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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998 Commission File Number 1-12332
PROTECTIVE LIFE CORPORATION
(Exact name of Registrant as specified in its charter)
2801 HIGHWAY 280 SOUTH
BIRMINGHAM, ALABAMA 35223
(Address of principal executive offices, including zip code)
DELAWARE 95-2492236
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Registrant's telephone number, including area code (205) 879-9230
Securities registered pursuant to Section 12(b) of
the Act:
Common Stock, $0.50 Par Value
Series A Junior Participating Cumulative Preferred Stock, $1.00 Par Value
PLC Capital L.L.C. 9% Cumulative Monthly Income Preferred Securities, Series A
PLC Capital Trust I 8.25% Trust Originated Preferred Securities
FELINE PRIDES Units
Guarantees Issued for the Benefit of Holders of:
PLC Capital L.L.C. 9% Cumulative Monthly Income Preferred Securities, Series A
PLC Capital Trust I 8.25% Trust Originated Preferred Securities
(Title of class)
Name of each exchange
on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 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 5, 1999: $2,181,401,938 Number of shares of Common Stock, $0.50 Par
Value, outstanding as of March 5, 1999: 64,448,096
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1998 Annual Report To Share Owners (the "1998
Annual Report To Share Owners") are incorporated by reference into Parts I, II,
and IV of this Report.
Portions of the Registrant's Proxy Statement dated March 26, 1999, are
incorporated by reference into Part III of this Report.
PROTECTIVE LIFE CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR FISCAL YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
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 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
PART I
Item 1. Business
Protective Life Corporation is a holding company, whose subsidiaries
provide financial services through the production, distribution, and
administration of insurance and investment products. The Company also
participates in a joint venture which owns a life insurance company in Hong
Kong. Founded in 1907, Protective Life Insurance Company is the Company's
principal 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 1998 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 (http://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 (http://www.sec.gov).
The Company operates seven divisions whose principal strategic focuses
can be grouped into three general categories: life insurance, specialty
insurance products, and retirement savings and investment products.
The following table shows the percentages of pretax operating income
represented by each of the strategic focuses and the Corporate and Other
segment.
Retirement
Specialty Savings and Corporate
Year Ended Life Insurance Investment and
December 31 Insurance Products Products Other
- ----------------- ------------ ------------- ------------ ---------
1994 53.2% 20.1% 27.3% (0.6)%
1995 53.4 15.9 32.7 (2.0)
1996 50.1 11.0 37.3 1.6
1997 49.8 18.0 23.3 8.9
1998 50.9 20.1 21.7 7.3
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 I to Consolidated Financial
Statements in the Company's 1998 Annual Report to Share Owners, which are
incorporated herein by reference.
In the following paragraphs, the Company reports its divisional sales,
new capital invested, members, and annualized premium. 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 divisional profitability, and
therefore are not intended to be predictive of future profitability.
LIFE INSURANCE
A strategic focus of the Company is to expand its life insurance
operations through internal growth and acquisitions. The Individual Life, West
Coast and Acquisitions Divisions support this strategy.
Individual Life Division
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
is also developing other distribution channels. These include marketing life
insurance products through regional stockbrokers and banks, and through worksite
and direct response arrangements. The Division also offers its products on a
"private label" basis to other insurance companies and their distribution
systems. The Division has experienced increased sales even though the life
insurance industry is a mature industry.
The Division has two principal agent networks. The first is based on
experienced independent personal producing general agents who are recruited by
regional sales managers. At December 31, 1998, there were over 55 regional sales
managers located throughout the United States. This distribution system
generally appeals to agents who prefer to represent one or a few insurers, and
who may depend on the regional sales managers or the Company to furnish various
support services to the agent. Approximately 47% of the Division's 1998 sales
came from this distribution system.
The Division also distributes specialty insurance products in the life
insurance brokerage market through a wholly-owned subsidiary, Empire General
Life Assurance Corporation ("Empire General"), representing approximately 42% of
sales. This distribution system generally appeals to agents who prefer to
represent many insurers, or who look to Empire General's product offerings to
fill a special need. For the entire Division, sales through stockbrokers and
banks represented 9% of sales.
The following table shows the Individual Life Division's sales measured
by new premium.
Year Ended
December 31 Sales
------------------ --------------------
(dollars in millions)
1994 $30.8
1995 36.3
1996 45.4
1997 48.7
1998 71.2
The Division also includes ProEquities, Inc. ("PES"), an
affiliated, full-service, securities broker-dealer. PES recruits members of the
Division's field force, financial planners, and others who are licensed to sell
securities to affiliate with it. PES makes available variable insurance
products, mutual funds, and other investment products to its licensed
representatives to offer to their clients and customers.
West Coast Division
On June 3, 1997, the Company acquired West Coast Life Insurance Company
("West Coast"). Headquartered in San Francisco, West Coast sells universal life
and level premium term-like insurance products in the life insurance brokerage
market and in the "bank owned life insurance" ("BOLI") market.
The West Coast Division primarily utilizes a distribution system
comprised of brokerage general agencies ("BGAs") who recruit a network of
independent life agents. The BGAs provide varying levels of service to the
independent agents based on the size, structure and capabilities of the
individual BGA organizations. At December 31, 1998, the Division worked with 80
BGAs located throughout the United States. This distribution system represented
approximately 55% of the Division's 1998 sales.
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, and represent
approximately 45% of the Division's sales.
The following table shows the West Coast Division's sales measured by
new premium including sales prior to the Company's acquisition of West Coast for
comparison purposes.
Year Ended
December 31 Sales
--------------------- -------------------
(dollars in millions)
1996 $14.9
1997 29.8
1998 40.6
Acquisitions Division
The Company is an active participant in the consolidation of the
life insurance industry. 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 transactions
have been closed by the Division since 1970, including 13 since 1989. Blocks of
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 Division do not include the
acquisition of an active sales force. In transactions where some marketing
capacity was included, the Division 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 to operate and report West Coast as a separate division of the
Company.
The Division believes that its highly focused and disciplined
approach to the acquisition process and its extensive experience in the
assimilation, conservation, and servicing of purchased policies give it a
significant competitive advantage over many other companies that attempt to make
similar acquisitions. The Division 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
Division are expected to decline with time unless new acquisitions are made.
Therefore, the Division'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 Division and the approximate amount of new (statutory) capital
invested.
Number New
Year Ended of Capital
December 31 Transactions Invested
- ------------------- -------------- -------------------
(dollars in millions)
1994 2 $ 45.6
1995 1 16.6
1996 3 47.1
1997 1 (1) 116.8 (1)
1998 1 77.8
- -----------
(1) West Coast
From time to time other of the Company's Divisions have acquired
companies and blocks of policies which are included in their respective results.
