December 31, 2001:
PERCENTAGE OF
MORTGAGE LOANS
ANCHOR TENANTS ON REAL ESTATE
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Food Lion, Inc. 3.5%
Winn Dixie Stores, Inc. 3.4
Wal-Mart Stores, Inc. 3.1
Rite-Aid Corporation 1.9
Walgreen Corporation 1.8
The Company’s mortgage lending criteria generally require that the loan-to-value ratio on each mortgage be at or under 75% at the time of origination. Projected rental payments from credit anchors (i.e., excluding rental payments from smaller local tenants) generally exceed 70% of the property’s projected operating expenses and debt service. The Company also offers a commercial loan product under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. Approximately $548.4 million of the Company’s mortgage loans have this participation feature.
Many of the Company’s mortgage loans have call or interest rate reset provisions between 3 and 10 years. However, if interest rates were to significantly increase, the Company may be unable to call the loans or increase the interest rates on its existing mortgage loans commensurate with the significantly increased market rates.
At December 31, 2001, $29.6 million or 1.2% of the mortgage loan portfolio was nonperforming. It is the Company’s policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company’s general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place.
In 1996, the Company sold approximately $554 million of its mortgage loans in a securitization transaction. In 1997, the Company sold approximately $445 million of its loans in a second securitization transaction. In 1998 the Company securitized $146 million of its mortgage loans and in 1999 the Company securitized $263 million. The securitizations’ senior tranches were sold, and the Company retained the junior tranches. The Company continues to service the securitized mortgage loans. At December 31, 2001, the Company had investments related to retained beneficial interests of mortgage loan securitizations of $286.4 million.
As a general rule, the Company does not invest directly in real estate. The investment real estate held by the Company consists largely of properties obtained through foreclosures or the acquisition of other insurance companies. In the Company’s experience, the appraised value of a foreclosed property often approximates the mortgage loan balance on the property plus costs of foreclosure. Also, foreclosed properties often generate a positive cash flow enabling the Company to hold and manage the property until the property can be profitably sold.
The following table shows the investment results from continuing operations of the Company:
REALIZED INVESTMENT
CASH, ACCRUED GAINS (LOSSES)
INVESTMENT PERCENTAGE ----------------------------------
INCOME, AND EARNED ON DERIVATIVE
YEAR ENDED INVESTMENTS AT AVERAGE OF CASH FINANCIAL ALL OTHER
DECEMBER 31 DECEMBER 31 NET INVESTMENT INCOME AND INVESTMENTS INSTRUMENTS INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
1997 $ 8,192,538 $583,193 8.0% $ 830
1998 8,718,455 629,045 7.7 3,121
1999 8,877,038 667,968 7.6 $ (2,279) 1,222
2000 10,419,217 730,149 7.6 9,013 (16,056)
2001 13,604,102 884,041 7.3 (11,431) (8,740)
The following table shows life insurance sales by face amount and life insurance in force.
YEAR ENDED DECEMBER 31
----------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
New Business Written
Life Marketing.................... $ 40,538,738 $ 45,918,373 $ 26,918,775 $ 21,238,653 $12,573,522
Group Products(1)................. 123,062 143,192 123,648 113,056 124,230
Credit Products................... 5,917,047 7,052,106 6,665,219 5,257,957 4,183,216
------------ ------------ -------------- -------------- -----------
Total.......................... $ 46,578,847 $ 53,113,671 $ 33,707,642 $ 26,609,666 $16,880,968
============ ============ ============== ============== ===========
Business Acquired
Life Marketing.................... $10,237,731
Acquisitions...................... $ 19,992,424 $ 7,787,284
Credit Products................... $ 2,457,296 $ 620,000 3,364,617
------------ ------------ ------------- ------------- -----------
Total......................... $ 19,992,424 $ 2,457,296 $ 620,000 $ 7,787,284 $13,602,348
============ ============ ============= ============= ===========
Insurance in Force at End of Year(2)
Life Marketing.................... $159,485,393 $129,502,305 $ 91,627,218 $ 66,086,218 $51,720,575
Acquisitions...................... 36,856,042 20,133,370 22,054,734 27,606,592 20,955,836
Group Products(1)................. 5,821,744 7,348,195 6,065,604 6,665,815 6,393,076
Credit Products................... 12,094,947 13,438,226 10,069,030 9,632,466 10,183,997
------------ ------------ ------------ ------------ -----------
Total......................... $214,258,126 $170,422,096 $129,816,586 $109,991,091 $89,253,484
============ ============ ============ ============ ===========
(1) On December 31, 2001, The Company completed the sale of substantially all of its Dental Benefits Division, with which the
group products are associated.
(2) Reinsurance assumed has been included; reinsurance ceded (2001-$171,449,182; 2000-$128,374,583; 1999-$92,566,755;
1998-$64,846,246; 1997-$34,139,554) has not been deducted.
The ratio of voluntary terminations of individual life insurance to mean individual life insurance in force, which is determined by dividing the amount of insurance terminated due to lapses during the year by the mean of the insurance in force at the beginning and end of the year, adjusted for the timing of major acquisitions was:
YEAR ENDED RATIO OF VOLUNTARY
DECEMBER 31 TERMINATIONS
- -------------------------------------------------------------
1997......................... 6.9%
1998......................... 6.4
1999......................... 6.0
2000......................... 5.8
2001......................... 7.4
The amount of investment products in force is measured by account balances. The following table shows stable value contract and annuity account balances. Most of the variable annuity account balances are reported in the Company's financial statements as liabilities related to separate accounts.
STABLE MODIFIED
YEAR ENDED VALUE GUARANTEED FIXED VARIABLE
DECEMBER 31 CONTRACTS ANNUITIES ANNUITIES ANNUITIES
- ----------------------------------------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
1997 $2,684,676 $ 926,071 $ 453,418 $1,057,186
1998 2,691,697 818,566 432,237 1,554,969
1999 2,680,009 941,692 391,085 2,085,072
2000 3,177,863 1,384,027 330,428 2,043,878
2001 3,716,530 1,883,998 1,143,394 2,131,476
The underwriting policies of the Company’s insurance subsidiaries are established by management. With respect to individual insurance, the subsidiaries use information from the application and, in some cases, inspection reports, attending physician statements, or medical examinations to determine whether a policy should be issued as applied for, rated, or rejected. Medical examinations of applicants are required for individual life insurance in excess of certain prescribed amounts (which vary based on the type of insurance) and for most individual insurance applied for by applicants over age 50. In the case of “simplified issue” policies, which are issued primarily through the Financial Institutions Division and the Individual Life Division in the payroll deduction market, coverage is rejected if the responses to certain health questions contained in the application indicate adverse health of the applicant. For other than “simplified issue” policies, medical examinations are requested of any applicant, regardless of age and amount of requested coverage, if an examination is deemed necessary to underwrite the risk. Substandard risks may be referred to reinsurers for full or partial reinsurance of the substandard risk.
