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

Attached files

file	filename
8-K - 8-K - PROTECTIVE LIFE CORP	a13-4419_18k.htm
EX-99.1 - EX-99.1 - PROTECTIVE LIFE CORP	a13-4419_1ex99d1.htm

Exhibit 99.2

Draft 2/6/2013

Protective Life Corporation (“PLC”)

Supplemental Schedules

Fourth Quarter 2012

Draft 2/6/2013

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 2/6/2013

Quarterly Financial Highlights

(Dollars In Thousands)	4TH QTR			1ST QTR		2ND QTR			3RD QTR			4TH QTR		12 MOS
(Unaudited)	2011			2012		2012			2012			2012		2011		2012

Pre-tax Operating Income (Loss) (1)

Life Marketing	$	33,810		$	30,369	$	30,348		$	28,673		$	15,642	$	96,123	$	105,032
Acquisitions	41,545			39,099		43,615			46,155			42,191		157,393		171,060
Annuities	24,230			35,783		28,553			9,408			45,348		80,224		119,092
Stable Value Products	14,226			12,646		15,958			13,050			18,675		56,780		60,329
Asset Protection	6,706			4,966		6,479			4,150			859		25,407		16,454
Corporate & Other	(4,416		)	27,880		(25,397		)	(6,614		)	928		5,767		(3,203		)
Total Pre-tax Operating Income	$	116,101		$	150,743	$	99,556		$	94,822		$	123,643	$	421,694	$	468,764

Balance Sheet Data

Total GAAP Assets	$	52,143,369		$	53,322,272	$	54,195,024		$	55,912,100		$	57,384,672
Total Protective Life Corporation’s Shareowners’ Equity	$	3,711,517		$	3,785,810	$	4,147,234		$	4,565,855		$	4,615,183
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (2)	$	2,726,073		$	2,784,007	$	2,828,898		$	2,849,089		$	2,878,461

Stock Data

Closing Price	$	22.56		$	29.62	$	29.41		$	26.21		$	28.58
Average Shares Outstanding
Basic	83,205,456			82,330,330		81,639,756			80,662,745			79,652,495		85,208,612		81,066,338
Diluted	84,464,572			83,921,135		83,243,703			82,406,103			81,339,803		86,475,229		82,723,016

(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 2/6/2013

Financial Strength Ratings as of December 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 2/6/2013

GAAP Consolidated Statements of Income

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

REVENUES
Gross premiums and policy fees	$	720,233		$	696,305		$	711,429		$	684,939		$	721,605		$	2,800,140		$	2,814,278
Reinsurance ceded	(371,652		)	(304,558		)	(344,673		)	(321,059		)	(375,546		)	(1,394,675		)	(1,345,836		)
Net premiums and policy fees	348,581			391,747			366,756			363,880			346,059			1,405,465			1,468,442
Net investment income	464,719			462,121			456,222			467,944			476,045			1,820,643			1,862,332
RIGL - derivatives	(9,756		)	(29,909		)	(48,268		)	(134,222		)	(26,081		)	(155,251		)	(238,480		)
RIGL - all other investments	33,296			35,726			65,593			122,555			7,161			234,915			231,035

OTTI losses	(24,420		)	(34,420		)	(13,670		)	(1,676		)	(16,422		)	(62,332		)	(66,188		)
Portion recognized in OCI (before taxes)	1,957			15,656			62			(6,880		)	(1,536		)	14,890			7,302
Net impairment losses recognized in earnings	(22,463		)	(18,764		)	(13,608		)	(8,556		)	(17,958		)	(47,442		)	(58,886		)
Other income	72,520			111,260			81,480			81,190			84,633			307,812			358,563
Total revenues	886,897			952,181			908,175			892,791			869,859			3,566,142			3,623,006

BENEFITS & EXPENSES
Benefits and settlement expenses	552,759			589,629			568,522			629,945			537,944			2,233,473			2,326,040
Amortization of deferred policy acquisition costs and value of business acquired	62,309			56,836			67,188			14,011			65,530			264,993			203,565
Other operating expenses	109,375			116,255			124,530			118,964			120,406			437,779			480,155
Interest expense - subsidiaries	7,081			6,109			6,098			6,253			10,336			28,023			28,796
Interest expense - holding company - other debt	23,335			23,372			23,298			23,731			23,481			93,794			93,882
Interest expense - holding company - subordinated debt	9,401			9,401			10,852			8,901			8,443			37,604			37,597
Total benefits and expenses	764,260			801,602			800,488			801,805			766,140			3,095,666			3,170,035

INCOME BEFORE INCOME TAX	122,637			150,579			107,687			90,986			103,719			470,476			452,971
Income tax expense	36,603			51,558			31,532			30,506			36,923			154,839			150,519
NET INCOME	86,034			99,021			76,155			60,480			66,796			315,637			302,452
Less: Net income (loss) attributable to noncontrolling interests	—			—			—			—			—			245			—
NET INCOME AVAILABLE TO PLC’S COMMON SHAREOWNERS	$	86,034		$	99,021		$	76,155		$	60,480		$	66,796		$	315,392		$	302,452

PER SHARE DATA FOR QUARTER
Operating income - diluted (1)	$	0.97		$	1.18		$	0.85		$	0.76		$	0.98
RIGL - derivatives net of gains related to corp debt, investments and annuities	(0.03		)	(0.18		)	(0.31		)	(0.98		)	(0.12		)
RIGL - all other investments	0.08			0.18			0.37			0.95			(0.04		)
Net income available to PLC’s common shareowners-diluted	$	1.02		$	1.18		$	0.91		$	0.73		$	0.82
Average shares outstanding-diluted	84,464,572			83,921,135			83,243,703			82,406,103			81,339,803
Dividends paid	$	0.16		$	0.16		$	0.18		$	0.18		$	0.18
PER SHARE DATA FOR YTD
Operating income - diluted (1)	$	3.28		$	1.18		$	2.04		$	2.80		$	3.78
RIGL - derivatives net of gains related to corp debt, investments and annuities	(1.00		)	(0.18		)	(0.49		)	(1.46		)	(1.59		)
RIGL - all other investments	1.37			0.18			0.55			1.49			1.47
Net income available to PLC’s common shareowners - diluted	$	3.65		$	1.18		$	2.10		$	2.83		$	3.66
Average shares outstanding - diluted	86,475,229			83,921,135			83,583,025			83,187,854			82,723,016
Dividends paid	$	0.62		$	0.16		$	0.34		$	0.52		$	0.70