SPECIALTY INSURANCE PRODUCTS
A second strategic focus of the Company is to participate in
specialized segments of the insurance industry that offer attractive growth
opportunities. The Dental and Consumer Benefits and Financial Institutions
Divisions support this strategy.
Dental and Consumer Benefits Division
In 1997, the Division (formerly known as the Group Division) exited
from the traditional group major medical business, fulfilling the Division's
strategy to focus primarily on dental and related products. Accordingly, the
Division was renamed.
The Division's primary strategic emphasis is on indemnity and prepaid
dental products. The Division was a pioneer in developing indemnity dental
products for the voluntary payroll deduction market. In 1995, the Division
entered the prepaid dental market when it acquired a company which transacts
business under the trade name "DentiCare". The Division's strategy is to promote
a "dual choice" option by offering prepaid dental products through the
Division's indemnity dental distribution channels.
The Division has significantly grown its prepaid dental business
through acquisitions. The Division acquired two small prepaid dental plans in
1996, and three small plans in 1997. In September 1998, the Division acquired
United Dental Care, Inc. ("United Dental Care"), a leading provider of prepaid
dental coverages. With the United Dental Care acquisition, the Division has
become the third largest provider of prepaid dental coverages.
The Division offers discounted fee-for-service dental programs to
individual consumers and groups through its Dental Network Plans where enrolled
consumers have access to a contracted network of dental providers who have
agreed to a discounted fee schedule.
The following table shows the approximate number of Dental and Consumer
Benefits Division's members in all of its dental programs and annualized dental
premium in-force at December 31.
Annualized
Dental
Members Premium
------------- -------------------
(in millions) (dollars in millions)
1994 0.2 $ 34.2
1995 0.6 74.8
1996 0.8 101.2
1997 1.2 146.1
1998 3.0 339.7
The Division also offers group life and disability coverages, and
administers an essentially closed block of individual cancer insurance policies,
with a minimal amount of new cancer insurance coverage issued.
Financial Institutions Division
The Financial Institutions Division specializes in marketing credit
life and disability insurance products through banks, consumer finance companies
and automobile dealers. The Division is one of the largest independent writers
of credit insurance in the United States. The majority of these policies cover
consumer loans made by financial institutions located primarily in the
southeastern United States and automobile dealers throughout the United States.
The demand for credit life and credit health insurance is related to the general
level for consumer loans.
The Division markets through employee field representatives,
independent brokers and wholly-owned subsidiaries. The Company believes it has
been a beneficiary of a "flight to quality," as financial institutions and
automobile dealers increasingly prefer to do business with insurers having
quality products, strong balance sheets and high-quality training and service
capabilities.
In September 1997, the Division acquired the Western Diversified Group.
The Western Diversified Group markets credit insurance and related products
through automobile dealers primarily in the midwestern United States. The
Western Diversified Group includes a small property and casualty insurer that
sells automobile extended service contracts, which the Division has begun to
market nationally through its other distribution channels. The Division acquired
a closed block of credit policies in 1996 and another in 1997.
The following table shows the Financial Institutions Division's sales
measured by new premium including sales of Western Diversified since the date of
acquisition.
Year Ended
December 31 Sales
--------------------- -------------------
(dollars in millions)
1994 $117.3
1995 136.3
1996 147.2
1997 189.3
1998 273.5
A significant portion of the Division's sales are reinsured with
producer-owned reinsurers.
RETIREMENT SAVINGS AND INVESTMENT PRODUCTS
A third 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 two Divisions that support this strategy are the Guaranteed
Investment Contracts and Investment Products Divisions.
Guaranteed Investment Contracts Division
The Guaranteed Investment Contracts ("GIC") Division markets 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, 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
related products, including fixed and floating rate funding agreements offered
to the trustees of municipal bond proceeds, bank trust departments and money
market funds, and long-term annuity contracts offered to fund certain state
obligations. The Division has benefited from the growing acceptance of funding
agreements among money managers. The Division'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 Division have
maturities of three to five years. The rate of growth in GIC account balances
has slowed as the amount of maturing contracts has increased relative to the
amount of sales of GIC and related deposits.
The following table shows the Guaranteed Investment Contract Division's
sales and account balances.
Year Ended Account
December 31 Sales Balances
--------------------- ---------- ---------
(dollars in millions)
1994 $806 $2,282
1995 751 2,524
1996 686 2,627
1997 696 2,869
1998 827 2,879
Investment Products Division
The Investment Products Division manufactures, sells, and supports
fixed and variable annuity products. These products are primarily sold through
stockbrokers, but are also sold through financial institutions and the
Individual Life Division's sales force. The demand for annuity products is
related to the general level of interest rates and performance of the equity
markets.
The Division offers 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 changes in interest rates. Since 1994, the Division
has offered variable annuities which offer the policyholder the opportunity to
invest in various investment accounts.
The following table shows the Investment Products Division's sales.
Year Ended Fixed Variable Total
December 31 Annuities Annuities Annuities
- -------------------- --------- ------------ ----------
(dollars in millions)
1994 $280 $171 $451
1995 118 189 307
1996 199 169 368
1997 180 324 504
1998 97 472 569
The following table shows the Investment Products account balances.
Year Ended Fixed Variable Total
December 31 Annuities Annuities Annuities
- ---------------- --------- ---------- ----------
(dollars in millions)
1994 $983 $170 $1,153
1995 996 388 1,384
1996 1,042 625 1,667
1997 1,229 1,057 2,286
1998 1,105 1,555 2,660
Corporate and Other
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 Divisions described above (including
net investment income on capital and interest on substantially all debt). This
segment also includes earnings from various investment-related transactions, the
Company's 50%-owned joint venture in Hong Kong and the operations of several
small subsidiaries. The earnings of this segment may fluctuate from year to
year.
Investments
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.
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. Due to the potential cash flow volatility of
mortgage-backed securities, the Company has focused on sequential, planned
amortization class ("PAC") and targeted amortization class ("TAC") securities.
These types have less cash flow volatility than other types of mortgage-backed
securities. The Company does not invest in the riskiest tranches of
mortgage-backed securities. 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, 1998. PACs pay down according to a
schedule. TACs pay down in amounts approximating targeted schedule. Sequentials,
like PACs and TACs, receive scheduled payments with any "excess" cash flow going
to repay the earliest maturing tranches first. All three 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. 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, TACs, and sequentials) 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
--------- ---------------
PAC 22.6%
TAC 10.6
Sequential 36.7
Accretion Directed 8.4
Pass Through 7.9
Support 2.2
CMBS 11.6
-------
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, 1998, approximately 99.6% of bonds
were rated by Moody's, S&P, or the NAIC.
At December 31, 1998, approximately $6,182.8 million of the Company's
$6,431.7 million bond portfolio was invested in U.S. Government or agency-backed
securities or investment grade bonds and only approximately $248.9 million of
its bond portfolio was rated less than investment grade, of which $83.5 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 1998 was $1.6 million.
