PROTECTIVE LIFE CORP - FORM 8-K - EX-99.2

Attached files

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8-K - 8-K - PROTECTIVE LIFE CORP	a12-11369_28k.htm
EX-99.1 - EX-99.1 - PROTECTIVE LIFE CORP	a12-11369_2ex99d1.htm

Exhibit 99.2

Draft 5/8/2012

Protective Life Corporation (“PLC”)

Supplemental Schedules

First Quarter 2012

Draft 5/8/2012

ACCOUNTING CHANGES

The financial data herein reflects, for all periods presented, the adoption and retrospective application of Accounting Standards Update 2010-26 (the “Update”), which addresses diversity in practice regarding the interpretation of which costs relating to the acquisition of new or renewal insurance contracts qualify for deferral. This Update prescribes that certain incremental direct costs of successful initial or renewal contract acquisitions may be deferred. It defines incremental direct costs as those costs that result directly from and are essential to the contract transaction and would not have been incurred by the insurance entity had the contract transaction not occurred. This Update also clarifies the definition of the types of incurred costs that may be capitalized and the accounting and recognition treatment of advertising, research, and other administrative costs related to the acquisition of insurance contracts. This Update was effective for the Company on January 1, 2012.

The financial data herein also reflects, for all periods presented, a revision to the Company’s definition of operating income (loss) as it relates to embedded derivatives on our variable annuity contracts and related hedging activities, to better reflect the basis on which the performance of our business is internally assessed. This change did not impact its comparable GAAP measure income before income tax. See information related to certain non-GAAP disclosures for additional information.

Draft 5/8/2012

Page 1

Quarterly Financial Highlights

(Dollars In Thousands)	1ST QTR		2ND QTR		3RD QTR			4TH QTR			1ST QTR		3 MOS
(Unaudited)	2011		2011		2011			2011			2012		2011		2012

Pre-tax Operating Income (Loss) (1)

Life Marketing	$	19,273	$	30,263	$	12,777		$	33,810		$	30,369	$	19,273	$	30,369
Acquisitions	32,391		39,429		44,028			41,545			39,099		32,391		39,099
Annuities	18,640		17,178		20,176			24,230			35,783		18,640		35,783
Stable Value Products	9,195		19,142		14,217			14,226			12,646		9,195		12,646
Asset Protection	6,852		5,685		6,164			6,706			4,966		6,852		4,966
Corporate & Other	10,021		3,977		(3,815		)	(4,416		)	27,880		10,021		27,880
Total Pre-tax Operating Income	$	96,372	$	115,674	$	93,547		$	116,101		$	150,743	$	96,372	$	150,743

Balance Sheet Data

Total GAAP Assets	$	47,524,453	$	50,212,328	$	51,244,311		$	52,143,369		$	53,322,272
Total Protective Life Corporation’s Shareowners’ Equity	$	2,919,665	$	3,104,801	$	3,579,515		$	3,711,517		$	3,785,810
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (2)	$	2,584,721	$	2,635,730	$	2,673,447		$	2,726,073		$	2,784,007

Stock Data

Closing Price	$	26.55	$	23.13	$	15.63		$	22.56		$	29.62
Average Shares Outstanding
Basic	86,603,228		86,346,216		84,722,232			83,205,456			82,330,330		86,603,228		82,330,330
Diluted	87,820,085		87,653,731		86,004,571			84,464,572			83,921,135		87,820,085		83,921,135

(1) “Pre-tax Operating Income (Loss)” is a non-GAAP financial measure. “Income (loss) Before Income Tax” is a GAAP financial measure to which “Pre-tax Operating Income” may be compared.

See Page 6 for a reconciliation of “Pre-tax Operating Income” to “Income (loss) Before Income Tax”.

(2) “Total Protective Life Corporation’s Shareowners’ equity excluding accumulated other comprehensive income (loss)” is a non-GAAP financial measure. “Total Protective Life Corporation’s Shareowners’ equity” is a GAAP financial measure to which “Total Protective Life Corporation’s Shareowners’ equity excluding accumulated other comprehensive income (loss)” may be compared.

See Page 5 for a reconciliation of “Total Protective Life Corporation’s Shareowners’ equity excluding accumulated other comprehensive income (loss)” to “Total Protective Life Corporation’s Shareowners’ equity”.

Draft 5/8/2012

Page 2

Financial Strength Ratings as of March 31, 2012

	A.M. Best	Fitch	Standard & Poor’s	Moody’s
Legal Entity

Insurance companies:
Protective Life Insurance Company	A+	A	AA-	A2
West Coast Life Insurance Company	A+	A	AA-	A2
Protective Life and Annuity Insurance Company	A+	A	AA-	—
Lyndon Property Insurance Company	A-	—	—	—

Draft 5/8/2012

Page 3

GAAP Consolidated Statements of Income

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

REVENUES
Gross Premiums and Policy Fees	$	666,343		$	716,586		$	696,978		$	720,233		$	696,305		$	666,343		$	696,305
Reinsurance Ceded	(331,808		)	(364,248		)	(326,967		)	(371,652		)	(304,558		)	(331,808		)	(304,558		)
Net Premiums and Policy Fees	334,535			352,338			370,011			348,581			391,747			334,535			391,747
Net investment income	444,213			448,785			462,926			464,719			462,121			444,213			462,121
RIGL - Derivatives	(12,686		)	(34,993		)	(97,816		)	(9,756		)	(29,909		)	(12,686		)	(29,909		)
RIGL - All Other Investments	4,472			58,917			138,230			33,296			35,726			4,472			35,726

OTTI losses	(16,021		)	(15,632		)	(6,259		)	(24,420		)	(34,420		)	(16,021		)	(34,420		)
Portion recognized in OCI (before taxes)	10,358			6,145			(3,570		)	1,957			15,656			10,358			15,656
Net OTTI losses recognized in earnings	(5,663		)	(9,487		)	(9,829		)	(22,463		)	(18,764		)	(5,663		)	(18,764		)
Other income	72,209			87,224			75,859			72,520			111,260			72,209			111,260
Total Revenues	837,080			902,784			939,381			886,897			952,181			837,080			952,181

BENEFITS & EXPENSES
Benefits and settlement expenses	536,369			551,553			592,792			552,759			589,629			536,369			589,629
Amortization of deferred policy acquisition costs and value of business acquired	65,226			65,718			71,740			62,309			56,836			65,226			56,836
Other operating expenses	105,220			110,672			112,512			109,375			116,255			105,220			116,255
Interest expense - subsidiaries	6,666			7,108			7,168			7,081			6,109			6,666			6,109
Interest expense - holding company - other debt	23,484			23,493			23,482			23,335			23,372			23,484			23,372
Interest expense - holding company - hybrid securities	9,401			9,401			9,401			9,401			9,401			9,401			9,401
Total Benefits and Expenses	746,366			767,945			817,095			764,260			801,602			746,366			801,602

INCOME BEFORE INCOME TAX	90,714			134,839			122,286			122,637			150,579			90,714			150,579
Income tax expense	31,887			46,920			39,429			36,603			51,558			31,887			51,558
NET INCOME	58,827			87,919			82,857			86,034			99,021			58,827			99,021
Less: Net Income (loss) attributable to noncontrolling interests	(51		)	296			—			—			—			(51		)	—
NET INCOME AVAILABLE TO PLC’S COMMON SHAREOWNERS	$	58,878		$	87,623		$	82,857		$	86,034		$	99,021		$	58,878		$	99,021

PER SHARE DATA FOR QUARTER
Operating income-diluted (1)	$	0.71		$	0.86		$	0.74		$	0.97		$	1.18
RIGL - Derivatives net of gains related to corp debt, investments and annuities	(0.06		)	(0.22		)	(0.69		)	(0.03		)	(0.18		)
RIGL - All Other Investments	0.02			0.36			0.91			0.08			0.18
Net income available to PLC’s common shareowners-diluted	$	0.67		$	1.00		$	0.96		$	1.02		$	1.18
Average shares outstanding-diluted	87,820,085			87,653,731			86,004,571			84,464,572			83,921,135
Dividends paid	$	0.14		$	0.16		$	0.16		$	0.16		$	0.16
PER SHARE DATA FOR YTD
Operating income-diluted (1)	$	0.71		$	1.57		$	2.32		$	3.28		$	1.18
RIGL - Derivatives net of gains related to corp debt, investments and annuities	(0.06		)	(0.28		)	(0.97		)	(1.00		)	(0.18		)
RIGL - All Other Investments	0.02			0.38			1.28			1.37			0.18
Net income available to PLC’s common shareowners-diluted	$	0.67		$	1.67		$	2.63		$	3.65		$	1.18
Average shares outstanding-diluted	87,820,085			87,736,449			87,152,812			86,475,229			83,921,135
Dividends paid	$	0.14		$	0.30		$	0.46		$	0.62		$	0.16

(1) “Operating Income” is a non-GAAP financial measure. “Net income available to PLC’s common shareowners” is a GAAP financial measure to which “Operating Income” may be compared.