(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 2/6/2013

GAAP Consolidated Balance Sheets

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

Fixed maturities, at fair value	$	27,983,446	$	28,189,744	$	28,850,496	$	29,607,238	$	29,787,959
Fixed maturities, at amortized cost	—		—		—		—		300,000
Equity securities	335,232		360,527		350,503		373,552		411,786
Mortgage loans	5,353,481		5,314,496		5,203,999		5,096,080		4,950,201
Investment real estate	29,899		31,527		20,582		19,858		19,816
Policy loans	879,819		877,850		870,775		869,607		865,391
Other long-term investments	257,714		324,001		333,358		347,065		361,837
Long-term investments	34,839,591		35,098,145		35,629,713		36,313,400		36,696,990
Short-term investments	101,489		110,194		89,495		110,684		217,812
Total investments	34,941,080		35,208,339		35,719,208		36,424,084		36,914,802
Cash	267,298		175,353		219,877		206,012		368,801
Accrued investment income	350,580		362,837		354,282		360,024		357,368
Accounts and premiums receivable	84,754		90,372		111,362		104,037		85,500
Reinsurance receivable	5,645,471		5,674,662		5,716,333		5,753,980		5,805,401
Deferred policy acquisition costs and value of business acquired	3,248,041		3,234,596		3,208,319		3,208,227		3,239,519
Goodwill	111,659		110,884		110,110		109,335		108,561
Property and equipment, net	48,578		48,596		48,307		48,321		47,607
Other assets	150,549		163,360		164,354		189,086		262,052
Current/Deferred income tax	50,783		—		62,316		55,518		30,827
Assets related to separate accounts
Variable annuity	6,741,959		7,698,456		7,949,926		8,895,947		9,601,417
Variable universal life	502,617		554,817		530,630		557,529		562,817

TOTAL ASSETS	$	52,143,369	$	53,322,272	$	54,195,024	$	55,912,100	$	57,384,672

Draft 2/6/2013

GAAP Consolidated Balance Sheets - Continued

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

LIABILITIES
Policy liabilities and accruals
Future policy benefits and claims	$	20,867,989		$	20,981,983		$	21,165,796		$	21,400,351		$	21,626,386
Unearned premiums	1,258,785			1,283,441			1,301,537			1,367,241			1,396,026
Stable value product deposits	2,769,510			2,772,378			2,676,312			2,328,237			2,510,559
Annuity deposits	10,946,848			10,856,119			10,774,666			10,751,652			10,658,463
Other policyholders’ funds	546,516			537,909			539,364			553,262			566,985
Repurchase program borrowings	—			221,569			200,000			280,000			150,000
Other liabilities	1,065,451			1,055,568			1,157,689			1,306,298			1,434,604
Mortgage loan backed certificates	19,755			8,834			—			—			—
Deferred income taxes	1,260,629			1,241,670			1,430,027			1,668,885			1,736,389
Income tax payable	—			22,725			—			—			—
Non-recourse funding obligations	407,800			297,000			297,000			297,000			586,000
Debt	1,520,000			1,480,000			1,510,000			1,400,000			1,400,000
Subordinated debt securities	524,743			524,743			515,593			540,593			540,593
Liabilities related to separate accounts
Variable annuity	6,741,959			7,698,456			7,949,926			8,895,947			9,601,417
Variable universal life	502,617			554,817			530,630			557,529			562,817
TOTAL LIABILITIES	48,432,602			49,537,212			50,048,540			51,346,995			52,770,239

SHAREOWNERS’ EQUITY
Common stock	44,388			44,388			44,388			44,388			44,388
Additional paid-in-capital	598,106			593,930			603,045			603,083			606,369
Treasury stock	(107,740		)	(131,578		)	(157,412		)	(183,330		)	(209,840		)
Retained earnings	2,191,319			2,277,267			2,338,877			2,384,948			2,437,544
Accumulated other comprehensive income (loss)	985,444			1,001,803			1,318,336			1,716,766			1,736,722
TOTAL PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY	3,711,517			3,785,810			4,147,234			4,565,855			4,615,183
Noncontrolling interest	(750		)	(750		)	(750		)	(750		)	(750		)
TOTAL EQUITY	3,710,767			3,785,060			4,146,484			4,565,105			4,614,433
TOTAL LIABILITIES AND SHAREOWNERS’ EQUITY	$	52,143,369		$	53,322,272		$	54,195,024		$	55,912,100		$	57,384,672

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	45.45		$	46.74		$	51.81		$	57.70		$	59.06
Less: Accumulated other comprehensive income (loss)	12.07			12.37			16.47			21.70			22.22
Excluding accumulated other comprehensive income (loss) (1)	$	33.38		$	34.37		$	35.34		$	36.00		$	36.84

Total Protective Life Corporation’s Shareowners’ Equity	$	3,711,517		$	3,785,810		$	4,147,234		$	4,565,855		$	4,615,183
Less: Accumulated other comprehensive income (loss)	985,444			1,001,803			1,318,336			1,716,766			1,736,722
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (1)	$	2,726,073		$	2,784,007		$	2,828,898		$	2,849,089		$	2,878,461

Common shares outstanding	81,669,195			80,998,430			80,046,258			79,136,858			78,137,493
Treasury Stock shares	7,107,765			7,778,530			8,730,702			9,640,102			10,639,467

(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 2/6/2013

Calculation of Operating Earnings Per Share

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

CALCULATION OF NET INCOME PER SHARE

Net income available to PLC’s common shareowners	$	86,034		$	99,021		$	76,155		$	60,480		$	66,796		$	315,392		$	302,452