The average size mortgage loan in the Company's portfolio is approximately $2.0
million. The largest single loan amount is $12.8 million.
The following table shows a breakdown of the Company's mortgage loan
portfolio by property type at December 31, 1998:
Percentage of
Mortgage Loans
Property Type on Real Estate
---------------- ----------------
Retail 75%
Apartments 10
Warehouses 8
Office Building 6
Other 1
----
Total 100%
====
Retail loans are generally on strip shopping centers located in smaller
towns and anchored by one or more strong 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 some of the largest anchor
tenants (measured by the Company's exposure) in the strip shopping centers at
December 31, 1998:
Percentage of
Mortgage Loans
Anchor Tenants on Real Estate
----------------- ----------------
Food Lion, Inc. 5%
KMart Corporation 3
Winn Dixie Stores, Inc. 3
Wal-Mart Stores, Inc. 2
CVS Corporation 2
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.
For several years the Company has offered 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 $464.4 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, 1998, $11.7 million or 0.7% 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, and in 1998 the
Company securitized an additional $146 million of its mortgage loans. The
securitizations' senior tranches were sold, and the Company retained the junior
tranches. The Company continues to service the securitized mortgage loans.
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 Company has an allowance for uncollectible amounts on investments.
This allowance was $24.8 million at December 31, 1998.
The following table shows the investment results of the Company for the
years 1994 through 1998:
Cash, Accrued Percentage
Investment Income, Net Earned on Realized
Year Ended and Investments Investment Average of Cash Investment
December 31 at December 31 Income and Investments Gains (Losses)
- ----------- ----------------- ----------- ----------------- --------------
(dollars in thousands)
1994 $5,362,016 $417,825 8.3% $6,298
1995 6,097,455 475,924 8.2 1,612
1996 6,743,770 517,483 8.1 5,510
1997 8,192,538 591,376 7.9 830
1998 8,718,455 636,396 7.5 3,121
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 A and B to the
Consolidated Financial Statements, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
in the Company's 1998 Annual Report to Share Owners.
Insurance in Force
The Company's total consolidated life insurance in force at December
31, 1998 was $110.0 billion. The following table shows sales by face amount and
insurance in force for the Company's divisions.
Year Ended December 31
1998 1997 1996 1995 1994
(dollars in thousands)
New Business Written
Individual Life..................... $ 16,188,344 $10,588,594 $ 9,245,002 $ 7,564,983 $ 6,329,630
West Coast.......................... 5,050,309 1,984,928
Dental and Consumer Benefits........ 113,056 124,230 115,748 119,357 184,429
Financial Institutions.............. 5,257,957 4,183,216 3,956,581 3,563,177 2,524,212
-------------- ------------ ----------- ------------- ------------
Total.......................... $ 26,609,666 $16,880,968 $13,317,331 $ 11,247,517 $ 9,038,271
============== ============ =========== ============ ============
Business Acquired
West Coast.......................... $10,237,731
Acquisitions........................ $ 7,787,284 $ 1,286,673 $ 6,129,159 $ 4,756,371
Financial Institutions.............. 3,364,617 1,607,463
-------------- ---------- ---------- ----------- ------------
Total.......................... $ 7,787,284 $13,602,348 $ 2,894,136 $ 6,129,159 $ 4,756,371
============== ========== ========== =========== ===========
Insurance in Force at End of Year(1)
Individual Life..................... $ 50,587,419 $39,715,608 $35,765,841 $32,500,935 $25,843,232
West Coast.......................... 15,498,799 12,004,967
Acquisitions........................ 27,606,592 20,955,836 20,037,857 16,778,359 11,728,569
Dental and Consumer Benefits........ 6,665,815 6,393,076 6,054,947 6,371,313 7,464,501
Financial Institutions.............. 9,632,466 10,183,997 7,468,761 6,233,256 4,841,318
-------------- ----------- ------------ ----------- -----------
Total.......................... $109,991,091 $89,253,484 $69,327,406 $61,883,863 $49,877,620
============== =========== ============ =========== ===========
(1)Reinsurance assumed has been included; reinsurance ceded (1998-$64,846,246;
1997-$34,139,554; 1996- $18,840,221; 1995-$17,524,366; 1994-$8,639,272) 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 and assumptions was:
Ratio of
Year Ended Voluntary
December 31 Terminations
1994........................................ 7.0%
1995........................................ 6.9
1996........................................ 6.4
1997........................................ 6.9
1998........................................ 6.4
Net terminations reflect voluntary lapses, some of which may be due to
the replacement of the Company's products with competitors' products. Also, a
higher percentage of voluntary lapses typically occurs in the first 15 months of
a policy, and accordingly, lapses will tend to increase or decrease in
proportion to the change in the amount of new insurance written during the
immediately preceding periods.
The amount of investment products in force is measured by account
balances. The following table shows guaranteed investment 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.
Guaranteed Modified
Year Ended Investment Guaranteed Fixed Variable
December 31 Contracts Annuities Annuities Annuities
-------------- ------------- ----------------- ------------ -------------
(dollars in thousands)
1994 $2,281,673 $661,359 $542,766 $ 170,454
1995 2,451,693 741,849 472,656 392,237
1996 2,474,728 862,747 390,461 624,714
1997 2,684,676 926,071 453,418 1,057,186
1998 2,691,697 818,566 286,413 1,554,969
Underwriting
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.
Group insurance underwriting policies are administered by experienced
group underwriters. The underwriting policies are designed for single employer
groups. Initial premium rates are based on prior claim experience and manual
premium rates with relative weights depending on the size of the group and the
nature of the benefits.
Indemnity Reinsurance
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; for group insurance, the
maximum amount retained on any one life is $100,000. In many cases the retention
is less. At December 31, 1998, the Company had insurance in force of $110.0
billion of which approximately $64.8 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 Individual Life, West Coast, and Acquisitions
Divisions. Although the Company does not anticipate increases to occur, the
reinsurance premium rates in many of the Company's reinsurance agreements are
not guaranteed, and could be increased by the reinsurer.
Policy Liabilities and Accruals
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 generally accepted accounting principles)
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 regulation). For
policy liabilities other than those for universal life policies, annuity
contracts, and GICs, these differences arise from the use of mortality and
morbidity tables and interest rate assumptions which are deemed under generally
accepted accounting principles 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, and GICs are carried in the Company's financial
reports at the account value of the policy or contract.
Federal Income Tax Consequences
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 life insurance company income with
noninsurance 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, 1998, 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.
Competition
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. Insurance
is a highly competitive industry, and 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.
The life and health insurance industry is consolidating, with larger,
more efficient organizations emerging from consolidation. Also, mutual insurance
companies are converting to stock ownership which will give them greater access
to capital markets.