The Company’s insurance subsidiaries require blood samples to be drawn with individual insurance applications for coverage at age 16 and above except in the payroll deduction market where the face amount must be $100,000 or more before blood testing is required. Blood samples are tested for a wide range of chemical values and are screened for antibodies to the HIV virus. Applications also contain questions permitted by law regarding the HIV virus which must be answered by the proposed insureds.
The Company’s insurance subsidiaries cede insurance to other insurance companies. The ceding insurance company remains liable with respect to ceded insurance should any reinsurer fail to meet the obligations assumed by it. The Company sets a limit on the amount of insurance retained on the life of any one person. In the individual lines it will not retain more than $500,000, including accidental death benefits, on any one life. In many cases the retention is less. At December 31, 2001, the Company had insurance in force of $214.3 billion of which approximately $171.4 billion was ceded to reinsurers.
Over the past several years, the Company’s reinsurers have reduced the net cost of reinsurance to the Company. Consequently, the Company has increased the amount of reinsurance which it cedes on newly-written individual life insurance policies, and has also ceded a portion of the mortality risk of existing business of the Life Marketing and Acquisitions business segments.
The Company also has used reinsurance in the sale of the Dental segment and to reinsure fixed annuities in conjunction with the acquisition of two small insurers.
The applicable insurance laws under which the Company’s insurance subsidiaries operate require that each insurance company report policy liabilities to meet future obligations on the outstanding policies. These liabilities are the amounts which, with the additional premiums to be received and interest thereon compounded annually at certain assumed rates, are calculated in accordance with applicable law to be sufficient to meet the various policy and contract obligations as they mature. These laws specify that the liabilities shall not be less than liabilities calculated using certain named mortality tables and interest rates.
The policy liabilities and accruals carried in the Company’s financial reports presented on the basis of accounting principles generally accepted in the United States of America ( GAAP) differ from those specified by the laws of the various states and carried in the insurance subsidiaries’ statutory financial statements (presented on the basis of statutory accounting principles mandated by state insurance regulations). For policy liabilities other than those for universal life policies, annuity contracts, GICs, and funding agreements, these differences arise from the use of mortality and morbidity tables and interest rate assumptions which are deemed to be more appropriate for financial reporting purposes than those required for statutory accounting purposes; from the introduction of lapse assumptions into the calculation; and from the use of the net level premium method on all business. Policy liabilities for universal life policies, annuity contracts, GICs, and funding agreements are carried in the Company’s financial reports at the account value of the policy or contract.
Existing federal laws and regulations affect the taxation of the Company’s products. Income tax payable by policyholders on investment earnings is deferred during the accumulation period of certain life insurance and annuity products. Congress has from time to time considered proposals that, if enacted, would have had an adverse impact on the federal income tax treatment of such products, or would increase the tax-deferred status of competing products. In addition, life insurance products are often used to fund estate tax obligations. Legislation has recently been enacted that would over time, reduce and eventually eliminate the estate tax. If the estate tax is significantly reduced or eliminated, the demand for certain life insurance products could be adversely affected. The Company cannot predict what tax initiatives may be enacted which could adversely affect the Company.
The Company’s insurance subsidiaries are taxed by the federal government in a manner similar to companies in other industries. However, certain restrictions on consolidating recently acquired life insurance companies and on consolidating life insurance company income with non-insurance income are applicable to the Company; thus, the Company is not able to consolidate all of the operating results of its subsidiaries for federal income tax purposes.
Under pre-1984 tax law, certain income of the Company was not taxed currently, but was accumulated in a memorandum account designated as “Policyholders’ Surplus” to be taxed only when such income was distributed to share owners or when certain limits on accumulated amounts were exceeded. Consistent with current tax law, amounts accumulated in Policyholders’ Surplus have been carried forward, although no accumulated income may be added to these accounts. As of December 31, 2001, the aggregate accumulation in the Policyholders’ Surplus account was $70.5 million. Under current income tax laws, the Company does not anticipate paying income tax on amounts in the Policyholders’ Surplus accounts.
Life and health insurance is a mature industry. In recent years, the industry has experienced little growth in life insurance sales, though the aging population has increased the demand for retirement savings products. Life and health insurance is a highly competitive industry. The Company encounters significant competition in all lines of business from other insurance companies, many of which have greater financial resources than the Company, as well as competition from other providers of financial services. Competition could result in, among other things, lower sales or higher lapses of existing products.
The insurance industry is consolidating, with larger, potentially more efficient organizations emerging from consolidation. Also, some mutual insurance companies are converting to stock ownership which will give them greater access to capital markets. Additionally, commercial banks, insurance companies, and investment banks may now combine, provided certain requirements are satisfied.
The Company’s ability to compete is dependent upon, among other things, its ability to attract and retain distribution channels to market its insurance and investment products, its ability to develop competitive and profitable products, its ability to maintain low unit costs, and its maintenance of strong ratings from rating agencies. However, irrational competition from other insurers could adversely affect the Company’s competitive position.
The Company’s insurance subsidiaries are subject to government regulation in each of the states in which they conduct business. Such regulation is vested in state agencies having broad administrative power dealing with many aspects of the insurance business, which may include premium rates, marketing practices, advertising, policy forms, and capital adequacy, and is concerned primarily with the protection of policyholders rather than share owners.
A life insurance company’s statutory capital is computed according to rules prescribed by the National Association of Insurance Commissioners (NAIC) as modified by the insurance company’s state of domicile. Statutory accounting rules are different from GAAP and are intended to reflect a more conservative view, for example, requiring immediate expensing of policy acquisition costs and more conservative computations of policy liabilities. The NAIC’s risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. These requirements are intended to allow insurance regulators to identify inadequately capitalized insurance companies based upon the types and mixtures of risks inherent in the insurer’s operations. The formula includes components for asset risk, liability risk, interest rate exposure, and other factors. Based upon the December 31, 2001 statutory financial reports, the Company’s insurance subsidiaries are adequately capitalized under the formula.
The Company’s insurance subsidiaries are required to file detailed annual reports with the supervisory agencies in each of the jurisdictions in which they do business and their business and accounts are subject to examination by such agencies at any time. Under the rules of the NAIC, insurance companies are examined periodically (generally every three to five years) by one or more of the supervisory agencies on behalf of the states in which they do business. To date, no such insurance department examinations have produced any significant adverse findings regarding any insurance company subsidiary of the Company.
Under insurance guaranty fund laws in most states, insurance companies doing business in such a state can be assessed up to prescribed limits for policyholder losses incurred by insolvent or failed insurance companies. Although the Company cannot predict the amount of any future assessments, most insurance guaranty fund laws currently provide that an assessment may be excused or deferred if it would threaten an insurer’s financial strength. The Company’s insurance subsidiaries were assessed immaterial amounts in 2001, which will be partially offset by credits against future state premium taxes.