Draft 5/8/2012

Page 4

GAAP Consolidated Balance Sheets

(Dollars In Thousands)	1ST QTR		2ND QTR		3RD QTR		4TH QTR		1ST QTR
(Unaudited)	2011		2011		2011		2011		2012
ASSETS

Fixed maturities	$	24,676,049	$	26,133,625	$	27,855,004	$	27,983,446	$	28,189,744
Equity securities	352,927		349,738		327,802		335,232		360,527
Mortgage loans	4,873,678		5,349,851		5,377,977		5,353,481		5,314,496
Investment real estate	21,884		23,737		27,495		29,899		31,527
Policy loans	784,320		881,757		880,203		879,819		877,850
Other long-term investments	276,291		297,825		284,550		257,714		324,001
Long-term investments	30,985,149		33,036,533		34,753,031		34,839,591		35,098,145
Short-term investments	406,676		134,698		80,387		101,489		110,194
Total investments	31,391,825		33,171,231		34,833,418		34,941,080		35,208,339
Cash	230,938		419,210		332,487		267,298		175,353
Accrued investment income	343,181		345,906		363,548		350,580		362,837
Accounts and premiums receivable	63,547		68,559		60,008		84,754		90,372
Reinsurance receivable	5,659,191		5,730,025		5,645,080		5,645,471		5,674,662
Deferred policy acquisition costs and value of business acquired	3,114,003		3,252,931		3,221,007		3,248,041		3,234,596
Goodwill	113,983		113,209		112,434		111,659		110,884
Property and equipment, net	42,585		43,142		45,997		48,578		48,596
Other assets	176,778		180,602		201,516		150,549		163,360
Current/Deferred income tax	29,422		39,936		11,142		50,783		—
Assets related to separate accounts
Variable annuity	5,797,956		6,291,158		5,947,391		6,741,959		7,698,456
Variable universal life	561,044		556,419		470,283		502,617		554,817

TOTAL ASSETS	$	47,524,453	$	50,212,328	$	51,244,311	$	52,143,369	$	53,322,272

Draft 5/8/2012

Page 5

GAAP Consolidated Balance Sheets - Continued

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR
(Unaudited)	2011			2011			2011			2011			2012

LIABILITIES
Policy liabilities and accruals
Future policy benefits and claims	$	18,727,050		$	20,619,144		$	20,665,267		$	20,867,989		$	20,981,983
Unearned premiums	1,201,591			1,225,066			1,244,457			1,258,785			1,283,441
Stable value product deposits	2,664,139			2,565,235			2,827,862			2,769,510			2,772,378
Annuity deposits	10,781,341			10,899,995			10,975,016			10,946,848			10,856,119
Other policyholders’ funds	557,378			589,879			575,056			546,516			537,909
Repurchase program borrowings	—			—			157,103			—			221,569
Other liabilities	975,974			964,392			1,196,554			1,065,451			1,055,568
Mortgage loan backed certificates	51,540			42,862			32,471			19,755			8,834
Deferred income taxes	781,515			896,221			1,139,532			1,260,629			1,241,670
Income tax payable	—			—			—			—			22,725
Non-recourse funding obligations	496,700			438,300			414,800			407,800			297,000
Debt	1,484,852			1,494,852			1,495,000			1,520,000			1,480,000
Subordinated debt securities	524,743			524,743			524,743			524,743			524,743
Liabilities related to separate accounts
Variable annuity	5,797,956			6,291,158			5,947,391			6,741,959			7,698,456
Variable universal life	561,044			556,419			470,283			502,617			554,817
TOTAL LIABILITIES	44,605,823			47,108,266			47,665,535			48,432,602			49,537,212

SHAREOWNERS’ EQUITY
Common stock	44,388			44,388			44,388			44,388			44,388
Additional paid-in-capital	590,783			592,451			594,084			598,106			593,930
Treasury stock	(25,763		)	(50,326		)	(83,549		)	(107,740		)	(131,578		)
Retained earnings	1,975,313			2,049,217			2,118,524			2,191,319			2,277,267
Accumulated other comprehensive income (loss)	334,944			469,071			906,068			985,444			1,001,803
TOTAL PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY	2,919,665			3,104,801			3,579,515			3,711,517			3,785,810
Noncontrolling interest	(1,035		)	(739		)	(739		)	(750		)	(750		)
TOTAL EQUITY	2,918,630			3,104,062			3,578,776			3,710,767			3,785,060
TOTAL LIABILITIES AND SHAREOWNERS’ EQUITY	$	47,524,453		$	50,212,328		$	51,244,311		$	52,143,369		$	53,322,272

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	34.07		$	36.68		$	43.22		$	45.45		$	46.74
Less: Accumulated other comprehensive income (loss)	3.91			5.54			10.94			12.07			12.37
Excluding accumulated other comprehensive income (loss) (1)	$	30.16		$	31.14		$	32.28		$	33.38		$	34.37

Total Protective Life Corporation’s Shareowners’ Equity	$	2,919,665		$	3,104,801		$	3,579,515		$	3,711,517		$	3,785,810
Less: Accumulated other comprehensive income (loss)	334,944			469,071			906,068			985,444			1,001,803
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (1)	$	2,584,721		$	2,635,730		$	2,673,447		$	2,726,073		$	2,784,007

Common shares outstanding	85,705,659			84,650,243			82,812,088			81,669,195			80,998,430
Treasury Stock shares	3,071,301			4,126,717			5,964,872			7,107,765			7,778,530

(1) “Total Protective Life Corporation’s Shareowners’ equity excluding accumulated other comprehensive income (loss)” is a non-GAAP financial measure. “Total Protective Life Corporation’s Shareowners’ equity” is a GAAP financial measure to which “Total Protective Life Corporation’s Shareowners’ equity excluding accumulated other comprehensive income (loss)” may be compared.

Draft 5/8/2012

Page 6

Calculation of Operating Earnings Per Share

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

CALCULATION OF NET INCOME PER SHARE

Net income available to PLC’s common shareowners	$	58,878		$	87,623		$	82,857		$	86,034		$	99,021		$	58,878		$	99,021

Average shares outstanding-basic	86,603,228			86,346,216			84,722,232			83,205,456			82,330,330			86,603,228			82,330,330
Average shares outstanding-diluted	87,820,085			87,653,731			86,004,571			84,464,572			83,921,135			87,820,085			83,921,135

Net income available to PLC’s common shareowners per share-basic	$	0.68		$	1.01		$	0.98		$	1.03		$	1.20		$	0.68		$	1.20
Net income available to PLC’s common shareowners per share-diluted	$	0.67		$	1.00		$	0.96		$	1.02		$	1.18		$	0.67		$	1.18

Income from continuing operations	$	58,878		$	87,623		$	82,857		$	86,034		$	99,021		$	58,878		$	99,021

EPS (basic)	$	0.68		$	1.01		$	0.98		$	1.03		$	1.20		$	0.68		$	1.20
EPS (diluted)	$	0.67		$	1.00		$	0.96		$	1.02		$	1.18		$	0.67		$	1.18

CALCULATION OF REALIZED INVESTMENT GAINS (LOSSES) PER SHARE

RIGL - Derivatives	$	(12,686	)	$	(34,993	)	$	(97,816	)	$	(9,756	)	$	(29,909	)	$	(12,686	)	$	(29,909	)
VA GMWB economic cost	4,345			5,153			5,902			6,481			7,240			4,345			7,240
RIGL - All Other Investments	(1,191		)	49,430			128,401			10,833			16,962			(1,191		)	16,962
Related amortization of DAC & VOBA	3,925			(721		)	(7,748		)	(1,022		)	5,543			3,925			5,543
	(5,607		)	18,869			28,739			6,536			(164		)	(5,607		)	(164		)
Tax effect	1,962			(6,604		)	(10,059		)	(2,288		)	58			1,962			58
	$	(3,645	)	$	12,265		$	18,680		$	4,248		$	(106	)	$	(3,645	)	$	(106	)