Average shares outstanding - basic	83,205,456			82,330,330			81,639,756			80,662,745			79,652,495			85,208,612			81,066,338
Average shares outstanding - diluted	84,464,572			83,921,135			83,243,703			82,406,103			81,339,803			86,475,229			82,723,016

Net income available to PLC’s common shareowners per share-basic	$	1.03		$	1.20		$	0.93		$	0.75		$	0.84		$	3.70		$	3.73
Net income available to PLC’s common shareowners per share-diluted	$	1.02		$	1.18		$	0.91		$	0.73		$	0.82		$	3.65		$	3.66

Income from continuing operations	$	86,034		$	99,021		$	76,155		$	60,480		$	66,796		$	315,392		$	302,452

EPS (basic)	$	1.03		$	1.20		$	0.93		$	0.75		$	0.84		$	3.70		$	3.73
EPS (diluted)	$	1.02		$	1.18		$	0.91		$	0.73		$	0.82		$	3.65		$	3.66

CALCULATION OF REALIZED INVESTMENT GAINS (LOSSES) PER SHARE

RIGL - derivatives	$	(9,756	)	$	(29,909	)	$	(48,268	)	$	(134,222	)	$	(26,081	)	$	(155,251	)	$	(238,480	)
VA GMWB economic cost	6,481			7,240			8,355			9,641			11,265			21,881			36,501
RIGL - all other investments	10,833			16,962			51,985			113,999			(10,797		)	187,473			172,149
Related amortization of DAC & VOBA	(1,022		)	5,543			(3,941		)	6,746			5,689			(5,566		)	14,037
	6,536			(164		)	8,131			(3,836		)	(19,924		)	48,537			(15,793		)
Tax effect	(2,288		)	58			(2,845		)	1,342			6,974			(16,989		)	5,529
	$	4,248		$	(106	)	$	5,286		$	(2,494	)	$	(12,950	)	$	31,548		$	(10,264	)

RIGL - derivatives per share-diluted	$	(0.03	)	$	(0.18	)	$	(0.31	)	$	(0.98	)	$	(0.12	)	$	(1.00	)	$	(1.59	)
RIGL - all other investments per share-diluted	$	0.08		$	0.18		$	0.37		$	0.95		$	(0.04	)	$	1.37		$	1.47

OPERATING INCOME PER SHARE (1)

Net income available to PLC’s common shareowners per share-diluted	$	1.02		$	1.18		$	0.91		$	0.73		$	0.82		$	3.65		$	3.66
Less: RIGL - derivatives per share-diluted	(0.03		)	(0.18		)	(0.31		)	(0.98		)	(0.12		)	(1.00		)	(1.59		)
Less: RIGL - all other investments per share-diluted	0.08			0.18			0.37			0.95			(0.04		)	1.37			1.47
Operating income per share-diluted	$	0.97		$	1.18		$	0.85		$	0.76		$	0.98		$	3.28		$	3.78

NET OPERATING INCOME (1)

Net income available to PLC’s common shareowners	$	86,034		$	99,021		$	76,155		$	60,480		$	66,796		$	315,392		$	302,452
Less: RIGL - derivatives net of tax	(2,129		)	(14,735		)	(25,943		)	(80,978		)	(9,630		)	(86,691		)	(131,286		)
Less: RIGL - all other investments net of tax and amortization	6,377			14,629			31,229			78,484			(3,320		)	118,239			121,022
Net operating income	$	81,786		$	99,127		$	70,869		$	62,974		$	79,746		$	283,844		$	312,716

PRE-TAX OPERATING INCOME (2)

Income before income tax and discontinued operations	$	122,637		$	150,579		$	107,687		$	90,986		$	103,719		$	470,476		$	452,971
Less: RIGL - derivatives	(9,756		)	(29,909		)	(48,268		)	(134,222		)	(26,081		)	(155,251		)	(238,480		)
Less: VA GMWB economic cost	6,481			7,240			8,355			9,641			11,265			21,881			36,501
Less: RIGL - all other investments	10,833			16,962			51,985			113,999			(10,797		)	187,473			172,149
Less: Related amortization of DAC & VOBA	(1,022		)	5,543			(3,941		)	6,746			5,689			(5,566		)	14,037
Less: Minority interest	—			—			—			—			—			245			—
Pre-tax operating income	$	116,101		$	150,743		$	99,556		$	94,822		$	123,643		$	421,694		$	468,764

(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 2/6/2013

Invested Asset Summary

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

Total Portfolio

Fixed Maturities	$	27,983.5	$	28,189.7	$	28,850.5	$	29,607.2	$	30,088.0	82	%
Mortgage Loans	5,353.5		5,314.5		5,204.0		5,096.1		4,950.2		13	%
Investment Real Estate	29.9		31.5		20.6		19.8		19.8		0	%
Equity Securities	335.2		360.5		350.5		373.6		411.8		1	%
Policy Loans	879.8		877.9		870.8		869.6		865.4		2	%
Short-Term Investments	101.5		110.2		89.5		110.7		217.8		1	%
Other Long-Term Investments	257.7		324.0		333.3		347.1		361.8		1	%
Total Invested Assets	$	34,941.1	$	35,208.3	$	35,719.2	$	36,424.1	$	36,914.8	100	%

Draft 2/6/2013

Invested Asset Summary - Fixed Income

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

Fixed Income

Corporate Bonds	$	20,148.4		$	20,321.8		$	20,903.8		$	21,580.4		$	22,054.4		73	%
Residential Mortgage-Backed Securities	2,656.1			2,664.5			2,501.3			2,393.9			2,197.1			7	%
Commercial Mortgage-Backed Securities	741.8			785.1			938.0			1,023.6			1,040.9			3	%
Other Asset-Backed Securities	971.0			996.8			1,056.3			1,091.7			1,133.0			4	%
U.S. Government-related Securities	1,771.5			1,645.1			1,629.2			1,659.9			1,475.8			5	%
Other Government-related Securities	137.9			180.0			166.3			160.2			164.2			1	%
States, Municipals and Political Subdivisions	1,556.8			1,596.4			1,655.6			1,697.5			1,722.6			6	%
Other	—			—			—			—			300.0			1	%
Total Fixed Income Portfolio	$	27,983.5		$	28,189.7		$	28,850.5		$	29,607.2		$	30,088.0		100	%