In addition, many states, including the states in which the Company’s insurance subsidiaries are domiciled, have enacted legislation or adopted regulations regarding insurance holding company systems. These laws require registration of and periodic reporting by insurance companies domiciled within the jurisdiction which control or are controlled by other corporations or persons so as to constitute an insurance holding company system. These laws also affect the acquisition of control of insurance companies as well as transactions between insurance companies and companies controlling them. Most states, including Tennessee, where Protective Life Insurance Company (Protective Life) is domiciled, require administrative approval of the acquisition of control of an insurance company domiciled in the state or the acquisition of control of an insurance holding company whose insurance subsidiary is incorporated in the state. In Tennessee, the acquisition of 10% of the voting securities of an entity is generally deemed to be the acquisition of control for the purpose of the insurance holding company statute and requires not only the filing of detailed information concerning the acquiring parties and the plan of acquisition, but also administrative approval prior to the acquisition.
The Company’s insurance subsidiaries are subject to various state statutory and regulatory restrictions on the insurance subsidiaries’ ability to pay dividends to Protective Life Corporation. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval. Dividends in larger amounts are subject to approval by the insurance commissioner of the state of domicile. The maximum amount that would qualify as ordinary dividends to the Company by Protective Life in 2002 is estimated to be $99.0 million. No assurance can be given that more stringent restrictions will not be adopted from time to time by states in which the Company’s insurance subsidiaries are domiciled, which restrictions could have the effect, under certain circumstances, of significantly reducing dividends or other amounts payable to the Company by such subsidiaries without affirmative prior approval by state regulatory authorities.
The Company’s insurance subsidiaries may be subject to regulation by the United States Department of Labor when providing a variety of products and services to employee benefit plans governed by the Employee Retirement Income Security Act (ERISA). Severe penalties are imposed for breach of duties under ERISA.
Certain policies, contracts and annuities offered by the Company’s insurance subsidiaries are subject to regulation under the federal securities laws administered by the Securities and Exchange Commission. The federal securities laws contain regulatory restrictions and criminal, administrative and private remedial provisions.
Additional issues related to regulation of the Company and its insurance subsidiaries are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2001 Annual Report to Share Owners.
At December 31, 2001 the Company had approximately 2,524 authorized positions, including approximately 1,333 in Birmingham, Alabama. Most employees are covered by contributory major medical, dental, group life, and long-term disability insurance plans. The cost of these benefits to the Company in 2001 was approximately $8.2 million. In addition, substantially all of the employees are covered by a pension plan. The Company also matches employee contributions to its 401(k) Plan and makes discretionary profit sharing contributions for employees not otherwise covered by a bonus or sales incentive plan. See Note 11 to Consolidated Financial Statements.
The Company’s Home Office is located at 2801 Highway 280 South, Birmingham, Alabama. This campus includes the original 142,000 square-foot building which was completed in 1976 and a second contiguous 220,000 square-foot building which was completed in 1985. In addition, parking is provided for approximately 1,200 vehicles. In 2000, the Company began construction of a third contiguous building which will have approximately 315,000 square feet and parking for approximately 1,560 vehicles. The third building is expected to be completed during 2002. The Company has financed the construction under an operating lease arrangement.
The Company leases administrative and marketing office space in approximately 30 cities including approximately 88,151 square feet in Birmingham, with most leases being for periods of three to ten years. The aggregate annualized rent is approximately $8.7 million.
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which the Company or any of its subsidiaries is a party or of which any of the Company’s properties is the subject. For additional information regarding legal proceedings see “Known Trends and Uncertainties” in the Company’s 2001 Annual Report to Share Owners.
No matter was submitted during the fourth quarter of 2001 to a vote of security holders of the Company.
The Company’s Common Stock is listed and principally traded on the New York Stock Exchange (NYSE symbol: PL). The following table sets forth the highest and lowest closing prices of the Company’s Common Stock, $0.50 par value, as reported by the New York Stock Exchange during the periods indicated, along with the dividends paid per share of Common Stock during the same periods.
RANGE DIVIDENDS
----- ---------
HIGH LOW
---- ---
2000
First Quarter............................ $31.75 $20.81 $.12
Second Quarter........................... 30.75 21.25 .13
Third Quarter............................ 32.06 25.75 .13
Fourth Quarter........................... 32.25 22.00 .13
2001
First Quarter............................ 32.16 27.69 .13
Second Quarter........................... 34.51 29.92 .14
Third Quarter............................ 34.48 25.55 .14
Fourth Quarter........................... 29.88 27.16 .14
On March 8, 2002, there were approximately 2,300 owners of record of Company Common Stock.
The Company (or its predecessor) has paid cash dividends each year since 1926 and each quarter since 1934. The Company expects to continue to pay cash dividends, subject to the earnings and financial condition of the Company and other relevant factors. The ability of the Company to pay cash dividends is dependent in part on cash dividends received by the Company from its life insurance subsidiaries. See Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Liquidity and Capital Resources” in the Company’s 2001 Annual Report to Share Owners. Such subsidiary dividends are restricted by the various insurance laws of the states in which the subsidiaries are incorporated. See Item 1 – “Business – Regulation”.
YEAR ENDED DECEMBER 31
--------------------------------------------------------------------------------
2001 2000 1999 1998 1997
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME STATEMENT DATA
Premium and policy fee................. $1,389,820 $ 1,175,898 $ 861,027 $ 790,584 $592,959
Reinsurance ceded...................... (771,151) (686,108) (462,297) (378,397) (227,623)
--------- --------- --------- ---------- --------
Net of reinsurance ceded........... 618,669 489,790 398,730 412,187 365,336
Net investment income.................. 884,041 730,149 667,968 629,045 583,193
Realized investment gains (losses).....
Derivative financial instruments (11,431) 9,013 (2,279)
All other investments (8,740) (16,056) 1,222 3,121 830
Other income........................... 131,678 151,833 89,680 60,022 31,506
--------- --------- --------- --------- --------
Total revenues..................... 1,614,217 1,364,729 1,155,321 1,104,375 980,865
Benefits and expenses.................. 1,404,621 1,153,054 951,932 922,404 832,325
Income tax expense..................... 68,538 74,321 71,941 63,309 49,702
Income (loss) from discontinued
operations (1) (30,522) 16,122 21,642 12,119 13,155
Extraordinary loss(2) (1,763)
Change in accounting principles (3) (7,593)
--------- --------- ---------- --------- ---------
Net income............................. $ 102,943 $ 153,476 $ 151,327 $ 130,781 $ 111,993
PER SHARE DATA(4)
Income from continuing operations (5)
basic.............................. $ 2.02 $ 2.09 $ 2.01 $ 1.87 $ 1.58
Net income - basic..................... $ 1.48 $ 2.33 $ 2.31 $ 2.06 $ 1.79
Average shares outstanding - basic..... 69,410,525 65,832,349 65,604,311 63,521,587 62,429,250
Operating income - diluted(6).......... $ 2.21 $ 2.15 $ 2.01 $ 1.83 $ 1.57
Income from continuing operations (5)
- diluted.......................... $ 2.01 $ 2.08 $ 1.99 $ 1.85 $ 1.57
Net income - diluted................... $ 1.47 $ 2.32 $ 2.29 $ 2.04 $ 1.78
Average shares
outstanding - diluted.............. 69,950,173 66,281,128 66,161,367 64,087,744 62,849,618
Cash dividends......................... $ .55 $ .51 $ .47 $ .43 $ .39
Share-owners' equity................... $ 20.42 $ 17.26 $ 13.41 $ 14.65 $ 12.30
Share-owners' equity excluding net
unrealized gains and losses
on investments..................... $ 19.63 $ 18.05 $ 15.68 $ 13.80 $ 11.30
(1) Income from discontinued operations in 2001 includes loss on sale of the Dental Division and other costs related to
the discontinuance, net of income tax.