RIGL - Derivatives per share-diluted	$	(0.06	)	$	(0.22	)	$	(0.69	)	$	(0.03	)	$	(0.18	)	$	(0.06	)	$	(0.18	)
RIGL - All Other Investments per share-diluted	$	0.02		$	0.36		$	0.91		$	0.08		$	0.18		$	0.02		$	0.18

OPERATING INCOME PER SHARE (1)

Net income available to PLC’s common shareowners per share-diluted	$	0.67		$	1.00		$	0.96		$	1.02		$	1.18		$	0.67		$	1.18
Less: RIGL - Derivatives per share-diluted	(0.06		)	(0.22		)	(0.69		)	(0.03		)	(0.18		)	(0.06		)	(0.18		)
Less: RIGL - All Other Investments per share-diluted	0.02			0.36			0.91			0.08			0.18			0.02			0.18
Operating income per share-diluted	$	0.71		$	0.86		$	0.74		$	0.97		$	1.18		$	0.71		$	1.18

NET OPERATING INCOME (1)

Net income available to PLC’s common shareowners	$	58,878		$	87,623		$	82,857		$	86,034		$	99,021		$	58,878		$	99,021
Less: RIGL - Derivatives net of tax	(5,422		)	(19,396		)	(59,744		)	(2,129		)	(14,735		)	(5,422		)	(14,735		)
Less: RIGL - All Other Investments net of tax and amortization	1,777			31,661			78,424			6,377			14,629			1,777			14,629
Net operating income	$	62,523		$	75,358		$	64,177		$	81,786		$	99,127		$	62,523		$	99,127

PRE-TAX OPERATING INCOME (2)

Income before income tax and discontinued operations	$	90,714		$	134,839		$	122,286		$	122,637		$	150,579		$	90,714		$	150,579
Less: RIGL - Derivatives	(12,686		)	(34,993		)	(97,816		)	(9,756		)	(29,909		)	(12,686		)	(29,909		)
Less: VA GMWB economic cost	4,345			5,153			5,902			6,481			7,240			4,345			7,240
Less: RIGL - All Other Investments	(1,191		)	49,430			128,401			10,833			16,962			(1,191		)	16,962
Less: Related amortization of DAC & VOBA	3,925			(721		)	(7,748		)	(1,022		)	5,543			3,925			5,543
Less: Minority Interest	(51		)	296			—			—			—			(51		)	—
Pre-tax operating income	$	96,372		$	115,674		$	93,547		$	116,101		$	150,743		$	96,372		$	150,743

(1) “Net Operating Income” and “Operating Income Per Share” are non-GAAP financial measures. “Net Income available to PLC’s common shareowners” and “Net Income available to PLC’s common shareowners Per Share” are GAAP financial measures to which “Net Operating Income” and “Operating Income Per Share” may be compared.

(2) “Pre-tax Operating Income” is a non-GAAP financial measure. “Income Before Income Tax” is a GAAP financial measure to which “Pre-tax Operating Income” may be compared.

Draft 5/8/2012

Page 7

Invested Asset Summary

(Dollars In Millions)	1ST QTR		2ND QTR		3RD QTR		4TH QTR		1ST QTR
(Unaudited)	2011		2011		2011		2011		2012

Total Portfolio

Fixed Maturities	$	24,676.0	$	26,133.6	$	27,855.0	$	27,983.5	$	28,189.7	80	%
Mortgage Loans	4,873.7		5,349.9		5,378.0		5,353.5		5,314.5		15	%
Investment Real Estate	21.9		23.7		27.5		29.9		31.5		0	%
Equity Securities	352.9		349.7		327.8		335.2		360.5		1	%
Policy Loans	784.3		881.8		880.2		879.8		877.9		3	%
Short-Term Investments	406.7		134.7		80.4		101.5		110.2		0	%
Other Long-Term Investments	276.3		297.8		284.5		257.7		324.0		1	%
Total Invested Assets	$	31,391.8	$	33,171.2	$	34,833.4	$	34,941.1	$	35,208.3	100	%

Draft 5/8/2012

Page 8

Invested Asset Summary - Fixed Income

(Dollars In Millions)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR
(Unaudited)	2011			2011			2011			2011			2012

Fixed Income

Corporate Bonds	$	17,638.5		$	18,741.8		$	19,856.5		$	20,148.4		$	20,321.8		72	%
Residential Mortgage-Backed Securities	2,633.8			2,702.2			2,827.2			2,656.1			2,664.5			9	%
Commercial Mortgage-Backed Securities	316.4			452.6			640.3			741.8			785.1			3	%
Other Asset-Backed Securities	1,062.1			1,029.1			953.7			971.0			996.8			3	%
U.S. Government-related Securities	1,607.7			1,577.2			1,813.4			1,771.5			1,645.1			6	%
Other Government-related Securities	262.2			232.5			192.0			137.9			180.0			1	%
States, Municipals and Political Subdivisions	1,155.3			1,398.2			1,571.9			1,556.8			1,596.4			6	%
Total Fixed Income Portfolio	$	24,676.0		$	26,133.6		$	27,855.0		$	27,983.5		$	28,189.7		100	%

Fixed Income - Quality

AAA	16.9		%	17.3		%	17.6		%	16.5		%	16.2		%
AA	6.5		%	6.8		%	7.9		%	8.0		%	8.0		%
A	21.8		%	25.2		%	26.7		%	27.5		%	28.7		%
BBB	45.1		%	42.5		%	40.4		%	41.0		%	39.5		%
Below investment grade	9.7		%	8.2		%	7.4		%	7.0		%	7.6		%
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Note: Prior period ratings and investment classifications have been restated to be consistent with current quarter presentation.

Draft 5/8/2012

Page 9

Fixed Maturities by NAIC Rating

STAT Carry Value % of Total

	1ST QTR		2ND QTR		3RD QTR		4TH QTR		1ST QTR
(Unaudited)	2011		2011		2011		2011		2012

NAIC Rating
1	52.50	%	55.32	%	57.10	%	56.07	%	55.97	%
2	42.31	%	40.33	%	38.61	%	38.92	%	38.64	%
3	2.79	%	2.31	%	2.28	%	2.80	%	3.47	%
4	1.18	%	1.01	%	1.11	%	1.31	%	0.76	%
5	0.72	%	0.87	%	0.75	%	0.73	%	0.96	%
6	0.50	%	0.16	%	0.15	%	0.17	%	0.20	%

	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Below investment grade (using NAIC 3-6)	5.19	%	4.35	%	4.29	%	5.01	%	5.39	%

Note: NAIC Ratings reflect statutory carrying values

Draft 5/8/2012
Page 10

Invested Asset Summary - Mortgages

(Dollars In Millions)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR
(Unaudited)	2011			2011			2011			2011			2012

Mortgage Loans - Type

Retail	66.6		%	64.4		%	65.4		%	65.7		%	65.7		%
Apartments	11.9		%	11.4		%	11.0		%	11.3		%	11.6		%
Office Buildings	12.6		%	14.1		%	13.7		%	13.4		%	13.2		%
Warehouses	6.9		%	8.0		%	7.7		%	7.6		%	7.4		%
Miscellaneous	2.0		%	2.1		%	2.2		%	2.0		%	2.1		%
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Delinquent Loans & Foreclosed Properties

60 Days Past Due (1)	$	—		$	10.3		$	6.9		$	2.4		$	5.3
90 Days Past Due	12.5			15.7			16.2			12.5			5.6
Renegotiated Loans (2)	16.1			16.1			16.1			16.1			—
Foreclosed Real Estate	1.6			1.7			5.5			10.4			2.7
	$	30.2		$	43.8		$	44.7		$	41.4		$	13.6

% of Commercial Mortgage Loan Portfolio	0.6		%	0.8		%	0.8		%	0.8		%	0.3		%

(1) Includes $2.3 million of nonperforming loans subject to a pooling and servicing agreement for 4Q11 and 1Q12

(2) Loans restructured under the terms of a pooling and servicing agreement.

Draft 5/8/2012

Page 11

Invested Asset Summary - Trading Portfolios

(Dollars In Millions)	1ST QTR		2ND QTR		3RD QTR		4TH QTR		1ST QTR
(Unaudited)	2011		2011		2011		2011		2012

Trading Portfolio Composition (excl. Modco Trading Portfolio)

Rating
AAA	$	7.9	$	3.0	$	2.6	$	2.2	$	1.7
AA	0.7		—		—		—		—
A	—		—		—		—		—
BBB	13.2		6.0		—		—		—
Below investment grade	48.1		20.7		23.8		21.0		19.1
Total	$	69.9	$	29.7	$	26.4	$	23.2	$	20.8

Modco Trading Portfolio

Rating
AAA	$	789.0	$	768.0	$	871.5	$	845.5	$	607.9
AA	296.8		316.5		325.2		267.4		259.6
A	589.2		693.1		654.5		702.9		742.3
BBB	871.4		869.4		888.8		909.3		1,007.5
Below investment grade	233.1		210.1		231.9		211.7		338.8
Short-term investments	155.4		102.2		67.6		85.8		63.6
Total	$	2,934.9	$	2,959.3	$	3,039.5	$	3,022.6	$	3,019.7

Note: Prior period ratings have been restated to be consistent with current quarter presentation.