Fixed Income - Quality

AAA	16.5		%	16.2		%	16.2		%	15.9		%	14.6		%
AA	8.0		%	8.0		%	7.1		%	7.2		%	7.2		%
A	27.5		%	28.7		%	30.3		%	30.8		%	30.8		%
BBB	41.0		%	39.5		%	39.2		%	39.1		%	39.7		%
Below investment grade	7.0		%	7.6		%	7.2		%	7.0		%	6.7		%
Not rated	0.0		%	0.0		%	0.0		%	0.0		%	1.0		%
	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 2/6/2013

Fixed Maturities by NAIC Rating

STAT Carry Value % of Total

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

NAIC Rating
1	56.07	%	55.97	%	56.44	%	56.82	%	56.77	%
2	38.92	%	38.64	%	38.58	%	38.16	%	38.52	%
3	2.80	%	3.47	%	3.21	%	3.32	%	3.23	%
4	1.31	%	0.76	%	0.76	%	0.70	%	0.62	%
5	0.73	%	0.96	%	0.94	%	0.91	%	0.70	%
6	0.17	%	0.20	%	0.07	%	0.09	%	0.16	%

	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Below investment grade (using NAIC 3-6)	5.01	%	5.39	%	4.98	%	5.02	%	4.71	%

Note: NAIC Ratings reflect statutory carrying values

Draft 2/6/2013

Invested Asset Summary - Mortgages

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

Mortgage Loans - Type

Retail	65.7		%	65.7		%	66.4		%	68.0		%	67.3		%
Apartments	11.3		%	11.6		%	10.7		%	8.9		%	9.5		%
Office Buildings	13.4		%	13.2		%	13.6		%	13.6		%	13.7		%
Warehouses	7.6		%	7.4		%	7.3		%	7.3		%	7.4		%
Miscellaneous	2.0		%	2.1		%	2.0		%	2.2		%	2.1		%
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Delinquent Loans & Foreclosed Properties

60 Days Past Due	$	2.4		$	5.3		$	30.1		$	1.6		$	2.3
90 Days Past Due	12.5			5.6			11.3			21.8			17.2
Renegotiated Loans (2)	16.1			—			—			—			—
Foreclosed Real Estate	10.4			2.7			2.7			2.4			4.4
	$	41.4		$	13.6		$	44.1		$	25.8		$	23.9	(1)

% of Commercial Mortgage Loan Portfolio	0.8		%	0.3		%	0.8		%	0.5		%	0.5		%

(1) Includes $6.9 million of nonperforming loans subject to a pooling and servicing agreement as of December 31, 2012.

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

Draft 2/6/2013

Invested Asset Summary - Trading Portfolios

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

Trading Portfolio Composition (excl. Modco Trading Portfolio)

Rating
AAA	$	2.2	$	1.7	$	1.3	$	0.9	$	0.5
AA	—		—		—		—		—
A	—		—		—		—		—
BBB	—		—		—		—		—
Below investment grade	21.0		19.1		17.2		15.4		14.1
Total	$	23.2	$	20.8	$	18.5	$	16.3	$	14.6

Modco Trading Portfolio

Rating
AAA	$	845.5	$	607.9	$	605.9	$	590.3	$	559.4
AA	267.4		259.6		245.5		267.6		239.8
A	702.9		742.3		799.1		801.8		801.6
BBB	909.3		1,007.5		1,037.7		1,055.4		1,038.9
Below investment grade	211.7		338.8		316.9		364.5		353.1
Short-term investments	85.8		63.6		43.4		56.0		118.9
Total	$	3,022.6	$	3,019.7	$	3,048.5	$	3,135.6	$	3,111.7

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

Draft 2/6/2013

Invested Asset Summary - MBS - Alt-A

Mortgage-backed Securities Collateralized by Alt-A Mortgage Loans as of December 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	$	0.9	$	—	$	—	$	—	$	—	$	0.9
BBB	—		—		—		—		—		—
Below investment grade	442.7		—		—		—		—		442.7
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	443.6	$	—	$	—	$	—	$	—	$	443.6

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

Rating
A	$	—	$	—	$	—	$	—	$	—	$	—
BBB	—		—		—		—		—		—
Below investment grade	18.3		—		—		—		—		18.3
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	18.3	$	—	$	—	$	—	$	—	$	18.3

Draft 2/6/2013

Invested Asset Summary - MBS - Prime

Mortgage-backed Securities Collateralized by Prime Loans as of December 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	$	428.0	$	83.4	$	356.7	$	358.3	$	—	$	1,226.4
AA	12.5		—		—		—		—		12.5
A	32.4		—		—		—		—		32.4
BBB	28.7		—		—		—		—		28.7
Below investment grade	450.9		—		—		—		—		450.9
Total mortgage-backed securities collateralized by prime loans	$	952.5	$	83.4	$	356.7	$	358.3	$	—	$	1,750.9

Includes $1.2 billion of agency mortgage backed securities.