(2) Due to early extinguishments of debt, net of income tax.
(3) Cumulative effect of change in accounting principle relating to SFAS No. 133, net of income tax.
(4) Prior periods have been restated to reflect a two-for-one stock split on April 1, 1998, and to reflect discontinued
operations.
(5) Net income excluding extraordinary loss, change in accounting principle, and income from discontinued operations.
(6) Net income excluding realized investment gains and losses and related amortization, extraordinary loss, change in
accounting principle, and income from discontinued operations. 2000 excludes income from sale of Hong Kong
affiliate of $.24 per share.
DECEMBER 31
----------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------------------------------------------------------------------------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA
Total assets........................... $ 19,718,824 $ 15,145,633 $ 12,994,164 $ 11,989,495 $ 10,511,635
Long-term debt(7)...................... $ 376,211 $ 306,125 $ 181,023 $ 152,286 $ 120,000
Total debt(7).......................... $ 376,211 $ 306,125 $ 236,023 $ 172,035 $ 120,000
9% Cumulative Monthly Income
Preferred Securities, Series A $ 55,000 $ 55,000
8.25% Trust Originated Preferred
Securities......................... $ 75,000 $ 75,000 $ 75,000 $ 75,000 $ 75,000
7.5% Trust Originated Preferred
Securities......................... $ 100,000
6.5% FELINE PRIDES $ 115,000 $ 115,000 $ 115,000 $ 115,000
Share-owners' equity $ 1,400,144 $ 1,114,058 $ 865,223 $ 944,194 $ 758,197
Share-owners' equity excluding net
unrealized gains and losses
on investments $ 1,345,816 $ 1,165,431 $ 1,011,304 $ 889,137 $ 696,470
(7) Excludes stable value contract account balances and annuity account balances which do not possess significant mortality
risk. Such account balances totaled $3.9 billion, $3.4 billion, $2.9 billion, $3.0 billion, and $3.0 billion at December 31, 2001,
2000, 1999, 1998, and 1997, respectively.
Information regarding the Company’s financial condition and results of operations is included under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2001 Annual Report to Share Owners and is incorporated herein by reference.
The information required by this item is included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Consolidated Financial Statements” in the Company’s 2001 Annual Report to Share Owners and is incorporated herein by reference.
The financial statements and supplementary data for the Company and its subsidiaries, which are included under the caption “Consolidated Financial Statements” in the Company’s 2001 Annual Report to Share Owners, are incorporated herein by reference.
To the Board of Directors and Share Owners of
Protective Life Corporation
Our audits of the consolidated financial statements referred to in our report dated March 1, 2002 appearing in the 2001 Annual Report to Share Owners of Protective Life Corporation and subsidiaries (which report and consolidated financial statements are incorporated by reference on this Annual Report on Form 10-K) also included an audit of the financial statement schedules listed in Item 14 (a) (2) of this Form 10-K. In our opinion, these financial statement schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
As discussed in Note 1 of the Notes to the Condensed Financial Statements, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
March 1, 2002
2001 2000 1999
REVENUES ---- ---- ----
Dividends from subsidiaries* $ 3,701 $ 27,362 $ 18,980
Service fees from subsidiaries* 87,239 78,999 82,559
Net investment income 6,804 7,173 10,506
Realized investment gains (losses) (12,341) 6,856 (5,817)
Other income (loss) (2000 - sale of affiliate) 24,856 1,327
-------- -------- --------
85,403 145,246 107,555
-------- -------- --------
EXPENSES
Operating and administrative 55,256 50,600 44,074
Interest - subsidiaries* 10,163 14,085 17,217
Interest - other 22,859 18,082 12,215
-------- -------- --------
88,278 82,767 73,506
-------- -------- --------
INCOME BEFORE FEDERAL INCOME
TAX AND OTHER ITEMS BELOW (2,875) 62,479 34,049
INCOME TAX EXPENSE (BENEFIT) (2,150) 16,468 11,136
-------- -------- --------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES (725) 46,011 22,913
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES* 141,783 91,343 108,535
-------- ------- --------
NET INCOME FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY LOSS AND
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE 141,058 137,354 131,448
INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
NET OF INCOME TAX (9,977) 16,122 21,642
LOSS FROM SALE OF DISCONTINUED OPERATIONS,
NET OF INCOME TAX (20,545)
EXTRAORDINARY (LOSS) ON EARLY
EXTINGUISHMENT OF DEBT, NET OF
INCOME TAX
(1,763)
-------- -------- --------
CUMULATIVE EFFECT OF CHANGE IN 110,536 153,476 151,327
ACCOUNTING PRINCIPLE, NET OF
INCOME TAX
(7,593)
-------- -------- --------
NET INCOME $102,943 $153,476 $151,327
======== ======== ========
- ---------------
*Eliminated in consolidation.
See notes to condensed financial statements.
DECEMBER 31
-----------
2001 2000
ASSETS
Investments:
Fixed maturities $ 26,000 $ 24,511
Other long-term investments 20,303 18,027
Short-term investments 10 4,000
Investments in subsidiaries (equity method)* 1,942,449 1,594,462
--------- ---------
1,988,762 1,641,000
Cash 2,114 2,958
Accrued investment income 247
Receivables from subsidiaries* 18,171 14,348
Property and equipment, net 285 513
Other 36,466 19,880
--------- ---------
$2,045,798 $1,678,946
========= =========
LIABILITIES
Accrued expenses and other liabilities $ 77,186 $ 42,750
Accrued income taxes (17,336) (32,264)
Deferred income taxes 36,150 54,716
Debt:
Senior and Medium-Term Notes 369,241 303,810
Subsidiaries* 180,413 195,876
--------- ---------
645,654 564,888
--------- ---------
SHARE-OWNERS' EQUITY
Preferred Stock
Junior Participating Cumulative
Preferred Stock
Common Stock 36,626 34,667
Additional paid-in capital 405,420 289,819
Treasury stock (15,895) (12,812)
Stock Held in Trust (1,535) (1,318)
Unallocated stock in Employee Stock Ownership Plan (3,317) (3,686)
Retained earnings (including undistributed
income of subsidiaries: 2001 - $1,064,188; 2000 - $922,405) 924,517 858,761
Accumulated other comprehensive income
Net unrealized gains (losses) on
investments (all from subsidiaries, net
of income tax: 2001 - $29,254; 2000 - $(27,662)) 54,328 (51,373)
--------- ---------
1,400,144 1,114,058
--------- ---------
$2,045,798 $1,678,946
========= =========
- ------------------
*Eliminated in consolidation.