Management believes that 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 financial strength ratings from rating agencies.
The Company competes against other insurance companies and financial
institutions in the origination of commercial mortgage loans.
Regulation
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 all
aspects of the insurance business, including premium rates, marketing practices,
advertising, policy forms, and capital adequacy, and is concerned primarily
with the protection of policyholders rather than share owners. The Company
cannot predict the form of any future proposals or regulation.
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 generally accepted accounting principles 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, 1998 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 1998, 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 1999 is estimated to be
$138.9 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.
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.
The Federal Government has advocated repeal of the Glass-Steagall Act
and certain other legislative changes, which would allow banks to diversify into
securities and other businesses, including possibly insurance. The ultimate
scope and effective date of any proposals are unknown at this time and are
likely to be modified as they are considered for enactment. It is anticipated
that these proposals may increase competition and, therefore, may adversely
affect the Company.
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 - Liquidity and Capital Resources"
in the Company's 1998 Annual Report to Share Owners.
Recent Developments
The NAIC has adopted the Codification of Statutory Accounting
Principles ("Codification"). The Codification changes current statutory
accounting rules in several areas. The Company has not estimated the potential
effect the Codification will have on the statutory capital of the Company's
insurance subsidiaries. The Codification has been proposed to become effective
January 1, 2001.
The NAIC is considering a new reserving standard, commonly referred to
as "Triple X" (i.e., roman numeral XXX), for universal life and level premium
term and term-like insurance products. The Company is currently assessing the
impact of Triple X on its products and what changes to the products might be
necessary in response to Triple X.
The President's Fiscal Year 2000 Budget contains proposals that, if
enacted, would adversely affect the life insurance industry. The first proposal
would require insurers to include in taxable income over 10 years the balances
accumulated in a tax memorandum account designated as Policyholders' Surplus.
The Company's accumulation in this account at December 31, 1998 was
approximately $70.5 million. A second proposal would require insurers to
capitalize higher percentages of acquisition expenses for tax purposes,
resulting in the earlier
payment of tax. A third proposal would reduce the attractiveness of corporate-
owned life insurance (or COLI) products.
Life insurance products are often used to fund estate tax obligations.
Recently a report issued by the Congressional Joint Economic Committee
recommended the elimination of the estate tax. If the estate tax were
eliminated, the demand for certain life insurance products would be adversely
affected.
Some insurers have recently lowered the premium rates for their level
premium term and term-like products. The Company's Individual Life and West
Coast Divisions are currently developing a response. Those Divisions' results,
in part, depend upon their ability to maintain competitive level premium term
and term-like products.
Employees
At December 31, 1998 the Company had approximately 2,500 employees,
including approximately 1,350 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 in 1998 amounted to approximately
$5.2 million to the Company. 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 plan. See Note K to Consolidated
Financial Statements.
Item 2. Properties
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 1,000 vehicles.
The Company leases administrative space in approximately 16 cities
including approximately 114,000 square feet in Birmingham, with most leases
being for periods of three to five years. The aggregate monthly rent is
approximately $428 thousand.
Marketing offices are leased in approximately 35 cities, with most
leases being for periods of three to five years. The aggregate monthly rent is
approximately $141 thousand.
Item 3. Legal Proceedings
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. See also "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources"
in the Company's 1998 Annual Report to Share Owners for certain information
relating to litigation involving the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of 1998 to a vote of
security holders of the Company.
PART II
Item 5. Market for the Registrant's Common Equity and Related Share-Owner
Matters
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.
Closing prices and dividends have been adjusted for the Company's two-for-one
stock split effective April 1, 1998.
Range Dividends
------------------- ---------
High Low
------- -------
1997
First Quarter........................... $22.31 $18.81 $.09
Second Quarter.......................... 25.38 20.31 .10
Third Quarter........................... 26.75 23.81 .10
Fourth Quarter.......................... 32.63 25.06 .10
1998
First Quarter........................... $36.50 $28.94 $.10
Second Quarter.......................... 38.38 31.75 .11
Third Quarter........................... 40.88 30.00 .11
Fourth Quarter.......................... 40.13 28.63 .11
On March 5, 1999, there were approximately 2,100 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 1998 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".
Item 6. Selected Financial Data
Year Ended December 31
-----------------------------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ -----
(dollars in thousands, except per share amounts)
INCOME STATEMENT DATA
Premium and policy fee $ 1,122,010 $ 856,549 $ 802,327 $ 765,749 $ 575,347
Reinsurance ceded (459,215) (334,214) (308,174) (333,173) (172,575)
----------- ------------ ------- -------- ---------
Net of reinsurance ceded 662,795 522,335 494,153 432,576 402,772
Net investment income................. 636,396 591,376 517,483 475,924 417,825
Realized investment gains(losses)..... 3,121 830 5,510 1,612 6,298
Other income.......................... 64,103 32,784 20,857 11,768 21,553
----------- ----------- -------- -------- ---------
Total revenues.............. 1,366,415 1,147,325 1,038,003 921,880 848,448
Benefits and expenses 1,145,691 967,952 898,262 800,846 742,275
Income tax expense 77,845 60,987 47,512 41,152 33,976
Minority interest 12,098 6,393 3,217 3,217 1,796
----------- ----------- -------- -------- --------
Net income $ 130,781 $ 111,993 $ 89,012 $ 76,665 $ 70,401
=========== =========== ======== ======== ========
PER SHARE DATA(1)
Operating income per share - basic $ 2.04 $ 1.79 $ 1.45 $ 1.34 $ 1.19
Net income per share - basic $ 2.06 $ 1.79 $ 1.47 $ 1.34 $ 1.28
Average shares outstanding - basic 63,521,587 62,429,250 60,570,782 57,320,224 54,952,772
Operating income per share - diluted $ 2.02 $ 1.78 $ 1.44 $ 1.33 $ 1.18
Net income per share - diluted $ 2.04 $ 1.78 $ 1.46 $ 1.33 $ 1.27
Average shares
outstanding - diluted 64,087,744 62,849,618 60,969,664 57,705,698 55,459,224
Cash dividends $ .43 $ .39 $ .35 $ .31 $ .275
Share-owners' equity $ 14.65 $ 12.30 $ 9.99 $ 9.15 $ 4.93
Share-owners' equity excluding net
unrealized gains and losses
on investments $ 13.80 $ 11.30 $ 9.88 $ 8.14 $ 6.89
December 31
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ---------- --------- -------
(dollars in thousands)
BALANCE SHEET DATA
Total assets.......................... $ 11,989,495 $10,511,635 $ 8,263,205 $ 7,231,257 $ 6,130,284
Long-term debt........................ $ 152,286 $ 120,000 $ 168,200 $ 115,500 $ 98,000
Total debt............................ $ 172,035 $ 120,000 $ 181,000 $ 115,500 $ 98,000
9% Cumulative Monthly Income
Preferred Securities, Series A $ 55,000 $ 55,000 $ 55,000 $ 55,000 $ 55,000
8.25% Trust Originated Preferred
Securities $ 75,000 $ 75,000
6.5% FELINE PRIDES $ 115,000 $ 115,000
Share-owners' equity $ 944,194 $ 758,197 $ 615,316 $ 526,557 $ 270,373
Share-owners' equity excluding
unrealized gains and losses
on investments $ 889,137 $ 696,470 $ 608,628 $ 468,694 $ 377,905
(1) Prior periods have been restated to reflect a two-for-one stock split on
June 1, 1995 and April 1, 1998.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 1998 Annual
Report to Share Owners and is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
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 1998 Annual Report to Share Owners, are
incorporated herein by reference.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Share Owners of
Protective Life Corporation
Our report on the consolidated financial statements of Protective Life
Corporation and subsidiaries has been incorporated by reference in this Form
10-K from page 52 of the 1998 Annual Report to Share Owners of Protective Life
Corporation. In connection with our audits of such financial statements, we have
also audited the related financial statement schedules listed in the index on
page 32 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Birmingham, Alabama
February 11, 1999
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
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, April 26, 1999, to be filed with the Securities
and Exchange Commission by the Company pursuant to Regulation 14A within 120
days after the end of its 1998 fiscal year.