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

Rating
AAA	$	26.3	$	9.1	$	23.5	$	26.3	$	—	$	85.2
AA	—		—		—		—		—		—
A	0.9		—		—		—		—		0.9
BBB	1.3		—		—		—		—		1.3
Below investment grade	12.3		—		—		—		—		12.3
Total mortgage-backed securities collateralized by prime loans	$	40.8	$	9.1	$	23.5	$	26.3	$	—	$	99.7

Draft 2/6/2013

Invested Asset Summary - CMBS

Commercial Mortgage-backed Securities as of December 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	$	113.8	$	—	$	86.5	$	244.1	$	272.8	$	717.2
AA	—		—		34.2		39.4		44.5		118.1
A	47.2		2.2		35.5		88.2		14.9		188.0
BBB	17.6		—		—		—		—		17.6
Total commercial mortgage-backed securities	$	178.6	$	2.2	$	156.2	$	371.7	$	332.2	$	1,040.9

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

Rating
AAA	$	3.5	$	—	$	10.9	$	32.1	$	13.4	$	59.9
AA	—		—		3.0		4.4		0.4		7.8
A	2.8		—		2.9		4.7		0.5		10.9
BBB	0.7		—		—		—		—		0.7
Total commercial mortgage-backed securities	$	7.0	$	—	$	16.8	$	41.2	$	14.3	$	79.3

Draft 2/6/2013

Invested Asset Summary - ABS(1)

Other Asset-backed Securities(1) as of December 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	$	554.6		$	4.6	$	32.1	$	26.3	$	35.1	$	652.7
AA	165.5			—		—		—		6.7		172.2
A	31.6			—		—		75.5		71.7		178.8
BBB	2.4			—		—		—		—		2.4
Below investment grade	126.9			—		—		—		—		126.9
Total other asset-backed securities	$	881.0		$	4.6	$	32.1	$	101.8	$	113.5	$	1,133.0

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

Rating
AAA	$	(24.4	)	$	—	$	0.1	$	0.4	$	0.6	$	(23.3	)
AA	(14.3		)	—		—		—		0.3		(14.0		)
A	1.5			—		—		6.5		1.4		9.4
BBB	—			—		—		—		—		—
Below investment grade	1.0			—		—		—		—		1.0
Total other asset-backed securities	$	(36.2	)	$	—	$	0.1	$	6.9	$	2.3	$	(26.9	)

(1) Excludes Residential and Commercial mortgage-backed securities

Draft 2/6/2013

Life Marketing Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

REVENUES
Gross premiums and policy fees	$	408,057		$	388,117		$	397,645		$	379,207		$	410,105		$	1,591,581		$	1,575,074
Reinsurance ceded	(237,886		)	(192,755		)	(209,803		)	(190,099		)	(239,056		)	(846,762		)	(831,713		)
Net premiums and policy fees	170,171			195,362			187,842			189,108			171,049			744,819			743,361
Net investment income	116,922			119,026			121,283			123,647			122,507			446,175			486,463
Other income	26,205			29,154			29,966			28,280			29,709			110,307			117,109
Total operating revenues	313,298			343,542			339,091			341,035			323,265			1,301,301			1,346,933

BENEFITS & EXPENSES
Benefits and settlement expenses	226,501			254,579			251,509			305,281			243,276			978,098			1,054,645
Amortization of deferred policy acquisition costs and value of business acquired	22,218			22,594			19,454			(26,464		)	29,495			87,461			45,079
Other operating expenses	30,769			36,000			37,780			33,545			34,852			139,619			142,177
Total benefits and expenses	279,488			313,173			308,743			312,362			307,623			1,205,178			1,241,901

INCOME BEFORE INCOME TAX	33,810			30,369			30,348			28,673			15,642			96,123			105,032
PRE-TAX OPERATING INCOME	$	33,810		$	30,369		$	30,348		$	28,673		$	15,642		$	96,123		$	105,032

Life Marketing Key Data

	4TH QTR		1ST QTR		2ND QTR		3RD QTR		4TH QTR		12 MOS
	2011		2012		2012		2012		2012		2011		2012

SALES BY PRODUCT
Traditional	$	162	$	287	$	307	$	326	$	195	$	3,846	$	1,115
Universal life	23,344		20,962		24,142		30,779		41,216		117,947		117,099
Bank-owned life insurance	1,722		1,345		1,376		33		499		11,363		3,253
Total	$	25,228	$	22,594	$	25,825	$	31,138	$	41,910	$	133,156	$	121,467

SALES BY DISTRIBUTION
Independent agents	$	15,280	$	13,940	$	14,818	$	18,373	$	26,561	$	89,398	$	73,692
Stockbrokers/banks	8,000		6,976		9,191		12,315		14,491		31,677		42,973
BOLI/other	1,948		1,678		1,816		450		858		12,081		4,802
Total	$	25,228	$	22,594	$	25,825	$	31,138	$	41,910	$	133,156	$	121,467

AVERAGE LIFE INSURANCE IN-FORCE
Traditional	467,829,953		461,855,587		455,686,339		449,416,242		443,238,635		476,813,161		449,462,487
Universal life	71,990,128		73,904,855		76,266,740		79,452,404		84,396,938		67,823,606		80,331,839
Total	$	539,820,081	$	535,760,442	$	531,953,079	$	528,868,646	$	527,635,573	$	544,636,767	$	529,794,326

AVERAGE ACCOUNT VALUES
Universal life	6,217,370		6,330,645		6,393,984		6,466,699		6,608,067		6,037,896		6,501,025
Variable universal life	342,478		371,893		383,082		388,002		391,767		364,803		387,424
Total	$	6,559,848	$	6,702,538	$	6,777,066	$	6,854,701	$	6,999,834	$	6,402,699	$	6,888,449

Draft 2/6/2013

Acquisitions Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

REVENUES
Gross premiums and policy fees	$	218,502		$	212,158		$	215,672		$	207,305		$	211,945		$	834,499		$	847,080
Reinsurance ceded	(101,534		)	(80,301		)	(102,644		)	(99,496		)	(104,804		)	(419,676		)	(387,245		)
Net premiums and policy fees	116,968			131,857			113,028			107,809			107,141			414,823			459,835
Net investment income	138,261			138,121			138,692			136,466			137,055			529,261			550,334
Other income	1,459			1,579			2,240			1,397			787			5,561			6,003
Total operating revenues	256,688			271,557			253,960			245,672			244,983			949,645			1,016,172
RIGL - investments	13,289			17,312			55,338			107,500			(1,209		)	167,107			178,941
RIGL - derivatives	(3,116		)	10,640			(48,002		)	(101,622		)	8,166			(133,931		)	(130,818		)
Total revenues	266,861			299,509			261,296			251,550			251,940			982,821			1,064,295