Draft 5/8/2012

Page 12

Invested Asset Summary - MBS - Alt-A

Mortgage-backed Securities Collateralized by Alt-A Mortgage Loans as of March 31, 2012:

(Dollars In Millions)	2008 and
(Unaudited)	Prior			2009		2010		2011		2012		Total

Estimated Fair Value of Security by Year of Security Origination

Rating
A	$	3.3		$	—	$	—	$	—	$	—	$	3.3
BBB	6.9			—		—		—		—		6.9
Below investment grade	418.8			—		—		—		—		418.8
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	429.0		$	—	$	—	$	—	$	—	$	429.0

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination

Rating
A	$	—		$	—	$	—	$	—	$	—	$	—
BBB	0.8			—		—		—		—		0.8
Below investment grade	(39.2		)	—		—		—		—		(39.2		)
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	(38.4	)	$	—	$	—	$	—	$	—	$	(38.4	)

Draft 5/8/2012

Page 13

Invested Asset Summary - MBS - Prime

Mortgage-backed Securities Collateralized by Prime Loans as of March 31, 2012:

(Dollars In Millions)	2008 and
(Unaudited)	Prior			2009		2010		2011		2012		Total

Estimated Fair Value of Security by Year of Security Origination

Rating
AAA	$	668.4		$	84.6	$	405.5	$	363.7	$	—	$	1,522.2
AA	5.5			—		—		—		—		5.5
A	59.6			—		—		—		—		59.6
BBB	21.2			—		—		—		—		21.2
Below investment grade	626.5			—		—		—		—		626.5
Total mortgage-backed securities collateralized by prime loans	$	1,381.2		$	84.6	$	405.5	$	363.7	$	—	$	2,235.0

Includes $1.4 million of agency mortgage backed securities

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination

Rating
AAA	$	42.0		$	7.2	$	17.3	$	15.6	$	—	$	82.1
AA	0.2			—		—		—		—		0.2
A	1.6			—		—		—		—		1.6
BBB	0.4			—		—		—		—		0.4
Below investment grade	(12.3		)	—		—		—		—		(12.3		)
Total mortgage-backed securities collateralized by prime loans	$	31.9		$	7.2	$	17.3	$	15.6	$	—	$	72.0

Draft 5/8/2012

Page 14

Invested Asset Summary - CMBS

Commercial Mortgage-backed Securities as of March 31, 2012:

(Dollars In Millions)	2008 and
(Unaudited)	Prior		2009		2010		2011		2012			Total

Estimated Fair Value of Security by Year of Security Origination

Rating
AAA	$	191.5	$	—	$	82.2	$	233.9	$	35.3		$	542.9
AA	5.2		—		31.7		37.2		—			74.1
A	39.0		5.8		34.4		78.3		10.6			168.1
Total commercial mortgage-backed securities	$	235.7	$	5.8	$	148.3	$	349.4	$	45.9		$	785.1

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination

Rating
AAA	$	5.1	$	—	$	6.3	$	18.4	$	(0.2	)	$	29.6
AA	0.1		—		0.5		1.4		—			2.0
A	1.6		0.1		1.7		1.4		(0.4		)	4.4
Total commercial mortgage-backed securities	$	6.8	$	0.1	$	8.5	$	21.2	$	(0.6	)	$	36.0

Draft 5/8/2012

Page 15

Invested Asset Summary - ABS(1)

Other Asset-backed Securities(1) as of March 31, 2012:

(Dollars In Millions)	2008 and
(Unaudited)	Prior			2009		2010		2011		2012		Total

Estimated Fair Value of Security by Year of Security Origination

Rating
AAA	$	566.2		$	2.8	$	32.1	$	26.1	$	10.1	$	637.3
AA	160.7			—		—		—		—		160.7
A	27.9			—		—		74.1		—		102.0
BBB	3.3			—		—		—		—		3.3
Below investment grade	93.5			—		—		—		—		93.5
Total other asset-backed securities	$	851.6		$	2.8	$	32.1	$	100.2	$	10.1	$	996.8

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination

Rating
AAA	$	(38.0	)	$	—	$	0.1	$	0.3	$	0.1	$	(37.5	)
AA	(14.3		)	—		—		—		—		(14.3		)
A	(0.4		)	—		—		2.9		—		2.5
BBB	—			—		—		—		—		—
Below investment grade	(39.2		)	—		—		—		—		(39.2		)
Total other asset-backed securities	$	(91.9	)	$	—	$	0.1	$	3.2	$	0.1	$	(88.5	)

(1) Excludes Residential and Commercial mortgage-backed securities

Draft 5/8/2012

Page 16

Life Marketing Quarterly Trends

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

REVENUES
Gross Premiums and Policy Fees	$	393,665		$	406,566		$	383,293		$	408,057		$	388,117		$	393,665		$	388,117
Reinsurance Ceded	(198,086		)	(219,292		)	(191,498		)	(237,886		)	(192,755		)	(198,086		)	(192,755		)
Net Premiums and Policy Fees	195,579			187,274			191,795			170,171			195,362			195,579			195,362
Net investment income	106,627			110,230			112,396			116,922			119,026			106,627			119,026
Other income	28,131			28,923			27,048			26,205			29,154			28,131			29,154
Total Revenues	330,337			326,427			331,239			313,298			343,542			330,337			343,542

BENEFITS & EXPENSES
Benefits and settlement expenses	245,162			236,439			269,996			226,501			254,579			245,162			254,579
Amortization of deferred policy acquisition costs and value of business acquired	27,982			22,047			15,214			22,218			22,594			27,982			22,594
Other operating expenses	37,920			37,678			33,252			30,769			36,000			37,920			36,000
Total Benefits and Expenses	311,064			296,164			318,462			279,488			313,173			311,064			313,173

INCOME BEFORE INCOME TAX	$	19,273		$	30,263		$	12,777		$	33,810		$	30,369		$	19,273		$	30,369

Life Marketing Key Data

(Dollars In Thousands)	1ST QTR		2ND QTR		3RD QTR		4TH QTR		1ST QTR		3 MOS
(Unaudited)	2011		2011		2011		2011		2012		2011		2012

SALES BY PRODUCT
Traditional	$	1,863	$	1,305	$	516	$	162	$	287	$	1,863	$	287
Universal life	35,945		32,988		25,670		23,344		20,962		35,945		20,962
Bank-owned life insurance	4,661		3,460		1,520		1,722		1,345		4,661		1,345
Total	$	42,469	$	37,753	$	27,706	$	25,228	$	22,594	$	42,469	$	22,594

SALES BY DISTRIBUTION
Independent agents	$	29,243	$	25,690	$	19,185	$	15,280	$	13,940	$	29,243	$	13,940
Stockbrokers/banks	8,343		8,427		6,907		8,000		6,976		8,343		6,976
BOLI/other	4,883		3,636		1,614		1,948		1,678		4,883		1,678
Total	$	42,469	$	37,753	$	27,706	$	25,228	$	22,594	$	42,469	$	22,594

Draft 5/8/2012

Page 17

Annuities Quarterly Trends

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

REVENUES
Gross Premiums and Policy Fees	$	14,923		$	16,709		$	17,670		$	19,083		$	21,928		$	14,923		$	21,928
Reinsurance Ceded	(21		)	(17		)	(16		)	(12		)	(13		)	(21		)	(13		)
Net Premiums and Policy Fees	14,902			16,692			17,654			19,071			21,915			14,902			21,915
Net investment income	124,356			128,202			127,095			127,577			125,985			124,356			125,985
RIGL - Derivatives	(21,483		)	(2,196		)	23,435			(5,579		)	(41,200		)	(21,483		)	(41,200		)
RIGL - All Other Investments	999			(2,215		)	501			10,176			15,013			999			15,013
Other income	11,358			13,119			14,516			16,167			17,711			11,358			17,711
Total Revenues	130,132			153,602			183,201			167,412			139,424			130,132			139,424