The executive officers of the Company are as follows:
Name Age Position
- ------------------------ ----- ------------------------------------
Drayton Nabers, Jr. 58 Chairman of the Board and
Chief Executive Officer and Director
John D. Johns 47 President, Chief Operating Officer
and Director
R. Stephen Briggs 49 Executive Vice President
Jim E. Massengale 56 Executive Vice President,
Acquisitions
A. S. Williams III 62 Executive Vice President,
Investments and Treasurer
Danny L. Bentley 41 Senior Vice President, Dental
and Consumer Benefits
Richard J. Bielen 38 Senior Vice President, Investments
Carolyn King 48 Senior Vice President,
Investment Products
Deborah J. Long 45 Senior Vice President, Secretary and
General Counsel
Steven A. Schultz 45 Senior Vice President,
Financial Institutions
Name Age Position
- -------------------- ----- ------------------------------------
Wayne E. Stuenkel 45 Senior Vice President
and Chief Actuary
Judy Wilson 41 Senior Vice President,
Guaranteed Investment Contracts
Jerry W. DeFoor 46 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. Nabers has been Chairman of the Board and Chief Executive Officer
and a Director of the Company since August 1996. From May 1994 to August 1996,
Mr. Nabers was Chairman of the Board, President and Chief Executive Officer and
a Director of the Company. From May 1992 to May 1994, he was President and Chief
Executive Officer and a Director of the Company. Mr. Nabers has served in
various capacities with the Company and its subsidiaries since 1979 and has
served as a member of the Board since August 1982. He is also a director of
Energen Corporation, National Bank of Commerce of Birmingham, and Alabama
National Bancorporation.
Mr. Johns has been President and Chief Operating Officer of the Company
since August 1996 and a Director of the Company since May 1997. He was Executive
Vice President and Chief Financial Officer of the Company from October 1993 to
August 1996. From August 1988 to October 1993, he served as Vice President and
General Counsel of Sonat Inc. He is also a director of National Bank of Commerce
of Birmingham and Alabama National Bancorporation.
Mr. Briggs has been Executive Vice President of the Company since
October 1993 and has responsibility for the Individual Life Division. From
January 1993 to October 1993, he was Senior Vice President, Life Insurance and
Investment Products of the Company. Mr. Briggs had been Senior Vice President,
Ordinary Marketing of the Company since August 1988. 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. He was Senior Vice President of the Company from May 1992 to August
1996. Mr. Massengale has been employed by the Company and its subsidiaries since
1983.
Mr. Williams has been Executive Vice President, Investments and
Treasurer of the Company since August 1996. He was Senior Vice President,
Investments and Treasurer of the Company from July 1981 to August 1996. Mr.
Williams has been employed by the Company and its subsidiaries since 1964.
Mr. Bentley has been Senior Vice President, Dental and Consumer
Benefits of the Company since August 1996. From May 1989 to August 1996, he
served as Vice President, Group Marketing of Protective Life. Mr. Bentley has
been employed by the Company and its subsidiaries since 1980.
Mr. Bielen has been Senior Vice President, Investments of the Company
since August 1996. From August 1991 to August 1996, he served as Vice President,
Investments of Protective Life.
Ms. King has been Senior Vice President, Investment Products of the
Company since April 1995. From August 1994 to March 1995, she served as Senior
Vice President and Chief Investment Officer of Provident Life and Accident
Insurance Company and of its parent company, Provident Life and Accident
Insurance Company of America. She served as President of Provident National
Assurance Company from November 1987 to March 1995. From November 1986 to August
1994, she served as Vice President of Provident Life and Accident Insurance
Company and of its parent company, Provident Life and Accident Insurance Company
of America.
Ms. Long has been Senior Vice President, Secretary and General Counsel
of the Company since November 1996. She was Senior Vice President and General
Counsel of the Company from February 1994 to November 1996. From August 1993 to
January 1994, Ms. Long served as General Counsel of the Company and from
February 1984 to January 1994 she practiced law with the law firm of Maynard,
Cooper & Gale, P.C.
Mr. Schultz has been Senior Vice President, Financial Institutions of
the Company since March 1993. Mr. Schultz served as Vice President, Financial
Institutions of the Company from February 1993 to 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.
Ms. Wilson has been Senior Vice President, Guaranteed Investment
Contracts of the Company since January 1, 1995. From July 1991 to December 31,
1994, she served as Vice President, Guaranteed Investment Contracts of
Protective Life.
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.
Section 16(a) Beneficial Ownership Reporting Compliance
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
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 1998, except for Mr. Williams who inadvertently filed a late
Form 4 reporting two transactions.
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
The information called for by Items 11 through 13 is incorporated
herein by reference from the Company's definitive proxy statement for the Annual
Meeting of Share Owners, April 26, 1999, to be filed with the Securities and
Exchange Commission by the Company pursuant to Regulation 14A within 120 days
after the end of its 1998 fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements:
The following financial statements set forth in the Company's
1998 Annual Report to Share Owners as indicated in the
following table are incorporated by reference (see Exhibit
13).
Report of Independent Accountants
Consolidated Statements of Income for the years
ended December 31, 1998, 1997, and 1996
Consolidated Balance Sheets as of December 31,
1998 and 1997
Consolidated Statements of Share-Owners' Equity
for the years ended December 31, 1998, 1997, and 1996
Consolidated Statements of Cash Flows
for the years ended December 31, 1998, 1997, and 1996
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
The Report of Independent Accountants which covers the
financial statement schedules appears on page 27 of this
report. The following schedules are located in this report on
the pages indicated.