BENEFITS & EXPENSES
Benefits and settlement expenses	178,056			194,173			180,488			169,441			172,791			662,293			716,893
Amortization of deferred policy acquisition costs and value of business acquired	19,938			23,175			17,732			17,707			17,891			74,167			76,505
Other operating expenses	17,149			15,110			12,125			12,369			12,110			55,792			51,714
Operating benefits and expenses	215,143			232,458			210,345			199,517			202,792			792,252			845,112
Amortization of DAC/VOBA related to realized gains (losses) - investments	(360		)	(33		)	208			109			462			874			746
Total benefits and expenses	214,783			232,425			210,553			199,626			203,254			793,126			845,858

INCOME BEFORE INCOME TAX	52,078			67,084			50,743			51,924			48,686			189,695			218,437

Adjustments to Reconcile to Operating Income:
Less: RIGL	10,173			27,952			7,336			5,878			6,957			33,176			48,123
Less: Related amortization of DAC/VOBA	360			33			(208		)	(109		)	(462		)	(874		)	(746		)

PRE-TAX OPERATING INCOME	$	41,545		$	39,099		$	43,615		$	46,155		$	42,191		$	157,393		$	171,060

Draft 2/6/2013

Annuities Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

REVENUES
Gross premiums and policy fees	$	19,083		$	21,928		$	23,252		$	24,870		$	27,878		$	68,385		$	97,928
Reinsurance ceded	(12		)	(13		)	(7		)	(5		)	(1		)	(66		)	(26		)
Net premiums and policy fees	19,071			21,915			23,245			24,865			27,877			68,319			97,902
Net investment income	127,577			125,985			124,159			123,933			130,268			507,230			504,345
RIGL - derivatives	(6,481		)	(7,240		)	(8,355		)	(9,641		)	(11,265		)	(21,881		)	(36,501		)
Other income	16,167			17,711			19,187			22,276			25,143			55,160			84,317
Total operating revenues	156,334			158,371			158,236			161,433			172,023			608,828			650,063
RIGL - investments	10,176			15,013			10,373			2,475			609			9,461			28,470
RIGL - derivatives, net of economic cost	902			(33,960		)	12,983			(22,893		)	(22,461		)	16,058			(66,331		)
Total Revenues	167,412			139,424			181,592			141,015			150,171			634,347			612,202

BENEFITS & EXPENSES
Benefits and settlement expenses	101,652			90,290			88,564			107,253			83,585			391,880			369,692
Amortization of deferred policy acquisition costs and value of business acquired	8,197			9,002			16,053			19,022			15,955			51,417			60,032
Other operating expenses	22,255			23,296			25,066			25,750			27,135			85,307			101,247
Operating benefits and expenses	132,104			122,588			129,683			152,025			126,675			528,604			530,971
Amortization related to benefit and settlement expenses	(405		)	1,619			(763		)	(1,124		)	198			(1,092		)	(70		)
Amortization of DAC related to realized gains (losses) - investments	1,787			(7,129		)	4,496			(5,731		)	(6,349		)	5,784			(14,713		)
Total benefits and expenses	133,486			117,078			133,416			145,170			120,524			533,296			516,188

INCOME (LOSS) BEFORE INCOME TAX	33,926			22,346			48,176			(4,155		)	29,647			101,051			96,014

Adjustments to Reconcile to Operating Income:
Less: RIGL - investments	10,176			15,013			10,373			2,475			609			9,461			28,470
Less: RIGL - derivatives, net of economic cost	902			(33,960		)	12,983			(22,893		)	(22,461		)	16,058			(66,331		)
Less: amortization related to benefit and settlement expenses	405			(1,619		)	763			1,124			(198		)	1,092			70
Less: related amortization of DAC	(1,787		)	7,129			(4,496		)	5,731			6,349			(5,784		)	14,713

PRE-TAX OPERATING INCOME	$	24,230		$	35,783		$	28,553		$	9,408		$	45,348		$	80,224		$	119,092

Annuities Key Data

	4TH QTR		1ST QTR		2ND QTR		3RD QTR			4TH QTR		12 MOS
	2011		2012		2012		2012			2012		2011		2012

SALES
Variable Annuity	$	498,617	$	567,408	$	673,338	$	761,011		$	733,228	$	2,348,599	$	2,734,985
Immediate Annuity	14,696		14,068		15,939		14,311			11,508		66,250		55,826
Single Premium Deferred Annuity	173,420		138,314		138,044		136,540			117,127		888,400		530,025
Market Value Adjusted Annuity	2,595		155		1,965		1,102			1,817		77,205		5,039
Equity Indexed Annuity	179		289		103		215			214		727		821
Total	$	689,507	$	720,234	$	829,389	$	913,179		$	863,894	$	3,381,181	$	3,326,696

PRE-TAX OPERATING INCOME (LOSS)
Variable Annuity	$	13,242	$	17,343	$	8,044	$	(2,920	)	$	18,917	$	14,106	$	41,384
Fixed Annuity	10,988		18,440		20,509		12,328			26,431		66,118		77,708
Total	$	24,230	$	35,783	$	28,553	$	9,408		$	45,348	$	80,224	$	119,092

DEPOSIT BALANCE
VA Fixed Annuity	$	510,567	$	515,613	$	563,315	$	581,243		$	551,098
VA Separate Account Annuity	6,140,365		7,050,549		7,358,411		8,309,426			9,037,748
Sub-total	6,650,932		7,566,162		7,921,726		8,890,669			9,588,846
Fixed Annuity	8,152,841		8,069,304		7,958,916		7,940,514			7,904,746
Total	$	14,803,773	$	15,635,466	$	15,880,642	$	16,831,183		$	17,493,592

Draft 2/6/2013

Stable Value Products Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR		2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012		2012			2012			2012			2011			2012

REVENUES
Net investment income	$	34,497		$	32,402	$	34,956		$	29,851		$	31,030		$	145,150		$	128,239
Other income	—			1		—			—			—			(1		)	1
Total operating revenues	34,497			32,403		34,956			29,851			31,030			145,149			128,240
RIGL - derivatives	98			646		(870		)	221			(174		)	(359		)	(177		)
RIGL - investments	(774		)	1,607		274			(3,139		)	(3,956		)	25,325			(5,214		)
Total revenues	33,821			34,656		34,360			26,933			26,900			170,115			122,849