See notes to condensed financial statements.
2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES ---- ---- ----
Net income $ 102,943 $ 153,476 $ 151,327
Adjustments to reconcile net income
to net cash provided by operating
activities:
Realized investment (gains) losses 12,341 (6,856) 5,817
Equity in undistributed net income
of subsidiaries* (105,418) (107,465) (130,177)
Deferred income taxes (18,566) 25,947 7,935
Accrued income taxes 14,928 (43,080) 19,666
Accrued expenses 25,313 6,822 4,380
Accrued investment income 247 1,913 (2,160)
Receivables from subsidiaries (7,823) 8,976 (8,746)
Other (net) (20,400) (11,255) 5,884
-------- -------- --------
Net cash provided by operating activities 3,565 28,478 53,926
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of and/or additional investments
in subsidiaries* (133,406) (102,987) (28,638)
Return of capital from subsidiaries 34,288 14,621
Principal payments received on loan
to subsidiary* 4,000 4,000 4,000
Change in fixed maturities and long-term
investments (7,020) 3,047 (5,516)
Change in short-term investments 3,990 (2,000) (2,000)
-------- -------- --------
Net cash used in investing activities (132,436) (63,652) (17,533)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of
credit arrangements and long-term debt 159,160 237,104 106,800
Principal payments on line of credit
arrangements and debt (93,729) (166,979) (41,538)
Repayment of subsidiary debt (69,621)
Issuance of guaranteed preferred
beneficial interests 100,000
Purchase of Common Stock (217) (697) (621)
Dividends to Share Owners (37,187) (32,919) (30,305)
--------- -------- --------
Net cash provided by (used in) financing
activities 128,027 36,509 (35,285)
--------- -------- --------
INCREASE (DECREASE) IN CASH (844) 1,335 1,108
CASH AT BEGINNING OF YEAR 2,958 1,623 515
--------- -------- --------
CASH AT END OF YEAR $ 2,114 $ 2,958 $ 1,623
========= ======== ========
- ------------------
*Eliminated in consolidation.
See notes to condensed financial statements.
The Company publishes consolidated financial statements that are its primary financial statements. Therefore, these parent company condensed financial statements are not intended to be the primary financial statements of the Company, and should be read in conjunction with the consolidated financial statements and notes thereto of Protective Life Corporation and subsidiaries.
On January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 133, as amended by SFAS Nos. 137 and 138, requires the company to record all derivative financial instruments, at fair value on the balance sheet. Changes in fair value of a derivative instrument are reported in net income or other comprehensive income, depending on the designated use of the derivative instrument. The adoption of SFAS No. 133 resulted in a cumulative charge to net income, net of income tax, of $7.6 million on January 1, 2001. The charge to net income primarily resulted from the recognition of derivative instruments embedded in the Company’s corporate bond portfolio. In addition, the charge to net income includes the recognition of the ineffectiveness on existing hedging relationships including the difference in spot and forward exchange rates related to foreign currency swaps used as an economic hedge of foreign-currency-denominated stable value contracts. Prospectively, the adoption of SFAS No. 133 may introduce volatility into the Company’s reported net income and other comprehensive income depending on future market conditions and the Company’s hedging activities.
At December 31, 2001, the Company had no borrowings under its $200 million line of credit arrangements. $100.0 million of Floating Rate Senior Notes due 2003, $75.0 million of Senior Notes due 2004, $49.9 million of Senior Notes due 2010, $9.9 million of Medium-Term Notes due 2011, $39.9 million of Senior Notes due 2015, $59.9 million of Senior Notes due 2016, $77.3 million of subordinated debentures due 2027, $34.7 million of Senior Notes due 2030, and $103.1 million of subordinated debentures due 2031 were outstanding at December 31, 2001. The subordinated debentures were issued to affiliates in connection with the issuance by such affiliates of Trust Originated Preferred Securities.
2001 2000 1999
---------------------------------------------------
CASH PAID (RECEIVED) DURING THE YEAR FOR:
Interest Paid to Non-Affiliates $ 22,693 $14,696 $ 12,215
Interest Paid to Subsidiary* 10,163 14,085 17,218
-------- ------- --------
$ 32,856 $28,781 $ 29,433
======== ======= ========
Income Taxes (reduced by amounts received
from affiliates under a tax sharing agreement) $ 3,000 $32,039 $(18,584)
======== ======= ========
NONCASH INVESTING AND FINANCING ACTIVITIES
Reissuance of Treasury Stock to ESOP $ 879 $ 255 $ 440
======== ======= ========
Change in unallocated Stock in ESOP $ 369 $ 357 $ 234
======== ======= ========
Stock-based Compensation $ 3,589 $33,655 $ 1,092
======== ======= ========
Redemption of FELINE PRIDES $113,414
========
Protective Life Insurance Company (Protective Life) has issued surplus debentures to the Company in order to finance acquisitions and growth. At December 31, 2001, the balance of the surplus debentures was $6.0 million. The surplus debentures are included in receivables from subsidiaries. Protective Life must obtain the approval of the Tennessee Commissioner of Insurance before it may pay interest or repay principal on the surplus debentures.
In 2000, the Company completed the sale of its Hong Kong affiliate. Included as a component of other income is $24.8 million relating to the transaction.
On December 31, 2001, the Company completed the sale to Fortis, Inc. of substantially all of its Dental Benefits Division (Dental Division), and discontinued other remaining Dental Division related operations, primarily other health insurance lines.
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------ ------ ------ ------ ------
STABLE VALUE
CONTRACTS,
ANNUITY
DEFERRED CONTRACTS AND
POLICY FUTURE POLICY OTHER NET PREMIUMS
ACQUISITION BENEFITS AND UNEARNED POLICYHOLDERS' AND POLICY
SEGMENT COSTS CLAIMS PREMIUMS FUNDS FEES
- -------------------------------------------------------------------------------------------------------------------
Year Ended
December 31, 2001:
Life Marketing $ 829,021 $3,326,841 $ 303 $ 86,937 $120,995
Acquisitions 418,268 3,046,401 434 876,221 182,433
Stable Value Contracts 6,374 - - 3,872,637
Annuities 128,488 281,074 - 2,232,779 28,145
Credit Products 141,882 208,818 901,062 2,773 250,061
Corporate and Other 8,650 16,573 2,241 247 37,035
Adjustments(2) 92,085 334 24,193
---------- ---------- -------- ---------- --------
TOTAL $1,532,683 $6,971,792 $904,374 $7,095,787 $618,669
========== ========== ======== ========== ========
Year Ended
December 31, 2000:
Life Marketing $ 630,838 $2,721,847 $ 315 $ 101,105 $ 99,813
Acquisitions 223,430 1,364,830 484 238,466 102,997
Stable Value Contracts 2,144 162,236 - 3,177,863 -
Annuities 127,334 306,021 - 1,633,203 30,127
Credit Products 112,135 292,634 931,735 3,963 220,421
Corporate and Other 81,711 70,729 2,261 1,286 36,432
Adjustments(2) 11,788 113,660 2,721 64,404
---------- ---------- -------- ---------- --------
TOTAL $1,189,380 $5,031,957 $937,516 $5,220,290 $489,790
========== ========== ======== ========== ========
Year Ended
December 31, 1999:
Life Marketing $115,713
Acquisitions 114,866
Stable Value Contracts -
Annuities 24,248
Credit Products 107,969
Corporate and Other 35,934
Adjustments
--------
TOTAL $398,730
========
(1) Allocations of Net Investment Income and Other Operating Expenses are based on a number of assumptions and estimates and
results would change if different methods were applied.