BENEFITS & EXPENSES
Benefits and settlement expenses	96,247			99,856			93,438			101,247			91,909			96,247			91,909
Amortization of deferred policy acquisition costs and value of business acquired	6,500			15,053			25,664			9,984			1,873			6,500			1,873
Other operating expenses	20,260			21,324			21,468			22,255			23,296			20,260			23,296
Total Benefits and Expenses	123,007			136,233			140,570			133,486			117,078			123,007			117,078

INCOME BEFORE INCOME TAX	7,125			17,369			42,631			33,926			22,346			7,125			22,346

Adjustments to Reconcile to Operating Income:
Less: RIGL - Derivatives, net of economic cost	(17,138		)	2,957			29,337			902			(33,960		)	(17,138		)	(33,960		)
Less: RIGL - All Other Investments	999			(2,215		)	501			10,176			15,013			999			15,013
Less: Amortization related to benefit and settlement expenses	(1,403		)	(105		)	2,195			405			(1,619		)	(1,403		)	(1,619		)
Less: Related amortization of DAC	6,027			(446		)	(9,578		)	(1,787		)	7,129			6,027			7,129

PRE-TAX OPERATING INCOME	$	18,640		$	17,178		$	20,176		$	24,230		$	35,783		$	18,640		$	35,783

Annuities Key Data

	1ST QTR		2ND QTR		3RD QTR			4TH QTR		1ST QTR		3 MOS
	2011		2011		2011			2011		2012		2011		2012

SALES
Variable Annuity	$	607,795	$	669,021	$	573,166		$	498,617	$	567,408	$	607,795	$	567,408
Immediate Annuity	19,194		14,200		18,160			14,696		14,068		19,194		14,068
Single Premium Deferred Annuity	246,942		212,323		255,715			173,420		138,314		246,942		138,314
Market Value Adjusted Annuity	42,950		18,989		12,671			2,595		155		42,950		155
Equity Indexed Annuity	178		291		79			179		289		178		289
Total	$	917,059	$	914,824	$	859,791		$	689,507	$	720,234	$	917,059	$	720,234

PRE-TAX OPERATING INCOME
Variable Annuity	$	5,993	$	5,094	$	(10,223	)	$	13,242	$	17,343	$	5,993	$	17,343
Fixed Annuity	12,647		12,084		30,399			10,988		18,440		12,647		18,440
Total	$	18,640	$	17,178	$	20,176		$	24,230	$	35,783	$	18,640	$	35,783

DEPOSIT BALANCE
VA Fixed Annuity	$	493,686	$	541,252	$	533,211		$	510,567	$	515,613
VA Separate Account Annuity	5,058,135		5,579,541		5,367,490			6,140,365		7,050,549
Sub-total	5,551,821		6,120,793		5,900,701			6,650,932		7,566,162
Fixed Annuity	7,931,246		8,035,741		8,125,616			8,152,841		8,069,304
Total	$	13,483,067	$	14,156,534	$	14,026,317		$	14,803,773	$	15,635,466

Draft 5/8/2012

Page 18

Stable Value Products Quarterly Trends

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR		3 MOS
(Unaudited)	2011			2011			2011			2011			2012		2011			2012

REVENUES
Net investment income	$	36,104		$	39,376		$	35,173		$	34,497		$	32,402	$	36,104		$	32,402
RIGL - Derivatives	645			(617		)	(485		)	98			646		645			646
RIGL - All Other Investments	7,967			7,661			10,471			(774		)	1,607		7,967			1,607
Other income	(1		)	1			(1		)	—			1		(1		)	1
Total Revenues	44,715			46,421			45,158			33,821			34,656		44,715			34,656

BENEFITS & EXPENSES
Benefits and settlement expenses	22,790			19,381			19,641			19,444			18,957		22,790			18,957
Amortization of deferred policy acquisition costs and value of business acquired	3,547			286			502			221			196		3,547			196
Other operating expenses	571			568			812			606			604		571			604
Total Benefits and Expenses	26,908			20,235			20,955			20,271			19,757		26,908			19,757

INCOME BEFORE INCOME TAX	17,807			26,186			24,203			13,550			14,899		17,807			14,899

Adjustments to Reconcile to Operating Income:
Less: RIGL-Derivatives	645			(617		)	(485		)	98			646		645			646
Less: RIGL-All Other Investments	7,967			7,661			10,471			(774		)	1,607		7,967			1,607

PRE-TAX OPERATING INCOME	$	9,195		$	19,142		$	14,217		$	14,226		$	12,646	$	9,195		$	12,646

Stable Value Products Key Data

	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
	2011			2011			2011			2011			2012			2011		2012

SALES
GIC	$	74,658		$	161,137		$	230,000		$	32,900		$	26,000		$	74,658	$	26,000
GFA - Direct Institutional	—			100,000			200,000			—			150,000			—		150,000
Total	$	74,658		$	261,137		$	430,000		$	32,900		$	176,000		$	74,658	$	176,000

DEPOSIT BALANCE
Quarter End Balance	$	2,664,139		$	2,565,235		$	2,827,862		$	2,769,510		$	2,772,378
Average Daily Balance	$	2,750,596		$	2,450,620		$	2,710,571		$	2,827,891		$	2,784,389

OPERATING SPREAD	1.34		%	3.12		%	2.10		%	2.01		%	1.82		%

ADJUSTED OPERATING SPREAD (1)	1.31		%	1.97		%	1.92		%	2.00		%	1.80		%

(1) Excludes participating mortgage loan income and bank loan participation fee income

Draft 5/8/2012

Page 19

Asset Protection Quarterly Trends

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

REVENUES
Gross Premiums and Policy Fees	$	71,606		$	72,333		$	70,646		$	69,621		$	68,936		$	71,606		$	68,936
Reinsurance Ceded	(31,813		)	(32,253		)	(31,782		)	(32,215		)	(31,473		)	(31,813		)	(31,473		)
Net Premiums and Policy Fees	39,793			40,080			38,864			37,406			37,463			39,793			37,463
Net investment income	6,984			6,788			6,675			6,054			6,542			6,984			6,542
Other income	21,126			22,909			25,750			24,842			26,601			21,126			26,601
Total Revenues	67,903			69,777			71,289			68,302			70,606			67,903			70,606

BENEFITS & EXPENSES
Benefits and settlement expenses	23,866			25,147			26,529			23,968			24,048			23,866			24,048
Amortization of deferred policy acquisition costs and value of business acquired	10,236			9,927			9,227			8,690			8,677			10,236			8,677
Other operating expenses	27,000			28,722			29,369			28,938			32,915			27,000			32,915
Total Benefits and Expenses	61,102			63,796			65,125			61,596			65,640			61,102			65,640

INCOME BEFORE INCOME TAX	6,801			5,981			6,164			6,706			4,966			6,801			4,966
Less: noncontrolling interests	(51		)	296			—			—			—			(51		)	—
OPERATING INCOME	$	6,852		$	5,685		$	6,164		$	6,706		$	4,966		$	6,852		$	4,966

Asset Protection Key Data

	1ST QTR		2ND QTR		3RD QTR		4TH QTR		1ST QTR		3 MOS
	2011		2011		2011		2011		2012		2011		2012

SALES
Credit insurance	$	8,766	$	9,650	$	8,970	$	8,381	$	8,802	$	8,766	$	8,802
Service contracts	64,178		79,142		83,109		80,544		82,800		64,178		82,800
Other products	17,244		20,116		18,532		17,016		18,295		17,244		18,295
Total	$	90,188	$	108,908	$	110,611	$	105,941	$	109,897	$	90,188	$	109,897

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Page 20

Acquisitions Quarterly Trends

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

REVENUES
Gross Premiums and Policy Fees	$	180,494		$	215,533		$	219,970		$	218,502		$	212,158		$	180,494		$	212,158
Reinsurance Ceded	(101,794		)	(112,681		)	(103,667		)	(101,534		)	(80,301		)	(101,794		)	(80,301		)
Net Premiums and Policy Fees	78,700			102,852			116,303			116,968			131,857			78,700			131,857
Net investment income	117,938			132,710			140,352			138,261			138,121			117,938			138,121
RIGL - Derivatives	7,480			(28,858		)	(109,437		)	(3,116		)	10,640			7,480			10,640
RIGL - All Other Investments	(5,274		)	34,676			124,416			13,289			17,312			(5,274		)	17,312
Other income	1,279			1,391			1,432			1,459			1,579			1,279			1,579
Total Revenues	200,123			242,771			273,066			266,861			299,509			200,123			299,509