BENEFITS & EXPENSES
Benefits and settlement expenses	19,444			18,957		18,221			16,002			11,610			81,256			64,790
Amortization of deferred policy acquisition costs and value of business acquired	221			196		230			410			111			4,556			947
Other operating expenses	606			604		547			389			634			2,557			2,174
Total benefits and expenses	20,271			19,757		18,998			16,801			12,355			88,369			67,911

INCOME BEFORE INCOME TAX	13,550			14,899		15,362			10,132			14,545			81,746			54,938

Adjustments to Reconcile to Operating Income:
Less: RIGL - derivatives	98			646		(870		)	221			(174		)	(359		)	(177		)
Less: RIGL - investments	(774		)	1,607		274			(3,139		)	(3,956		)	25,325			(5,214		)

PRE-TAX OPERATING INCOME	$	14,226		$	12,646	$	15,958		$	13,050		$	18,675		$	56,780		$	60,329

Stable Value Products Key Data

	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
	2011			2012			2012			2012			2012			2011		2012

SALES
GIC	$	32,900		$	26,000		$	—		$	101,954		$	272,150		$	498,695	$	400,104
GFA - Direct Institutional	—			150,000			26,500			45,000			—			300,000		221,500
Total	$	32,900		$	176,000		$	26,500		$	146,954		$	272,150		$	798,695	$	621,604

DEPOSIT BALANCE
Quarter End Balance	$	2,769,510		$	2,772,378		$	2,676,312		$	2,328,237		$	2,510,559
Average Daily Balance	$	2,827,891		$	2,784,389		$	2,737,667		$	2,591,485		$	2,437,851

OPERATING SPREAD	2.01		%	1.82		%	2.33		%	2.01		%	3.06		%

ADJUSTED OPERATING SPREAD (1)	2.00		%	1.80		%	1.98		%	2.00		%	2.60		%

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

Draft 2/6/2013

Asset Protection Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

REVENUES
Gross premiums and policy fees	$	69,621		$	68,936		$	69,883		$	68,729		$	67,081		$	284,206		$	274,629
Reinsurance ceded	(32,215		)	(31,473		)	(32,214		)	(31,456		)	(31,681		)	(128,063		)	(126,824		)
Net premiums and policy fees	37,406			37,463			37,669			37,273			35,400			156,143			147,805
Net investment income	6,054			6,542			5,883			5,972			5,913			26,501			24,310
Other income	24,842			26,601			29,513			29,247			25,821			94,627			111,182
Total operating revenues	68,302			70,606			73,065			72,492			67,134			277,271			283,297

BENEFITS & EXPENSES
Benefits and settlement expenses	23,968			24,048			25,247			27,492			23,910			99,510			100,697
Amortization of deferred policy acquisition costs and value of business acquired	8,690			8,677			8,829			8,705			7,740			38,080			33,951
Other operating expenses	28,938			32,915			32,510			32,145			34,625			114,029			132,195
Total benefits and expenses	61,596			65,640			66,586			68,342			66,275			251,619			266,843

INCOME BEFORE INCOME TAX	6,706			4,966			6,479			4,150			859			25,652			16,454
Less: noncontrolling interests	—			—			—			—			—			245			—
PRE-TAX OPERATING INCOME	$	6,706		$	4,966		$	6,479		$	4,150		$	859		$	25,407		$	16,454

Asset Protection Key Data

	4TH QTR		1ST QTR		2ND QTR		3RD QTR		4TH QTR		12 MOS
	2011		2012		2012		2012		2012		2011		2012

SALES
Credit insurance	$	8,381	$	8,802	$	10,066	$	9,558	$	6,913	$	35,767	$	35,339
Service contracts	80,544		82,800		94,122		92,890		83,821		306,973		353,633
Other products	17,016		18,295		15,063		14,868		14,116		72,908		62,342
Total	$	105,941	$	109,897	$	119,251	$	117,316	$	104,850	$	415,648	$	451,314

Draft 2/6/2013

Corporate & Other Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

REVENUES
Gross premiums and policy fees	$	4,970		$	5,166		$	4,977		$	4,828		$	4,596		$	21,469		$	19,567
Reinsurance ceded	(5		)	(16		)	(5		)	(3		)	(4		)	(108		)	(28		)
Net premiums and policy fees	4,965			5,150			4,972			4,825			4,592			21,361			19,539
Net investment income	41,408			40,045			31,249			48,075			49,272			166,326			168,641
Other income	3,847			36,214			574			(10		)	3,173			42,158			39,951
Total operating revenues	50,220			81,409			36,795			52,890			57,037			229,845			228,131
RIGL - investments	(11,858		)	(16,970		)	(14,000		)	7,163			(6,241		)	(14,420		)	(30,048		)
RIGL - derivatives	(1,159		)	5			(4,024		)	(287		)	(347		)	(15,138		)	(4,653		)
Total revenues	37,203			64,444			18,771			59,766			50,449			200,287			193,430

BENEFITS & EXPENSES
Benefits and settlement expenses	3,543			5,963			5,256			5,600			2,574			21,528			19,393
Amortization of deferred policy acquisition costs and value of business acquired	1,618			354			186			253			225			2,654			1,018
Other operating expenses	49,475			47,212			56,750			53,651			53,310			199,896			210,923
Total benefits and expenses	54,636			53,529			62,192			59,504			56,109			224,078			231,334

INCOME (LOSS) BEFORE INCOME TAX	(17,433		)	10,915			(43,421		)	262			(5,660		)	(23,791		)	(37,904		)

Adjustments to Reconcile to Operating Income:
Less: RIGL - investments	(11,858		)	(16,970		)	(14,000		)	7,163			(6,241		)	(14,420		)	(30,048		)
Less: RIGL - derivatives	(1,159		)	5			(4,024		)	(287		)	(347		)	(15,138		)	(4,653		)
Less: noncontrolling interests	—			—			—			—			—			—			—