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
3(a) 1998 Restated Certificate of
Incorporation of the Company filed with
the Secretary of State of Delaware on
November 12, 1998.
3(b) 1998 Amended and Restated By-laws of the
Company effective November 2, 1998.
4(a) Reference is made to Exhibit 3(a) above.
4(b) Reference is made to Exhibit 3(b) above.
*4(c) Certificate of Formation of PLC Capital
L.L.C. filed as Exhibit 4(c) to the
Company's Registration Statement on Form
S-3 filed March 25, 1994 (No. 33-52831).
*4(d) Amended and Restated Limited Liability
Company Agreement of PLC Capital L.L.C.
filed as Exhibit 4(d) to Amendment
No. 2, filed April 15, 1994, to the
Company's Registration Statement on Form
S-3 (No. 33-52831).
*incorporated by reference
*4(e) Form of Action establishing series of
Preferred Securities (included as Annex
A to Exhibit 4(d) to the Company's
Registration Statement on Form S-3 (No.
33-52831)).
*4(f) Specimen Preferred Security Certificate
(included as Annex B to Exhibit 4(d) to
the Company's Registration Statement on
Form S-3 (No. 33-52831)).
*4(g) Form of Guarantee Agreement between the
Company and PLC Capital L.L.C. with
respect to the Preferred Securities to
be issued by PLC Capital L.L.C. filed as
Exhibit 4(i) to Amendment No. 2, filed
April 15, 1994, to the Company's
Registration Statement on Form S-3
(No. 33-52831).
*4(h) 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(i) Rights Certificate filed as Exhibit 1 to
the Company's Form 8-A filed August 7,
1995.
*4(j) 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(k) 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(l) 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(m) Form of Preferred Security Certificate
for PLC Capital Trust I (included as
Exhibit A-1 of Exhibit 4(k)).
*4(n) 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).
*incorporated by reference
*4(o) Certificate of Trust of PLC Capital
Trust II filed as Exhibit
4(aa) to the Company's Registration
Statement on Form S-3
filed July 8, 1997 (No. 333-30905).
*4(p) Declaration of Trust of PLC Capital
Trust II filed as Exhibit 4(dd) to the
Company's Registration Statement on Form
S-3 filed July 8, 1997 (No. 333-30905).
*4(q) Form of Amended and Restated Declaration
of Trust of PLC Capital II filed as
Exhibit 4(gg) to the Company's
Registration Statement on Form S-3 filed
July 8, 1997 (No. 333-30905).
*4(r) Form of Preferred Security Certificate
for PLC Capital Trust II
(included in Exhibit 4(q)).
*4(s) Form of Guarantee Agreement with respect
to Preferred Securities to be issued by
PLC Capital Trust II filed as Exhibit
4(v) to the Company's Registration
Statement on Form S-3 filed July 8, 1997
(No. 333-30905).
*4(t) Form of Purchase Contract Agreement
between the Company and The Bank of New
York, as Purchase Contract Agent, filed
as Exhibit 4(y) to the Company's Current
Report on Form 8-K filed November 20,
1997.
*4(u) Form of Pledge Agreement, among the
Company, The Bank of New York, as
Purchase Contract Agent, and the Chase
Manhattan Bank, as Collateral Agent,
filed as Exhibit 4(z) to the Company's
Current Report on Form 8-K filed
November 20, 1997.
*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 1992 Performance Share
Plan filed as Exhibit 10(b)(3) to the
Company's Form 10-Q Quarterly Report
filed May 15, 1992.
*10(b)(1)+ First Amendment to the Company's 1992
Performance Share Plan and filed as
Exhibit 10(b)(1) to the Company's Form
10-K Annual Report for the year ended
December 31, 1995.
*incorporated by reference
+Management contract or compensatory plan or arrangement
*10(b)(2)+ 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 January 1, 1989 filed as Exhibit
10(c)(1) to the Company's Form 10-K
Annual Report for the year ended
December 31, 1991.
*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 Form 10-K Annual Report for
the year ended December 31, 1996.
*10(e) Reference is made to Exhibit 4(g) above.
*10(f)+ 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(g)+ 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(h)+ 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.
*10(i)+ 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(i)(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.
13 Selected portions of the 1998 Annual
Report To Share Owners which are
incorporated herein by reference.
21 Organization Chart of the Company and
Affiliates.
*incorporated by reference
+Management contract or compensatory plan or arrangement
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
99 Safe Harbor for Forward-Looking
Statements.
*incorporated by reference
(b) Current Reports on Form 8-K:
(1) Form 8-K, dated February 11, 1998
- Item 5
- Item 7
(2) Form 8-K, dated March 11, 1998
- Item 5
- Item 7
(3) Form 8-K, dated April 23, 1998
- Item 5
- Item 7
(4) Form 8-K, dated July 28, 1998
- Item 5
- Item 7
(5) Form 8-K, dated October 27, 1998
- Item 5
- Item 7
SIGNATURES
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/Drayton Nabers, Jr.
Drayton Nabers, Jr.
Chairman of the Board and
Chief Executive Officer
March 25, 1999
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/Drayton Nabers, Jr. Chairman of the Board and March 25, 1999
DRAYTON NABERS, JR. Chief Executive Officer
(Principal Executive Officer)
and Director
/s/John D. Johns President and Chief Operating Officer March 25, 1999
JOHN D. JOHNS (Principal Financial Officer)
and Director
/s/Jerry W. DeFoor Vice President and Controller, March 25, 1999
JERRY W. DEFOOR and Chief Accounting Officer
(Principal Accounting Officer)
* Chairman Emeritus and March 25, 1999
WILLIAM J. RUSHTON III Director
* Director March 25, 1999
WILLIAM J. CABANISS, JR.
* Director March 25, 1999
JOHN J. MCMAHON, JR.
* Director March 25, 1999
A. W. DAHLBERG
* Director March 25, 1999
RONALD L. KUEHN, JR.
* Director March 25, 1999
HERBERT A. SKLENAR
* Director March 25, 1999
JAMES S. M. FRENCH
* Director March 25, 1999
ROBERT A. YELLOWLEES
* Director March 25, 1999
ELAINE L. CHAO
* Director March 25, 1999
DONALD M. JAMES
* Director March 25, 1999
J. GARY COOPER
*Drayton Nabers, Jr., 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/Drayton Nabers, Jr.
DRAYTON NABERS, JR.