(2) Asset adjustments represent the inclusion of assets related to discontinued operations.
COL. A COL. G COL. H COL. I COL. J
------ ------ ------ ------ ------
AMORTIZATION
OF DEFERRED
NET BENEFITS AND POLICY OTHER
INVESTMENT SETTLEMENT ACQUISITIONS OPERATING
SEGMENT INCOME(1) EXPENSES COSTS EXPENSES(1)
- -------------------------------- ---------------- ---------------- ---------------- --------------
Year Ended
December 31, 2001:
Life Marketing $179,346 $190,538 $ 41,399 $ 49,743
Acquisitions 187,535 238,877 20,501 43,232
Stable Value Contracts 261,079 222,306 1,662 3,961
Annuities 167,905 137,204 24,021 29,434
Credit Products 48,940 154,893 57,681 99,103
Corporate and Other 39,236 28,806 1,794 59,466
Adjustments(2) -------- -------- -------- --------
TOTAL $884,041 $972,624 $147,058 $284,939
======== ======== ======== ========
Year Ended
December 31, 2000:
Life Marketing $152,511 $149,430 $ 48,771 $ 47,861
Acquisitions 116,940 125,151 17,081 24,939
Stable Value Contracts 243,132 207,143 900 3,881
Annuities 132,314 109,607 24,156 25,403
Credit Products 47,029 135,494 50,132 90,958
Corporate and Other 38,223 33,953 2,140 56,054
Adjustments(2) -------- -------- -------- --------
TOTAL $730,149 $760,778 $143,180 $249,096
======== ======== ======== ========
Year Ended
December 31, 1999:
Life Marketing $138,198 $147,631 $ 29,481 $ 66,391
Acquisitions 129,806 129,581 19,444 31,967
Stable Value Contracts 210,208 175,290 744 4,709
Annuities 106,645 88,642 19,820 21,014
Credit Products 24,506 55,899 24,718 57,382
Corporate and Other 58,605 32,613 2,482 44,124
Adjustments -------- -------- -------- --------
TOTAL $667,968 $629,656 $ 96,689 $225,587
======== ======== ======== ========
(1) Allocations of Net Investment Income and Other Operating Expenses are based on a number of assumptions and estimates and
results would change if different methods were applied.
(2) Asset adjustments represent the inclusion of assets related to discontinued operations.
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------ ------ ------ ------ ------
PERCENTAGE OF
CEDED TO OTHER ASSUMED FROM AMOUNT ASSUMED
GROSS AMOUNT COMPANIES OTHER COMPANIES NET AMOUNT TO NET
----------------------------------------------------------------------------------------
Year Ended
December 31, 2001:
Life insurance
in force $191,105,511 $171,449,182 $23,152,614 $42,808,943 54.1%
============ ============ =========== =========== =====
Premiums and
policy fees:
Life insurance $ 774,294 $ 565,130 $ 198,832 $ 407,996 48.7%
Accident/health
insurance 181,509 122,747 58,762 0.0%
Property and liability
insurance 158,890 83,274 76,295 151,911 50.2%
------------ ------------ ----------- -----------
TOTAL $ 1,114,693 $ 771,151 $ 275,127 $ 618,669
============ ============ =========== ===========
Year Ended
December 31, 2000:
Life insurance
in force $153,371,754 $128,374,583 $17,050,342 $42,047,513 40.6%
============ ============ =========== =========== =====
Premiums and
policy fees:
Life insurance $ 670,113 $ 493,793 $ 112,668 $ 288,988 39.0%
Accident/health
insurance 203,430 128,520 17,164 92,074 18.6%
Property and liability
insurance 159,354 63,795 13,169 108,728 12.1%
------------ ------------ ----------- -----------
TOTAL $ 1,032,897 $ 686,108 $ 143,001 $ 489,790
============ ============ =========== ===========
Year Ended
December 31, 1999:
Life insurance
in force $112,726,959 $ 92,566,755 $17,089,627 $37,249,831 45.9%
============ ============ =========== =========== =====
Premiums and
policy fees:
Life insurance $ 530,728 $ 368,139 $ 130,368 $ 292,957 44.5%
Accident/health
insurance 153,818 93,657 11,893 72,054 16.5%
Property and liability
insurance 34,109 501 111 33,719 0.3%
------------ ------------ ----------- -----------
TOTAL $ 718,655 $ 462,297 $ 142,372 $ 398,730
============ ============ =========== ===========
None
Except for the information concerning executive officers of the Company set forth below, the information called for by this Item 10 is incorporated herein by reference to the section entitled “Election of Directors and Information about Nominees” in the Company’s definitive proxy statement for the Annual Meeting of Share Owners, May 6, 2002, to be filed with the Securities and Exchange Commission by the Company pursuant to Regulation 14A within 120 days after the end of its 2001 fiscal year.
The executive officers of the Company are as follows:
NAME AGE POSITION
---- --- --------
John D. Johns 50 President and Chief Executive Officer, and
Director
R. Stephen Briggs 52 Executive Vice President, Individual Life
Jim E. Massengale 59 Executive Vice President, Acquisitions
Allen W. Ritchie 44 Executive Vice President and Chief Financial
Officer
Richard J. Bielen 41 Senior Vice President, Chief Investment Officer
and Treasurer
J. William Hamer, Jr. 57 Senior Vice President and Chief
Human Resources Officer
Thomas Davis Keyes 49 Senior Vice President,
Information Services
Carolyn King 51 Senior Vice President,
Investment Products
Deborah J. Long 48 Senior Vice President,
Secretary and General Counsel
Steven A. Schultz 48 Senior Vice President,
Financial Institutions
Wayne E. Stuenkel 48 Senior Vice President
and Chief Actuary
Carl S. Thigpen 45 Senior Vice President, Chief Mortgage and Real
Estate Officer
Judy Wilson 44 Senior Vice President,
Stable Value Products
Jerry W. DeFoor 49 Vice President and Controller,
and Chief Accounting Officer
All executive officers are elected annually and serve at the pleasure of the Board of Directors. None of the executive officers is related to any director of the Company or to any other executive officer.