PRE-TAX OPERATING INCOME (LOSS)	$	(4,416	)	$	27,880		$	(25,397	)	$	(6,614	)	$	928		$	5,767		$	(3,203	)

Draft 2/6/2013

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 2/6/2013

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

(Dollars In Thousands)	4TH QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2011			2012

Life Marketing	$	33,810		$	15,642		$	96,123		$	105,032
Acquisitions	41,545			42,191			157,393			171,060
Annuities	24,230			45,348			80,224			119,092
Stable Value Products	14,226			18,675			56,780			60,329
Asset Protection	6,706			859			25,407			16,454
Corporate & Other	(4,416		)	928			5,767			(3,203		)
Total Pre-tax operating income	116,101			123,643			421,694			468,764

Realized Investment Gains (Losses) - Investments	9,811			(5,108		)	181,907			186,186
Realized Investment Gains (Losses) - Derivatives	(3,275		)	(14,816		)	(133,370		)	(201,979		)
Income Tax Expense	(36,603		)	(36,923		)	(154,839		)	(150,519		)

Net income available to PLC’s common shareowners	$	86,034		$	66,796		$	315,392		$	302,452

Draft 2/6/2013

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

	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2011			2012			2012			2012			2012			2011			2012

OPERATING INCOME PER SHARE

Operating income per share-diluted	$	0.97		$	1.18		$	0.85		$	0.76		$	0.98		$	3.28		$	3.78
RIGL - Derivatives per share-diluted	(0.03		)	(0.18		)	(0.31		)	(0.98		)	(0.12		)	(1.00		)	(1.59		)
RIGL - All Other Investments-diluted	0.08			0.18			0.37			0.95			(0.04		)	1.37			1.47
Net income available to PLC’s common shareowners per share-diluted	$	1.02		$	1.18		$	0.91		$	0.73		$	0.82		$	3.65		$	3.66

Draft 2/6/2013

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

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

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	45.45	$	46.74	$	51.81	$	57.70	$	59.06
Less: Accumulated other comprehensive income (loss)	12.07		12.37		16.47		21.70		22.22
Excluding accumulated other comprehensive income (loss)	$	33.38	$	34.37	$	35.34	$	36.00	$	36.84

Draft 2/6/2013

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

(Dollars In Thousands)	Three Months												Twelve Months
(Unaudited)	3/31/2012			6/30/2012			9/30/2012			12/31/2012			12/31/2012
NUMERATOR:
Net income available to PLC’s common shareowners	$	99,021		$	76,155		$	60,480		$	66,796		$	302,452
Less:
Realized investment gains (losses), net of income tax
Investments	11,025			33,790			74,099			(7,018		)	111,896
Derivatives	(14,734		)	(25,943		)	(80,978		)	(9,630		)	(131,285		)
Related amortization of DAC and VOBA, net of income tax	3,603			(2,561		)	4,385			3,698			9,125
Operating Income	$	99,127		$	70,869		$	62,974		$	79,746		$	312,716

					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:
December 31, 2011	$	3,711,517	$	985,444	$	2,726,073
March 31, 2012	3,785,810		1,001,803		2,784,007
June 30, 2012	4,147,234		1,318,336		2,828,898
September 30, 2012	4,565,855		1,716,766		2,849,089
December 31, 2012	4,615,183		1,736,722		2,878,461
Total					$	14,066,528

Average					$	2,813,306

Operating Income Return on Average Equity					11.1		%

Draft 2/6/2013

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

(Dollars In Thousands)	Three Months												Twelve Months
(Unaudited)	3/31/2011			6/30/2011			9/30/2011			12/31/2011			12/31/2011
NUMERATOR:
Net income available to PLC’s common shareowners	$	58,878		$	87,623		$	82,857		$	86,034		$	315,392
Less:
Realized investment gains (losses), net of income tax
Investments	(774		)	32,129			83,460			7,041			121,856
Derivatives	(5,422		)	(19,396		)	(59,744		)	(2,129		)	(86,691		)
Related amortization of DAC and VOBA, net of income tax	2,551			(468		)	(5,036		)	(664		)	(3,617		)
Operating Income	$	62,523		$	75,358		$	64,177		$	81,786		$	283,844

					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:
December 31, 2010	$	2,841,188	$	307,850	$	2,533,338
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
Total					$	13,153,309

Average					$	2,630,662

Operating Income Return on Average Equity					10.8		%

Draft 2/6/2013

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

(Dollars In Thousands)	Three Months								Twelve Months
(Unaudited)	3/31/2012		6/30/2012		9/30/2012		12/31/2012		12/31/2012
NUMERATOR:
Net income available to PLC’s common shareowners	$	99,021	$	76,155	$	60,480	$	66,796	$	302,452

					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:
December 31, 2011	$	3,711,517	$	985,444	$	2,726,073
March 31, 2012	3,785,810		1,001,803		2,784,007
June 30, 2012	4,147,234		1,318,336		2,828,898
September 30, 2012	4,565,855		1,716,766		2,849,089
December 31, 2012	4,615,183		1,736,722		2,878,461
Total					$	14,066,528

Average					$	2,813,306

Net income available to PLC’s common shareowners Return on Average Equity					10.8		%

Draft 2/6/2013

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

(Dollars In Thousands)	Three Months								Twelve Months
(Unaudited)	3/31/2011		6/30/2011		9/30/2011		12/31/2011		12/31/2011
NUMERATOR:
Net income available to PLC’s common shareowners	$	58,878	$	87,623	$	82,857	$	86,034	$	315,392

					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:
December 31, 2010	$	2,841,188	$	307,850	$	2,533,338
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
Total					$	13,153,309

Average					$	2,630,662

Net income available to PLC’s common shareowners Return on Average Equity					12.0		%

Draft 2/6/2013

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 2/6/2013

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 2/6/2013

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 as originally reported	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 as adjusted	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 2/6/2013

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 - February 6, 2013

Attached files

PROTECTIVE LIFE CORP Reports