Attorney-in-fact
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
STATEMENTS OF INCOME PROTECTIVE
LIFE CORPORATION (Parent Company) Years Ended
December 31, 1998, 1997, and 1996
(in thousands)
1998 1997 1996
--------- ----------- -----------
REVENUES
Dividends from subsidiaries* $77,639 $ 5,317 $ 3,391
Service fees from subsidiaries* 56,683 54,712 40,850
Net investment income 9,295 10,433 2,489
Realized investment gains (losses) 985 (994)
Other income (loss) (406) 2,186 (384)
--------- ----------- -----------
144,196 71,654 46,346
EXPENSES
Operating and administrative 36,737 36,309 26,901
Interest - subsidiaries* 6,266 6,266 5,904
Interest - others 17,626 13,185 7,859
--------- ----------- -----------
60,629 55,760 40,664
--------- ----------- -----------
INCOME BEFORE FEDERAL INCOME
TAX AND OTHER ITEMS BELOW 83,567 15,894 5,682
INCOME TAX EXPENSE 9,843 2,342 1,630
--------- ----------- -----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES 73,724 13,552 4,052
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES* 57,057 98,441 84,960
--------- ----------- -----------
NET INCOME $130,781 $111,993 $ 89,012
========= ========== ===========
*Eliminated in consolidation.
See notes to condensed financial statements.
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
BALANCE SHEETS
PROTECTIVE LIFE CORPORATION (Parent Company)
(in thousands)
December 31
-------------------------------------
1998 1997
-------------- -----------
ASSETS
Investments:
Fixed maturities $ 26,000 $ 26,000
Long-term investments 11,424 47
Short-term investments 7,000
Investment real estate 133
Investments in subsidiaries (equity method)* 1,380,593 1,114,185
------------- ----------
1,418,017 1,147,365
Cash 515 305
Receivables from subsidiaries* 22,578 29,920
Property and equipment, net 1,007
Accrued income taxes 8,850
Other 10,590 15,723
------------ ----------
Total Assets $1,461,557 $1,193,313
LIABILITIES
Accrued expenses and other liabilities $ 66,895 $ 48,102
Accrued income taxes 415
Deferred income taxes 16,548 1,102
Debt:
Banks 48,500
Senior Notes 75,000 75,000
Medium-Term Notes 44,923 45,000
Subsidiaries* 265,497 265,497
------------ ----------
Total Liabilities 517,363 435,116
------------ ----------
SHARE-OWNERS' EQUITY
Preferred Stock
Junior Participating Cumulative
Preferred Stock
Common Stock 34,667 33,336
Additional paid-in capital 254,705 167,923
Treasury stock (13,140) (13,455)
Unallocated stock in Employee Stock Ownership Plan (4,277) (4,592)
Retained earnings (including undistributed
income of subsidiaries: 1998 - $680,263;
1997 - $627,706) 617,182 513,258
Accumulated other comprehensive income
Net unrealized gains (losses) on
investments (all from subsidiaries, net
of income tax: 1998 - $29,646; 1997 - $33,238) 55,057 61,727
------------ ----------
Total Share-Owners' Equity 944,194 758,197
------------ ----------
$1,461,557 $1,193,313
============ ==========
*Eliminated in consolidation.
See notes to condensed financial statements.
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
STATEMENTS OF CASH FLOWS
PROTECTIVE LIFE CORPORATION (Parent
Company) Years Ended December 31, 1998,
1997, and 1996
(in thousands)
1998 1997 1996
--------------- ------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $130,781 $111,993 $ 89,012
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed net income
of subsidiaries* (57,057) (98,441) (84,960)
Deferred income taxes 15,446 (5,668) (222)
Other (net) (1,324) 3,633 (271)
--------------- ------------- --------------
Net cash provided by operating activities 87,846 11,517 3,559
--------------- ------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of and/or additional investments
in subsidiaries* (115,960) (111,168) (104,872)
Principal payments received on loan
to subsidiary* 2,000 10,000
Change in fixed maturities and long-term
investments (2,242) (2,993) (22,892)
Change in short-term investments 7,000 (7,000)
--------------- ------------- --------------
Net cash used in investing activities (109,202) (121,161) (117,764)
--------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Common Stock 70,546
Borrowings under line of
credit arrangements and long-term debt 52,000 275,777 165,934
Principal payments on line of credit
arrangements and debt (3,577) (140,900) (100,434)
Purchase of Treasury Stock (1,839)
Dividends to Share Owners (26,857) (24,113) (20,888)
--------------- ------------- --------------
Net cash provided by (used in) financing
activities 21,566 108,925 115,158
--------------- ------------- --------------
INCREASE (DECREASE) IN CASH 210 (719) 953
CASH AT BEGINNING OF YEAR 305 1,024 71
--------------- ------------- --------------
CASH AT END OF YEAR $ 515 $ 305 $ 1,024
=============== ============= ==============
*Eliminated in consolidation.
See notes to condensed financial statements.
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
PROTECTIVE LIFE CORPORATION (Parent Company)
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.
NOTE 1 - DEBT
At December 31, 1998, the Company had borrowed $30.0 million under its $70
million revolving line of credit and an additional $18.5 million of bank
borrowings. $75.0 million of Senior Notes due 2004, $44.9 million of Medium-Term
Notes due 2011, $69.6 million of subordinated debentures due 2024, $77.3 million
of subordinated debentures due 2027 and $118.6 million of subordinated
debentures due 2003 were outstanding at December 31, 1998. The subordinated
debentures were issued to affiliates in connection with the issuance by such
affiliates of 9% Cumulative Monthly Income Preferred Securities, Series A; 8.25%
Trust Originated Preferred Securities (TOPrS); and 6.5% Trust Originated
Preferred Securities (TOPrS) issued as part of the Company's FELINE PRIDES,
respectively.
NOTE 2 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1998 1997 1996
CASH PAID (RECEIVED) DURING THE YEAR FOR:
Interest Paid to Non-Affiliates $ 9,285 $ 8,244 $ 6,809
Interest Paid to Subsidiary* 20,351 10,768 6,266
---------- ----------- ---------
$ 29,636 $ 19,012 $ 13,075
========== =========== =========
Income Taxes (reduced by amounts received
from affiliates under a tax sharing agreement) $ (464) $ (2,026) $ 2,148
========== =========== =========
NONCASH INVESTING AND FINANCING ACTIVITIES
Reissuance of Treasury Stock to ESOP $ 205 $ 85 $ 669
========== =========== =========
Unallocated Stock in ESOP $ 315 $ 333 $ 334
========== =========== =========
Reissuance of Treasury Stock $ 3,097 $ 1,383 $ 261
========== =========== =========
Issuance of Common Stock $ 85,126
==========
NOTE 3 - SUBSIDIARY SURPLUS DEBENTURES
Protective Life Insurance Company ("Protective Life") has issued surplus
debentures to the Company in order to finance acquisitions and growth. At
December 31, 1998, the balance of the surplus debentures was $18 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 debenture.
*Eliminated in consolidation.