BENEFITS & EXPENSES
Benefits and settlement expenses	142,481			164,906			176,850			178,056			194,173			142,481			194,173
Amortization of deferred policy acquisition costs and value of business acquired	16,603			18,053			20,807			19,578			23,142			16,603			23,142
Other operating expenses	7,141			14,735			16,767			17,149			15,110			7,141			15,110
Total Benefits and Expenses	166,225			197,694			214,424			214,783			232,425			166,225			232,425

INCOME BEFORE INCOME TAX	33,898			45,077			58,642			52,078			67,084			33,898			67,084

Adjustments to Reconcile to Operating Income:
Less: RIGL - Derivatives	7,480			(28,858		)	(109,437		)	(3,116		)	10,640			7,480			10,640
Less: RIGL - All Other Investments	(5,274		)	34,676			124,416			13,289			17,312			(5,274		)	17,312
Less: Related amortization of deferred policy acquisition costs and value of business acquired	(699		)	(170		)	(365		)	360			33			(699		)	33

PRE-TAX OPERATING INCOME	$	32,391		$	39,429		$	44,028		$	41,545		$	39,099		$	32,391		$	39,099

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Page 21

Corporate & Other Quarterly Trends

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

REVENUES
Gross Premiums and Policy Fees	$	5,655		$	5,445		$	5,399		$	4,970		$	5,166		$	5,655		$	5,166
Reinsurance Ceded	(94		)	(5		)	(4		)	(5		)	(16		)	(94		)	(16		)
Net Premiums and Policy Fees	5,561			5,440			5,395			4,965			5,150			5,561			5,150
Net investment income	52,204			31,479			41,235			41,408			40,045			52,204			40,045
RIGL - Derivatives	672			(3,322		)	(11,329		)	(1,159		)	5			672			5
RIGL - All Other Investments	(4,883		)	9,308			(6,987		)	(11,858		)	(16,970		)	(4,883		)	(16,970		)
Other income	10,316			20,881			7,114			3,847			36,214			10,316			36,214
Total Revenues	63,870			63,786			35,428			37,203			64,444			63,870			64,444

BENEFITS & EXPENSES
Benefits and settlement expenses	5,823			5,824			6,338			3,543			5,963			5,823			5,963
Amortization of deferred policy acquisition costs and value of business acquired	358			352			326			1,618			354			358			354
Other operating expenses	51,879			47,647			50,895			49,475			47,212			51,879			47,212
Total Benefits and Expenses	58,060			53,823			57,559			54,636			53,529			58,060			53,529

INCOME (LOSS) BEFORE INCOME TAX	5,810			9,963			(22,131		)	(17,433		)	10,915			5,810			10,915

Adjustments to Reconcile to Operating Income:
Less: RIGL-Derivatives	672			(3,322		)	(11,329		)	(1,159		)	5			672			5
Less: RIGL-All Other Investments	(4,883		)	9,308			(6,987		)	(11,858		)	(16,970		)	(4,883		)	(16,970		)
Less: noncontrolling interests	—			—			—			—			—			—			—

PRE-TAX OPERATING INCOME (LOSS)	$	10,021		$	3,977		$	(3,815	)	$	(4,416	)	$	27,880		$	10,021		$	27,880

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Page 22

INFORMATION RELATED TO CERTAIN NON-GAAP DISCLOSURES

The following pages contain information related to certain non-GAAP disclosures (consolidated and segment operating income (loss), operating income per diluted share, shareowners’ equity per share excluding accumulated other comprehensive income (loss), operating income return on average equity, and net income return on average equity).

All income per share results are presented on a diluted basis, unless otherwise noted.

CONSOLIDATED AND SEGMENT OPERATING INCOME (LOSS) AND OPERATING INCOME PER DILUTED SHARE

Consolidated and segment operating income (loss) and operating income per diluted share (hereinafter collectively referred to as “consolidated and segment operating income”) are defined as income before income tax, excluding net realized investment gains and losses (excluding periodic settlements of derivatives associated with debt and certain investments) net of the related amortization of deferred acquisition costs (“DAC”) and value of business acquired (“VOBA”). Operating earnings exclude changes in the guaranteed minimum withdrawal benefits (“GMWB”) embedded derivatives (excluding the portion attributed to economic cost), realized and unrealized gains (losses) on derivatives used to hedge the VA product, actual GMWB incurred claims and net of the related amortization of DAC attributed to each of these items.

In the first quarter of 2012, management revised the definition of operating income (loss) as it relates to certain features of our variable annuity contracts and related hedging activities, to better reflect the basis on which the performance of its business is internally assessed. Under the revised definition, the following items will be excluded from operating income:

· Changes in GMWB embedded derivatives related to this rider feature of certain variable annuity products (excluding the portion attributed to economic costs). Economic cost is the long-term expected average cost of providing the product benefit over the life of the policy based on product pricing assumptions. These include assumptions about the economic/market environment, and elective and non-elective policy owner behavior (e.g. lapses, withdrawal timing, mortality, etc.). These features are considered embedded derivatives under ASC 815.

· Changes in value of certain derivative instruments used to mitigate the risk related to variable annuity contracts.

· That portion of the change in balance sheet components amortized over estimated gross profit that is attributed to the embedded GMWB derivative and related economic hedges (e.g. DAC amortization).

Management believes that consolidated and segment operating income (loss) provides relevant and useful information to investors, as it represents the basis on which the performance of the Company’s business is internally assessed. Although the items excluded from consolidated and segment operating income may be significant components in understanding and assessing the Company’s overall financial performance, management believes that consolidated and segment operating income enhances an investor’s understanding of the Company’s results of operations by highlighting the income (loss) generally attributable to the normal, recurring operations of the Company’s business.

SHAREOWNERS’ EQUITY PER SHARE EXCLUDING ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

As prescribed by GAAP, certain investments are recorded at their market values with the resulting unrealized gains (losses) affected by a related adjustment to DAC and VOBA, net of income tax, reported as a component of shareowners’ equity. The market values of fixed maturities increase or decrease as interest rates change. The Company believes that an insurance company’s shareowners’ equity per share may be difficult to analyze without disclosing the effects of recording accumulated other comprehensive income (loss), including unrealized gains (losses) on investments. Therefore, the Company reports the non-GAAP measure shareowners’ equity per share excluding accumulated other comprehensive income (loss), including unrealized gains (losses) on investments. This non-GAAP measure may be reconciled to the GAAP measure, shareowners’ equity per share by including accumulated other comprehensive income (loss), including unrealized gains (losses) on investments.

OPERATING INCOME RETURN ON AVERAGE EQUITY

Operating income return on average equity is a measure used by management to evaluate the Company’s performance. It is calculated by dividing operating income (as defined above) for a rolling twelve month period by the average ending balance of shareowners’ equity excluding accumulated other comprehensive income (loss) for the five most recent quarters.

NET INCOME RETURN ON AVERAGE EQUITY

Net income return on average equity is a measure used by management to evaluate the Company’s performance. It is calculated by dividing net income for a rolling twelve month period by the average ending balance of shareowners’ equity excluding accumulated other comprehensive income (loss) for the five most recent quarters.

Draft 5/8/2012
Page 23

Reconciliation of Segment Operating Income (Loss) to Net Income available to PLC’s common shareowners

(Dollars In Thousands)	1ST QTR			1ST QTR
(Unaudited)	2011			2012

Life Marketing	$	19,273		$	30,369
Acquisitions	32,391			39,099
Annuities	18,640			35,783
Stable Value Products	9,195			12,646
Asset Protection	6,852			4,966
Corporate & Other	10,021			27,880

Total Pre-tax operating income	96,372			150,743

Realized Investment Gains (Losses) - Investments	2,734			22,505
Realized Investment Gains (Losses) - Derivatives	(8,341		)	(22,669		)
Income Tax Expense	(31,887		)	(51,558		)

Net income available to PLC’s common shareowners	$	58,878		$	99,021

Draft 5/8/2012
Page 24

Reconciliation of Operating Income per Diluted Share to Net Income Available to PLC’s Common Shareowners per Diluted Share

	1ST QTR			2ND QTR			3RD QTR			4TH QTR			1ST QTR			3 MOS
(Unaudited)	2011			2011			2011			2011			2012			2011			2012

OPERATING INCOME PER SHARE

Operating income per share-diluted	$	0.71		$	0.86		$	0.74		$	0.97		$	1.18		$	0.71		$	1.18
RIGL - Derivatives per share-diluted	(0.06		)	(0.22		)	(0.69		)	(0.03		)	(0.18		)	(0.06		)	(0.18		)
RIGL - All Other Investments-diluted	0.02			0.36			0.91			0.08			0.18			0.02			0.18
Net income available to PLC’s common shareowners per share-diluted	$	0.67		$	1.00		$	0.96		$	1.02		$	1.18		$	0.67		$	1.18