Mr. Johns has been President and Chief Executive Officer of the Company since December 2001 and a Director of the Company since May 1997. He was President and Chief Operating Officer of the Company from August 1996 to December 2001. He is also a director of National Bank of Commerce of Birmingham, Alabama National Bancorporation and John H. Harland Company. Mr. Johns has been employed by the Company and its subsidiaries since 1993.
Mr. Briggs has been Executive Vice President, Individual Life of the Company since October 1993 and has responsibility for the Individual Life Division. Mr. Briggs has been associated with the Company and its subsidiaries since 1971.
Mr. Massengale has been Executive Vice President, Acquisitions of the Company since August 1996 and also has responsibility for the West Coast Division. Mr. Massengale has been employed by the Company and its subsidiaries since 1983.
Mr. Ritchie has been Executive Vice President and Chief Financial Officer of the Company since August 2001. From July 1998 until 2000, Mr. Ritchie was President, Chief Executive Officer and Director of Per-Se Technologies, Inc. From April 1998 until July 1998, he served as Chief Operating Officer of Per-Se. From January 1998 until April 1998, Mr. Ritchie served as Executive Vice President and Chief Financial Officer of Per-Se Technologies. From 1996 to 1997, Mr. Ritchie was President of AGCO Corporation.
Mr. Bielen has been Senior Vice President, Chief Investment Officer and Treasurer, of the Company since January 2002. From August 1996 until January 2002, he was Senior Vice President, Investments of the Company. Mr. Bielen has been employed by the Company and its subsidiaries since 1991.
Mr. Hamer has been Senior Vice President, Chief Human Resources Officer of the Company since March 2001. From 1981 to March 2001, he was Vice President, Human Resources. Mr. Hamer has been employed by the Company since 1981.
Mr. Keyes has been Senior Vice President, Information Services of the Company since April 1999. He was Vice President, Information Services of the Company from May 1993 to April 1999. Mr. Keyes has been employed by the Company and its subsidiaries since 1982.
Ms. King has been Senior Vice President, Investment Products of the Company since April 1995.
Ms. Long has been Senior Vice President, Secretary and General Counsel of the Company since November 1996. Ms. Long has been employed by the Company and its subsidiaries since 1993.
Mr. Schultz has been Senior Vice President, Financial Institutions of the Company since March 1993. Mr. Schultz has been employed by the Company and its subsidiaries since 1989.
Mr. Stuenkel has been Senior Vice President and Chief Actuary of the Company since March 1987. Mr. Stuenkel is a Fellow of the Society of Actuaries and has been employed by the Company and its subsidiaries since 1978.
Mr. Thigpen has been Senior Vice President, Chief Mortgage and Real Estate Officer of the Company since January 2002. From March 2001 to January 2002, he was Senior Vice President, Investments. From May 1996 to March 2001, he was Vice President, Investments for the Company. Mr. Thigpen has been employed by the Company and its subsidiaries since 1992.
Ms. Wilson has been Senior Vice President, Stable Value Products of the Company since January 1995. Ms. Wilson has been employed by the Company and its subsidiaries since 1991.
Mr. DeFoor has been Vice President and Controller, and Chief Accounting Officer of the Company since April 1989. Mr. DeFoor is a certified public accountant and has been employed by the Company and its subsidiaries since 1982.
These executive officers also serve as executive officers and/or directors of various other Company subsidiaries.
Directors and executive officers of the Company are required to file reports with the Securities and Exchange Commission showing changes in their beneficial ownership of the Company’s Common Stock. The Company has reviewed copies of these reports and written representations from the individuals who are required to file reports. Based on this review, we believe that each of the Company’s directors and executive officers has complied with the reporting requirements in 2001, with the following exceptions. The Form 5 filed by Mr. Cabaniss included a previously unreported indirect holding in a trust for which he is designated as a co-trustee. A report of a sale of 1,739 shares by Mr. Nabers in connection with his retirement was inadvertently filed late. One Form 4 filed by Mr. Briggs included a previously unreported indirect holding. One Form 4 filed by Mr. Hamer reporting the sale of 6,954 shares and the indirect ownership of shares held by his daughter was inadvertently filed late.
The information called for by this Item is incorporated herein by reference from the Company’s definitive proxy statement for the Annual Meeting of Share Owners, May 6, 2002.
The information called for by this Item is incorporated herein by reference from the Company’s definitive proxy statement for the Annual Meeting of Share Owners, May 6, 2002.
None.
(a) The following documents are filed as part of this report:
1. Financial Statements:
The following financial statements set forth in the Company's 2001 Annual Report to Share Owners as indicated in the
following table are incorporated by reference (see Exhibit 13).
Page
Consolidated Statements of Income for the years
ended December 31, 2001, 2000, and 1999...............................................
Consolidated Balance Sheets as of December 31,
2001 and 2000 ........................................................................
Consolidated Statements of Share-Owners' Equity
for the years ended December 31, 2001, 2000, and 1999.................................
Consolidated Statements of Cash Flows
for the years ended December 31, 2001, 2000, and 1999.................................
Notes to Consolidated Financial Statements..............................................
Report of Independent Accountants.......................................................
2. Financial Statement Schedules:
The Report of Independent Accountants which covers the financial statement schedules appears on page 21 of this
report. The following schedules are located in this report on the pages indicated.
Page
Schedule II - Condensed Financial Information
of Registrant.........................................................................
Schedule III - Supplementary Insurance Information......................................
Schedule IV - Reinsurance...............................................................
All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not
required under the related instructions or are inapplicable and therefore have been omitted.
3. Exhibits:
Included as exhibits are the items listed below. The Company will furnish a copy of any of the exhibits listed upon
the payment of $5.00 per exhibit to cover the cost of the Company in furnishing the exhibit.
Item Number Document
2(a) Stock and Asset Purchase Agreement By and Among Protective Life Corporation, Protective Life
Insurance Company, Fortis, Inc. and Dental Care Holdings, Inc. dated July 9, 2001.
2(b) Indemnity Reinsurance Agreement By and Between Protective Life Insurance Company and Fortis
Benefits Insurance Company dated December 31, 2001.
2(c) Indemnity Reinsurance Agreement By and Between Empire General Life Assurance Corporation and
Fortis Benefits Insurance Company dated December 31, 2001.
2(d) Indemnity Reinsurance Agreement By and Between Protective Life & Annuity Insurance Company and
First Fortis Life Insurance Company dated December 31, 2001.
*3(a) 1998 Restated Certificate of Incorporation of the Company filed with the Secretary of State of
Delaware on November 12, 1998, filed as Exhibit 3(a) to the Company's Annual Report on Form
10-K/A for the year ended December 31, 1998.
- ------------------------------
*incorporated by reference
*3(b) 1998 Restated By-laws of the Company effective November 2, 1998, filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
3(b)(1) Amendment No. 1 dated February 4, 2002, to the 1998 Restated By-Laws of the Company.
