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

Attached files

file	filename
8-K - 8-K - PROTECTIVE LIFE CORP	a13-23067_18k.htm
EX-99.1 - EX-99.1 - PROTECTIVE LIFE CORP	a13-23067_1ex99d1.htm

Exhibit 99.2

Draft 10/30/2013

	Draft 10/30/2013
	Page 1

Quarterly Financial Highlights

(Dollars In Thousands)	3RD QTR			4TH QTR		1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012		2013			2013			2013			2012			2013

Pre-tax Operating Income (Loss) (1)

Life Marketing	$	28,673		$	15,642	$	23,707		$	24,673		$	29,218		$	89,390		$	77,598
Acquisitions	46,155			42,191		34,377			29,435			29,429			128,869			93,241
Annuities	9,408			45,348		43,398			36,382			50,866			73,744			130,646
Stable Value Products	13,050			18,675		17,844			22,464			19,206			41,654			59,514
Asset Protection	4,150			859		6,081			7,384			6,827			15,595			20,292
Corporate & Other	(6,614		)	928		(18,332		)	(2,483		)	(14,251		)	(4,131		)	(35,066		)
Total Pre-tax Operating Income	$	94,822		$	123,643	$	107,075		$	117,855		$	121,295		$	345,121		$	346,225

Balance Sheet Data

Total Assets	$	55,912,100		$	57,384,672	$	58,573,487		$	58,162,886		$	58,460,511

Total Protective Life Corporation’s Shareowners’ Equity	$	4,565,855		$	4,615,183	$	4,541,292		$	3,837,991		$	3,638,532
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (2)	$	2,849,089		$	2,878,461	$	2,941,969		$	3,036,797		$	3,112,444

Stock Data

Closing Price	$	26.21		$	28.58	$	35.80		$	38.41		$	42.55
Average Shares Outstanding
Basic	80,662,745			79,652,495		79,139,392			79,404,770			79,492,274			81,541,462			79,346,771
Diluted	82,406,103			81,339,803		80,706,744			81,087,238			80,852,078			83,187,854			80,882,552

(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 10/30/2013
	Page 2

Financial Strength Ratings as of September 30, 2013

	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 10/30/2013
			Page 3

Consolidated Statements of Income

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	684,939		$	721,605		$	726,847		$	756,331		$	657,218		$	2,092,673		$	2,140,396
Reinsurance ceded	(321,059		)	(375,546		)	(335,350		)	(390,490		)	(270,730		)	(970,290		)	(996,570		)
Net premiums and policy fees	363,880			346,059			391,497			365,841			386,488			1,122,383			1,143,826
Net investment income	467,944			476,045			457,634			466,220			454,275			1,386,287			1,378,129
RIGL - derivatives	(134,222		)	(26,081		)	7,385			143,881			41,326			(212,399		)	192,592
RIGL - all other investments	122,555			7,161			(4,145		)	(109,978		)	(19,508		)	223,874			(133,631		)

OTTI losses	(1,676		)	(16,422		)	(1,340		)	(1,789		)	(6,635		)	(49,766		)	(9,764		)
Portion recognized in OCI (before taxes)	(6,880		)	(1,536		)	(3,244		)	(2,211		)	(2,046		)	8,838			(7,501		)
Net impairment losses recognized in earnings	(8,556		)	(17,958		)	(4,584		)	(4,000		)	(8,681		)	(40,928		)	(17,265		)
Other income	81,190			84,633			85,027			94,392			98,794			273,930			278,213
Total revenues	892,791			869,859			932,814			956,356			952,694			2,753,147			2,841,864