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES
(in thousands)
COL. A COL. B COL. C COL. D COL. E COL. F COL. G
GIC and
Future Annuity Net
Deferred Policy Deposits and Premiums
Policy Benefits Other and Net
Acquisition and Unearned Policyholders' Policy Investment
Segment Costs Claims Premiums Funds Fees Income(1)
Year Ended
December 31, 1998:
Individual Life $ 301,941 $1,054,253 $ 355 $ 10,802 $126,166 $ 55,903
West Coast 144,455 1,006,280 0 77,254 22,380 63,492
Acquisitions 255,347 1,383,759 553 233,846 96,735 112,154
Dental 23,836 114,693 5,728 81,572 286,235 15,995
Financial Institutions 39,212 215,451 385,006 105,434 112,272 25,313
Guaranteed Investment
Contracts 1,448 172,674 0 2,691,697 0 213,136
Investment Products 75,177 194,726 0 1,233,528 18,809 105,890
Corporate and Other 9 944 39 88 198 44,513
-----------------------------------------------------------------------------------------------------------------
TOTAL $841,425 $4,142,780 $391,681 $4,434,221 $662,795 $636,396
=================================================================================================================
Year Ended
December 31, 1997:
Individual Life $252,321 $ 920,924 $ 356 $ 16,334 $ 127,480 $ 54,647
West Coast 108,126 739,463 0 95,495 14,122 30,194
Acquisitions 138,052 1,025,340 1,437 311,151 102,635 110,155
Dental 22,459 120,925 6,541 80,564 193,239 24,202
Financial Institutions 52,837 159,422 391,085 6,791 72,263 16,462
Guaranteed Investment
Contracts 1,785 180,690 0 2,684,676 0 211,915
Investment Products 56,074 177,150 0 1,184,268 12,367 105,321
Corporate and Other 1,083 380 1,438 183 229 38,480
-----------------------------------------------------------------------------------------------------------------
TOTAL $632,737 $3,324,294 $400,857 $4,379,462 $522,335 $591,376
=================================================================================================================
Year Ended
December 31, 1996:
Individual Life $220,232 $ 793,370 $ 685 $ 15,577 $116,710 $ 48,478
Acquisitions 156,172 1,117,159 1,087 251,450 106,543 106,015
Dental 27,944 119,010 5,957 83,632 188,633 16,540
Financial Institutions 32,040 119,242 253,153 1,880 73,422 13,941
Guaranteed Investment
Contracts 1,164 149,756 0 2,474,728 0 214,369
Investment Products 50,657 149,742 0 1,120,557 8,189 98,767
Corporate and Other 175 170 55 192 656 19,373
-----------------------------------------------------------------------------------------------------------------
TOTAL $488,384 $2,448,449 $260,937 $3,948,016 $494,153 $517,483
=================================================================================================================
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION (con't)
PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES
(in thousands)
COL. A COL. H COL. I COL. J
Amortization
Benefits of Deferred
and Policy Other
Settlement Acquisition Operating
Segment Expenses Costs Expenses(1)
Year Ended
December 31, 1998:
Individual Life $ 106,306 $ 30,543 $ 48,231
West Coast 54,617 4,924 5,354
Acquisitions 112,051 18,894 28,194
Dental 195,903 10,352 78,809
Financial Institutions 52,629 28,526 55,197
Guaranteed Investment
Contracts 178,745 735 2,876
Investment Products 85,045 17,213 19,637
Corporate and Other 469 1 10,440
--------------------------------------------------------------------
TOTAL $785,765 $ 111,188 $ 248,738
=====================================================================
Year Ended
December 31, 1997:
Individual Life $114,678 $ 27,374 $ 37,921
West Coast 28,304 961 6,849
Acquisitions 116,506 16,606 24,050
Dental 134,384 15,711 52,365
Financial Institutions 27,643 30,812 21,120
Guaranteed Investment
Contracts 179,235 618 3,946
Investment Products 82,019 15,110 15,749
Corporate and Other 339 35 15,617
---------------------------------------------------------------------
TOTAL $683,108 $ 107,227 $177,617
=====================================================================
Year Ended
December 31, 1996:
Individual Life $ 96,404 $ 28,393 $ 40,969
Acquisitions 118,181 17,162 25,186
Dental 143,944 5,326 52,956
Financial Institutions 42,781 24,900 11,660
Guaranteed Investment
Contracts 169,927 509 3,851
Investment Products 73,093 14,710 15,323
Corporate and Other 710 30 12,247
---------------------------------------------------------------------
TOTAL $645,040 $ 91,030 $162,192
=====================================================================
(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.
SCHEDULE IV - REINSURANCE
PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES
(dollars in thousands)
COL. A COL. B COL. C COL. D COL. E COL. F
Percentage
Ceded to Assumed from of Amount
Gross Other Other Net Assumed to
Amount Companies Companies Amount Net
- ---------------------------------------------------------------------------------------------------------------------
Year Ended
December 31, 1998:
Life insurance
in force $ 91,980,657 $ 64,846,246 $ 18,010,434 $ 45,144,845 39.9%
======================================================================================================================
Premiums and
policy fees:
Life insurance $ 537,000 $ 294,363 $ 87,964 $ 330,601 26.6%
Accident/health
insurance 456,378 164,852 14,279 305,805 4.7%
Property and liability
insurance 26,389 0 0 26,389 0.0%
- ----------------------------------------------------------------------------------------------------------------------
TOTAL $1,019,767 $ 459,215 $ 102,243 $ 662,795
======================================================================================================================
Year Ended
December 31, 1997:
Life insurance
in force $ 78,240,282 $ 34,139,554 $ 11,013,202 $ 55,113,930 20.0%
=======================================================================================================================
Premiums and
policy fees:
Life insurance $ 387,108 $ 147,184 $ 74,738 $ 314,662 23.8%
Accident/health
insurance 378,704 187,539 10,510 201,675 5.3%
Property and liability
insurance 6,139 176 35 5,998 0.6%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $ 771,951 $ 334,899 $ 85,283 $ 522,335
=======================================================================================================================
Year Ended
December 31, 1996:
Life insurance
in force $ 53,052,020 $ 18,840,221 $ 16,275,386 $ 50,487,185 32.2%
=======================================================================================================================
Premiums and
policy fees:
Life insurance $ 272,331 $ 113,487 $ 129,717 $ 288,561 45.0%
Accident/health
insurance 370,812 194,687 29,467 205,592 14.3%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $ 643,143 $ 308,174 $ 159,184 $ 494,153
=======================================================================================================================
EXHIBITS TO FORM 10-K
OF
PROTECTIVE LIFE CORPORATION
FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1998
INDEX TO EXHIBITS
3(a)...........................................................
3(b)...........................................................
13.............................................................
21.............................................................
23.............................................................
24.............................................................
27.............................................................
99.............................................................