4(a) Reference is made to Exhibit 3(a) above.
4(b) Reference is made to Exhibits 3(b) and 3(b)(1) above.
*4(c) Rights Agreement, dated as of August 7, 1995, between the Company and The Bank of New York as
successor to AmSouth Bank (formerly, AmSouth Bank N.A.), as Rights Agent filed as Exhibit 2 to
the Company's Form 8-K Current Report filed August 7, 1995 and filed as Exhibit 1 to the
Company's Form 8-A Registration Statement filed August 7, 1995.
*4(d) Rights Certificate filed as Exhibit 1 to the Company's Form 8-A filed August 7, 1995.
*4(e) Certificate of Trust of PLC Capital Trust I filed as Exhibit 4(a) to the Company's
Registration Statement on Form S-3 filed April 11, 1997 (No. 333-25027).
*4(f) Declaration of Trust of PLC Capital Trust I filed as Exhibit 4(b) to the Company's
Registration Statement on Form S-3 filed April 11, 1997 (No. 333-25027).
*4(g) Form of Amended and Restated Declaration of Trust for PLC Capital Trust I filed as Exhibit
4(c) to Amendment No. 1, filed April 21, 1997, to the Company's Registration Statement on Form
S-3 (No. 33-25027).
*4(h) Form of Preferred Security Certificate for PLC Capital Trust I (included as Exhibit A-1 of
Exhibit 4(f)).
*4(i) Form of Guarantee with respect to Preferred Securities of PLC Capital Trust I filed as Exhibit
4(i) to the Company's Registration Statement on Form S-3 filed April 11, 1997 (No. 333-25027).
*4(j) Certificate of Trust of PLC Capital Trust III filed as Exhibit 4(bb) to the Company's
Registration Statement on Form S-3 filed July 8, 1997 (No. 333-30965).
*4(k) Declaration of Trust of PLC Capital Trust III filed as Exhibit 4 (ee) to the Company's
Registration Statement on Form S-3 filed July 8, 1997 (No. 333-30965).
*4(l) Form of Amended and Restated Declaration of Trust of PLC Capital III, dated August 22, 2001
filed as Exhibit 4.3 to the Company's Current Filing on Form 8-K filed August 22, 2001.
*4(m) Form of Preferred Security Certificate for PLC Capital Trust III (included in Exhibit 4(l)).
*4(n) Preferred Securities Guarantee Agreement, dated August 22, 2001 with respect to Preferred
Securities issued by PLC Capital Trust III filed as Exhibit 4.4 to the Company's Current
Report on Form 8-K filed August 22, 2001.
*10(a)† The Company's Annual Incentive Plan (effective as of January 1, 1997) filed as Exhibit 10(b)
to the Company's Form 10-Q Quarterly Report filed May 14, 1997.
*10(b)† The Company's 1997 Long-Term Incentive Plan (formerly, the "1997 Performance Share Plan"),
filed as Exhibit 10(a) to the Company's Form 10-Q Quarterly Report filed May 15, 1998.
10(c)† Excess Benefit Plan amended and restated as of July 1, 2001.
*10(d)† Form of Indemnity Agreement for Directors filed as Exhibit 19.1 to the Company's Form 10-Q
Quarterly Report filed August 14, 1986.
*10(d)(1)† Form of Indemnity Agreement for Officers filed as Exhibit 10(d)(1) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
*10(e)† Form of the Company's Employment Continuation Agreement filed as Exhibit 10(a) to the
Company's Form 10-Q Quarterly Report filed September 30, 1997.
*10(f)† The Company's Deferred Compensation Plan for Directors Who Are Not Employees of the Company as
amended through March 3, 1997, filed as Exhibit 10(e) to the Company's Form 10-Q Quarterly
Report filed May 14, 1997.
*10(g)† The Company's Deferred Compensation Plan for Officers as amended through March 3, 1997, filed
as Exhibit 10(d) to the Company's Form 10-Q Quarterly Report filed May 14, 1997.
- ----------------------------
*incorporated by reference
†Management contract or compensatory plan or arrangement
*10(h)† The Company's 1996 Stock Incentive Plan as amended through March 3, 1997, filed as Exhibit
10(c) to the Company's Form 10-Q Quarterly Report filed May 14, 1997.
*10(h)(1)† The Company's specimen letter confirming grants under the Company's 1996 Stock Incentive Plan,
filed as Exhibit 10(2) to the Company's Form 10-Q Quarterly Report filed November 13, 1996.
10(i) Credit Agreement among Protective Life Corporation, the several lenders from time to time party
thereto, Suntrust Bank, as Syndication Agent, and AmSouth Bank, as Administrative Agent, dated
October 17, 2001.
10(j) Reference is made to Exhibit 2(a) above.
10(k) Reference is made to Exhibit 2(b) above.
13 Selected portions of the 2001 Annual Report To Share Owners which are incorporated herein by
reference.
21 Organization Chart of the Company and Affiliates.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney.
99 Safe Harbor for Forward-Looking Statements.
(b) Current Reports on Form 8-K:
(1) Form 8-K, dated August 23, 2001
- Item 5
- Item 7
- --------------------
*incorporated by reference
†Management contract or compensatory plan or arrangement
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PROTECTIVE LIFE CORPORATION | |
|---|---|
| BY/s/John D. Johns | |
| John D. Johns | |
| President and | |
| Chief Executive Officer |
Dated: March 27, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
/s/John D. Johns President and Chief Executive Officer March 27, 2002
- ---------------------- (Principal Executive Officer)
JOHN D. JOHNS and Director
/s/Allen W. Ritchie Executive Vice President and March 27, 2002
- ----------------------- Chief Fiancial Officer
ALLEN W. RITCHIE (Principal Financial Officer)
/s/Jerry W. DeFoor Vice President and Controller, March 27, 2002
- ----------------------- and Chief Accounting Officer
JERRY W. DEFOOR (Principal Accounting Officer)
* Director March 27, 2002
- -----------------------
WILLIAM J. CABANISS, JR.
* Director March 27, 2002
- ----------------------
JOHN J. MCMAHON, JR.
* Director March 27, 2002
- ----------------------
A. W. DAHLBERG
* Director March 27, 2002
- ----------------------
JAMES S. M. FRENCH
* Director March 27, 2002
- ----------------------
ROBERT A. YELLOWLEES
* Director March 27, 2002
- ----------------------
DONALD M. JAMES
* Director March 27, 2002
- ----------------------
J. GARY COOPER
* Director March 27, 2002
- ----------------------
H. CORBIN DAY
* Director March 27, 2002
- ----------------------
W. MICHAEL WARREN, JR.
* Director March 27, 2002
- ----------------------
SUSAN MOLINARI
- ---------------------
*John D. Johns, by signing his name hereto, does sign this document on behalf of each of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission.
| BY/s/John D. Johns | |
| JOHN D. JOHNS | |
| Attorney-in-fact |