Draft 5/8/2012
Page 25

Reconciliation of Total Protective Life Corporation’s Shareowners’ Equity per Share to Total Protective Life Corporation’s Shareowners’ Equity (Excl. AOCI) per share

	1ST QTR		2ND QTR		3RD QTR		4TH QTR		1ST QTR
(Unaudited)	2011		2011		2011		2011		2012

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	34.07	$	36.68	$	43.22	$	45.45	$	46.74
Less: Accumulated other comprehensive income (loss)	3.91		5.54		10.94		12.07		12.37
Excluding accumulated other comprehensive income (loss)	$	30.16	$	31.14	$	32.28	$	33.38	$	34.37

Draft 5/8/2012

Page 26

Calculation of Operating Income Return on Average Equity Rolling Twelve Months Ended March 31, 2012

(Dollars In Thousands)	Three Months												Twelve Months
(Unaudited)	6/30/2011			9/30/2011			12/31/2011			3/31/2012			3/31/2012
NUMERATOR:
Net income available to PLC’s common shareowners	$	87,623		$	82,857		$	86,034		$	99,021		$	355,535
Less:
Realized investment gains (losses), net of income tax
Investments	32,129			83,460			7,041			11,025			133,655
Derivatives	(19,396		)	(59,744		)	(2,129		)	(14,734		)	(96,003		)
Related amortization of DAC and VOBA, net of income tax	(468		)	(5,036		)	(664		)	3,603			(2,565		)
Add back:
Derivative gains related to Corp. debt and investments, net of income tax	—			—			—			—			—
Operating Income	$	75,358		$	64,177		$	81,786		$	99,127		$	320,448

					Total
					Protective Life
					Corporation’s
	Total				Shareowners’
	Protective Life		Accumulated		Equity Excluding
	Corporation’s		Other		Accumulated Other
	Shareowners’		Comprehensive		Comprehensive
	Equity		Income (Loss)		Income (Loss)
DENOMINATOR:
March 31, 2011	$	2,919,665	$	334,944	$	2,584,721
June 30, 2011	3,104,801		469,071		2,635,730
September 30, 2011	3,579,515		906,068		2,673,447
December 31, 2011	3,711,517		985,444		2,726,073
March 31, 2012	3,785,810		1,001,803		2,784,007
Total					$	13,403,978

Average					$	2,680,796

Operating Income Return on Average Equity					12.0		%

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Page 27

Calculation of Operating Income Return on Average Equity Rolling Twelve Months Ended March 31, 2011


(Dollars In Thousands)	Three Months												Twelve Months
(Unaudited)	6/30/2010			9/30/2010			12/31/2010			3/31/2011			3/31/2011
NUMERATOR:
Net income available to PLC’s common shareowners	$	25,032		$	55,762		$	81,383		$	58,878		$	221,055
Less:
Realized investment gains (losses), net of income tax
Investments	33,089			67,062			(50,214		)	(774		)	49,163
Derivatives	(76,276		)	(59,324		)	66,541			(5,422		)	(74,481		)
Related amortization of DAC and VOBA, net of income tax	14,417			(760		)	723			2,551			16,931
Add back:
Derivative gains related to Corp. debt and investments, net of income tax	27			27			27			—			81
Operating Income	$	53,829		$	48,811		$	64,360		$	62,523		$	229,523

						Total
						Protective Life
						Corporation’s
	Total					Shareowners’
	Protective Life		Accumulated			Equity Excluding
	Corporation’s		Other			Accumulated Other
	Shareowners’		Comprehensive			Comprehensive
	Equity		Income (Loss)			Income (Loss)
DENOMINATOR:
March 31, 2010	$	2,348,512	$	(52,027	)	$	2,400,539
June 30, 2010	2,605,378		189,818			2,415,560
September 30, 2010	3,086,756		624,562			2,462,194
December 31, 2010	2,841,188		307,850			2,533,338
March 31, 2011	2,919,665		334,944			2,584,721
Total						$	12,396,352

Average						$	2,479,270

Operating Income Return on Average Equity						9.3		%

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Page 28

Calculation of Net Income Available to PLC’s common shareowners Return on Average Equity Rolling Twelve Months Ended March 31, 2012

(Dollars In Thousands)	Three Months								Twelve Months
(Unaudited)	6/30/2011		9/30/2011		12/31/2011		3/31/2012		3/31/2012
NUMERATOR:
Net income available to PLC’s common shareowners	$	87,623	$	82,857	$	86,034	$	99,021	$	355,535

					Total
					Protective Life
					Corporation’s
	Total				Shareowners’
	Protective Life		Accumulated		Equity Excluding
	Corporation’s		Other		Accumulated Other
	Shareowners’		Comprehensive		Comprehensive
	Equity		Income (Loss)		Income (Loss)
DENOMINATOR:
March 31, 2011	$	2,919,665	$	334,944	$	2,584,721
June 30, 2011	3,104,801		469,071		2,635,730
September 30, 2011	3,579,515		906,068		2,673,447
December 31, 2011	3,711,517		985,444		2,726,073
March 31, 2012	3,785,810		1,001,803		2,784,007
Total					$	13,403,978

Average					$	2,680,796

Net income available to PLC’s common shareowners Return on Average Equity					13.3		%

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Page 29

Calculation of Net Income available to PLC’s common shareowners Return on Average Equity Rolling Twelve Months Ended March 31, 2011

(Dollars In Thousands)	Three Months								Twelve Months
(Unaudited)	6/30/2010		9/30/2010		12/31/2010		3/31/2011		3/31/2011
NUMERATOR:
Net income available to PLC’s common shareowners	$	25,032	$	55,762	$	81,383	$	58,878	$	221,055

						Total
						Protective Life
						Corporation’s
	Total					Shareowners’
	Protective Life		Accumulated			Equity Excluding
	Corporation’s		Other			Accumulated Other
	Shareowners’		Comprehensive			Comprehensive
	Equity		Income (Loss)			Income (Loss)
DENOMINATOR:
March 31, 2010	$	2,348,512	$	(52,027	)	$	2,400,539
June 30, 2010	2,605,378		189,818			2,415,560
September 30, 2010	3,086,756		624,562			2,462,194
December 31, 2010	2,841,188		307,850			2,533,338
March 31, 2011	2,919,665		334,944			2,584,721
Total						$	12,396,352

Average						$	2,479,270

Net income available to PLC’s common shareowners Return on Average Equity						8.9		%

Draft 5/8/2012

Page 30

Summary of Impact of DAC Accounting & Operating Definition Change

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2011			2011			2011			2011

GAAP Consolidated Statement of Income Data:
Pre-tax Operating Income (Loss) (1)
Life Marketing as originally reported	$	26,239		$	33,704		$	20,321		$	36,010		$	116,274
DAC change	(6,966		)	(3,441		)	(7,544		)	(2,200		)	(20,151		)
Life Marketing as adjusted	19,273			30,263			12,777			33,810			96,123

Asset Protection as originally reported	6,542			5,530			6,019			6,571			24,662
DAC change	310			155			145			135			745
Asset Protection as adjusted	6,852			5,685			6,164			6,706			25,407

Annuities as originally reported	13,085			24,375			43,784			29,482			110,726
DAC change	(4,935		)	(5,237		)	(4,179		)	(4,451		)	(18,802		)
VA change to operating income	10,490			(1,960		)	(19,429		)	(801		)	(11,700		)
Annuities as adjusted	18,640			17,178			20,176			24,230			80,224

Stable Value Products	9,195			19,142			14,217			14,226			56,780
Acquisitions	32,391			39,429			44,028			41,545			157,393
Corporate & Other	10,021			3,977			(3,815		)	(4,416		)	5,767

Total Pre-tax Operating Income as originally reported	97,473			126,157			124,554			123,418			471,602
DAC change	(11,591		)	(8,523		)	(11,578		)	(6,516		)	(38,208		)
VA change to operating income	10,490			(1,960		)	(19,429		)	(801		)	(11,700		)
Total Pre-tax Operating Income as adjusted	96,372			115,674			93,547			116,101			421,694

Income before income tax as originally reported	104,095			143,273			131,203			128,581			507,152
DAC change	(13,381		)	(8,434		)	(8,917		)	(5,944		)	(36,676		)
Income before income tax as adjusted	90,714			134,839			122,286			122,637			470,476

Net Income Available to PLC’s Common Shareowners as originally reported	67,517			93,068			88,614			89,871			339,070
DAC change	(8,639		)	(5,445		)	(5,757		)	(3,837		)	(23,678		)
Net Income Available to PLC’s Common Shareowners as adjusted	58,878			87,623			82,857			86,034			315,392

Per Share Data (Diluted):
Operating Earnings per Share as originally reported (1)	$	0.72		$	0.94		$	0.98		$	1.02		$	3.65
DAC change	(0.09		)	(0.06		)	(0.09		)	(0.05		)	(0.28		)
VA change to operating income	0.08			(0.02		)	(0.15		)	—			(0.09		)
Operating Earnings per Share as adjusted	$	0.71		$	0.86		$	0.74		$	0.97		$	3.28

Net Income Available to PLC’s Common Shareowners as originally reported	$	0.77		$	1.06		$	1.03		$	1.06		$	3.92
DAC change	(0.10		)	(0.06		)	(0.07		)	(0.04		)	(0.27		)
Net Income Available to PLC’s Common Shareowners as adjusted	$	0.67		$	1.00		$	0.96		$	1.02		$	3.65

(1) “Operating income” is a non-GAAP financial measure. “Net income available to PLC’s common shareowners” is a GAAP financial measure to which “Operating Income” may be compared.