BENEFITS & EXPENSES
Benefits and settlement expenses	629,945			537,944			581,880			557,866			624,577			1,788,096			1,764,323
Amortization of deferred policy acquisition costs and value of business acquired	14,011			65,530			52,239			74,946			22,446			138,035			149,631
Other operating expenses	118,964			120,406			138,061			123,661			121,136			359,749			382,858
Interest expense - subsidiaries	6,253			10,336			11,105			11,511			12,169			18,460			34,785
Interest expense - holding company - other debt	23,731			23,481			23,434			22,891			21,777			70,401			68,102
Interest expense - holding company - subordinated debt	8,901			8,443			8,468			8,468			8,468			29,154			25,404
Total benefits and expenses	801,805			766,140			815,187			799,343			810,573			2,403,895			2,425,103

INCOME BEFORE INCOME TAX	90,986			103,719			117,627			157,013			142,121			349,252			416,761
Income tax expense	30,506			36,923			39,336			53,814			49,060			113,596			142,210
NET INCOME	60,480			66,796			78,291			103,199			93,061			235,656			274,551
Less: Net income (loss) attributable to noncontrolling interests	—			—			—			—			—			—			—
NET INCOME AVAILABLE TO PLC’S COMMON SHAREOWNERS	$	60,480		$	66,796		$	78,291		$	103,199		$	93,061		$	235,656		$	274,551

PER SHARE DATA FOR QUARTER
Operating income - diluted (1)	$	0.76		$	0.98		$	0.89		$	0.96		$	0.98
RIGL - derivatives	(0.98		)	(0.12		)	0.16			1.27			0.46
RIGL - all other investments	0.95			(0.04		)	(0.08		)	(0.96		)	(0.29		)
Net income available to PLC’s common shareowners-diluted	$	0.73		$	0.82		$	0.97		$	1.27		$	1.15
Average shares outstanding-diluted	82,406,103			81,339,803			80,706,744			81,087,238			80,852,078
Dividends paid	$	0.18		$	0.18		$	0.18		$	0.20		$	0.20

PER SHARE DATA FOR YTD
Operating income - diluted (1)	$	2.80		$	3.78		$	0.89		$	1.84		$	2.82
RIGL - derivatives	(1.46		)	(1.59		)	0.16			1.44			1.90
RIGL - all other investments	1.49			1.47			(0.08		)	(1.04		)	(1.33		)
Net income available to PLC’s common shareowners - diluted	$	2.83		$	3.66		$	0.97		$	2.24		$	3.39
Average shares outstanding - diluted	83,187,854			82,723,016			80,706,744			80,898,042			80,882,552
Dividends paid	$	0.52		$	0.70		$	0.18		$	0.38		$	0.58

(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 10/30/2013
			Page 4

Consolidated Balance Sheets

(Dollars In Thousands)	3RD QTR		4TH QTR		1ST QTR		2ND QTR		3RD QTR
(Unaudited)	2012		2012		2013		2013		2013
ASSETS
Fixed maturities, at fair value	$	29,607,238	$	29,787,959	$	30,065,491	$	28,922,966	$	28,323,215
Fixed maturities, at amortized cost	—		300,000		315,000		335,000		350,000
Equity securities	373,552		411,786		415,176		446,518		461,231
Mortgage loans	5,096,080		4,950,201		4,835,917		4,773,709		4,794,924
Investment real estate	19,858		19,816		18,952		16,178		18,750
Policy loans	869,607		865,391		862,202		855,780		856,333
Other long-term investments	347,065		361,837		348,394		429,987		482,367
Long-term investments	36,313,400		36,696,990		36,861,132		35,780,138		35,286,820
Short-term investments	110,684		217,812		161,506		172,011		216,224
Total investments	36,424,084		36,914,802		37,022,638		35,952,149		35,503,044
Cash	206,012		368,801		275,103		255,712		354,449
Accrued investment income	360,024		357,368		361,463		365,483		364,233
Accounts and premiums receivable	104,037		85,500		104,539		96,819		76,138
Reinsurance receivable	5,753,980		5,805,401		5,842,124		5,832,194		5,744,801
Deferred policy acquisition costs and value of business acquired	3,208,227		3,239,519		3,262,029		3,414,988		3,307,513
Goodwill	109,335		108,561		107,786		107,012		106,237
Property and equipment, net	48,321		47,607		48,590		49,492		51,806
Other assets	189,086		262,052		272,760		305,752		343,015
Current/Deferred income tax	55,518		30,827		—		—		23,970
Assets related to separate accounts
Variable annuity	8,895,947		9,601,417		10,670,833		11,162,856		11,921,925
Variable universal life	557,529		562,817		605,622		620,429		663,380