Draft 5/8/2012

Page 31

Summary of Impact of DAC Accounting Change

(Dollars In Thousands)	1ST QTR			2ND QTR			3RD QTR			4TH QTR
(Unaudited)	2011			2011			2011			2011

GAAP Consolidated Balance Sheet Data:

Total GAAP Assets as originally reported	$	48,295,466		$	50,987,849		$	52,023,403		$	52,932,085
DAC change	(771,013		)	(775,521		)	(779,092		)	(788,716		)
Total GAAP Assets as adjusted	$	47,524,453		$	50,212,328		$	51,244,311		$	52,143,369

Total PLC’s Shareowners’ Equity as originally reported	3,417,209			3,605,238			4,082,235			4,220,465
DAC change	(497,544		)	(500,437		)	(502,720		)	(508,948		)
Total PLC’s Shareowners’ Equity as adjusted	$	2,919,665		$	3,104,801		$	3,579,515		$	3,711,517

Total PLC’s Shareowners’ Equity Excluding AOCI as originally reported (1)	3,097,855			3,154,309			3,197,783			3,254,246
DAC change	(513,134		)	(518,579		)	(524,336		)	(528,173		)
Total PLC’s Shareowners’ Equity Excluding AOCI as adjusted (1)	$	2,584,721		$	2,635,730		$	2,673,447		$	2,726,073

Per Share Data (Common Shares Outstanding):

Total PLC’s Shareowners’ Equity as originally reported	39.87			42.59			49.30			51.68
DAC change	(5.80		)	(5.91		)	(6.08		)	(6.23		)
Total PLC’s Shareowners’ Equity as adjusted	$	34.07		$	36.68		$	43.22		$	45.45

Total PLC’s Shareowners’ Equity Excluding AOCI as originally reported (1)	36.15			37.26			38.61			39.85
DAC change	(5.99		)	(6.12		)	(6.33		)	(6.47		)
Total PLC’s Shareowners’ Equity Excluding AOCI as adjusted (1)	$	30.16		$	31.14		$	32.28		$	33.38

(1) “Total PLC’s Shareowners’ Equity excluding accumulated other comprehensive income (loss)” is a non-GAAP financial measure. “Total PLC Shareowners’ equity” is a GAAP financial measure to which “Total PLC’s Shareowners’ Equity excluding accumulated other comprehensive income (loss)” can be compared.

Draft 5/8/2012

Page 32

Summary of Impact of DAC Accounting & Operating Definition Change

(Dollars In Thousands)
(Unaudited)	2007			2008			2009			2010

GAAP Consolidated Statement of Income Data:

Pre-tax Operating Income (Loss) (1)
Life Marketing as originally reported	$	189,186		$	188,535		$	137,826		$	147,470
DAC change	(48,411		)	(42,714		)	(30,018		)	(23,606		)
Life Marketing as adjusted	140,775			145,821			107,808			123,864

Asset Protection as originally reported	41,559			30,789			23,229			29,897
DAC change	244			1,729			3,019			1,594
Asset Protection as adjusted	41,803			32,518			26,248			31,491

Annuities as originally reported	23,051			18,707			56,642			53,901
DAC change	(18,201		)	(27,212		)	(15,997		)	(22,689		)
VA change to operating income	—			16,744			(18,591		)	20,951
Annuities as adjusted	4,850			8,239			22,054			52,163

Stable Value Products	50,231			89,811			61,963			39,207
Acquisitions	129,247			136,479			133,760			111,143
Corporate & Other	(3,416		)	(105,986		)	81,980			(25,053		)

Total Pre-tax Operating Income as originally reported	429,858			358,335			495,400			356,565
DAC change	(66,368		)	(68,197		)	(42,996		)	(44,701		)
VA change to operating income	—			16,744			(18,591		)	20,951
Total Pre-tax Operating Income as adjusted	363,490			306,882			433,813			332,815

Income before income tax as originally reported	436,088			(75,131		)	416,778			388,863
DAC change	(66,368		)	(68,197		)	(34,593		)	(54,091		)
Income before income tax as adjusted	369,720			(143,328		)	382,185			334,772

Net Income Available to PLC’s Common Shareowners	289,566			(41,855		)	271,488			260,241
DAC change	(42,837		)	(44,031		)	(22,351		)	(34,927		)
Net Income Available to PLC’s Common Shareowners	246,729			(85,886		)	249,137			225,314

Per Share Data (Diluted):
Operating Earnings per Share as originally reported (1)	$	3.99		$	3.37		$	3.97		$	2.73
DAC change	(0.60		)	(0.62		)	(0.34		)	(0.33		)
VA change to operating income	—			0.15			(0.15		)	0.15
Operating Earnings per Share as adjusted	$	3.39		$	2.90		$	3.48		$	2.55

Net Income Available to PLC’s Common Shareowners as originally reported	$	4.05		$	(0.59	)	$	3.34		$	2.97
DAC change	(0.60		)	(0.62		)	(0.27		)	(0.40		)
Net Income Available to PLC’s Common Shareowners as adjusted	$	3.45		$	(1.21	)	$	3.07		$	2.57

(1) “Operating income” is a non-GAAP financial measure. “Net income available to PLC’s common shareowners” is a GAAP financial measure to which “Operating Income” may be compared.

Draft 5/8/2012

Page 33

Summary of Impact of DAC Accounting Change

(Dollars In Thousands)
(Unaudited)	2007			2008			2009			2010

GAAP Consolidated Balance Sheet Data:

Total GAAP Assets as originally reported	$	41,786,041		$	39,572,449		$	42,311,587		$	47,562,786
DAC change	(624,656		)	(729,089		)	(728,036		)	(759,163		)
Total GAAP Assets as adjusted	$	41,161,385		$	38,843,360		$	41,583,551		$	46,803,623

Total PLC’s Shareowners’ Equity as originally reported	2,456,761			761,095			2,478,821			3,331,087
DAC change	(403,135		)	(470,538		)	(469,892		)	(489,899		)
Total PLC’s Shareowners’ Equity as adjusted	$	2,053,626		$	290,557		$	2,008,929		$	2,841,188

Total PLC’s Shareowners’ Equity Excluding AOCI as originally reported (1)	2,537,290			2,428,151			2,799,990			3,037,833
DAC change	(403,186		)	(447,217		)	(469,568		)	(504,495		)
Total PLC’s Shareowners’ Equity Excluding AOCI as adjusted (1)	$	2,134,104		$	1,980,934		$	2,330,422		$	2,533,338

Per Share Data (Common Shares Outstanding):

Total PLC’s Shareowners’ Equity as originally reported	35.02			10.89			28.96			38.88
DAC change	(5.74		)	(6.73		)	(5.49		)	(5.71		)
Total PLC’s Shareowners’ Equity as adjusted	$	29.28		$	4.16		$	23.47		$	33.17

Total PLC’s Shareowners’ Equity Excluding AOCI as originally reported (1)	36.17			34.74			32.72			35.46
DAC change	(5.75		)	(6.40		)	(5.49		)	(5.89		)
Total PLC’s Shareowners’ Equity Excluding AOCI as adjusted (1)	$	30.42		$	28.34		$	27.23		$	29.57

PROTECTIVE LIFE CORP - FORM 8-K - EX-99.2 - May 8, 2012

Attached files

PROTECTIVE LIFE CORP Reports