TOTAL ASSETS	$	55,912,100	$	57,384,672	$	58,573,487	$	58,162,886	$	58,460,511

			Draft 10/30/2013
			Page 5

Consolidated Balance Sheets - Continued

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR
(Unaudited)	2012			2012			2013			2013			2013

LIABILITIES
Policy liabilities and accruals
Future policy benefits and claims	$	21,400,351		$	21,626,386		$	21,793,320		$	21,932,062		$	22,029,491
Unearned premiums	1,367,241			1,396,026			1,426,496			1,454,003			1,512,909
Stable value product account balances	2,328,237			2,510,559			2,544,609			2,579,172			2,531,262
Annuity account balances	10,751,652			10,658,463			10,524,393			10,509,829			10,431,938
Other policyholders’ funds	553,262			566,985			569,533			577,821			602,978
Repurchase program borrowings	280,000			150,000			300,000			340,000			100,000
Other liabilities	1,306,298			1,434,604			1,375,962			1,225,042			1,177,807
Deferred income taxes	1,668,885			1,736,389			1,690,052			1,318,175			1,239,796
Income tax payable	—			—			4,782			13			—
Non-recourse funding obligations	297,000			586,000			596,000			604,900			619,900
Debt	1,400,000			1,400,000			1,390,000			1,460,000			1,450,000
Subordinated debt securities	540,593			540,593			540,593			540,593			540,593
Liabilities related to separate accounts
Variable annuity	8,895,947			9,601,417			10,670,833			11,162,856			11,921,925
Variable universal life	557,529			562,817			605,622			620,429			663,380
TOTAL LIABILITIES	51,346,995			52,770,239			54,032,195			54,324,895			54,821,979

SHAREOWNERS’ EQUITY
Common stock	44,388			44,388			44,388			44,388			44,388
Additional paid-in-capital	603,083			606,369			599,514			606,523			602,072
Treasury stock	(183,330		)	(209,840		)	(203,698		)	(203,385		)	(200,637		)
Retained earnings	2,384,948			2,437,544			2,501,765			2,589,271			2,666,621
Accumulated other comprehensive income (loss)	1,716,766			1,736,722			1,599,323			801,194			526,088
TOTAL PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY	4,565,855			4,615,183			4,541,292			3,837,991			3,638,532
Noncontrolling interest	(750		)	(750		)	—			—			—
TOTAL EQUITY	4,565,105			4,614,433			4,541,292			3,837,991			3,638,532
TOTAL LIABILITIES AND SHAREOWNERS’ EQUITY	$	55,912,100		$	57,384,672		$	58,573,487		$	58,162,886		$	58,460,511

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	57.70		$	59.06		$	57.89		$	48.91		$	46.31
Less: Accumulated other comprehensive income (loss)	21.70			22.22			20.39			10.21			6.69
Excluding accumulated other comprehensive income (loss) (1)	$	36.00		$	36.84		$	37.50		$	38.70		$	39.62

Total Protective Life Corporation’s Shareowners’ Equity	$	4,565,855		$	4,615,183		$	4,541,292		$	3,837,991		$	3,638,532
Less: Accumulated other comprehensive income (loss)	1,716,766			1,736,722			1,599,323			801,194			526,088
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (1)	$	2,849,089		$	2,878,461		$	2,941,969		$	3,036,797		$	3,112,444

Common shares outstanding	79,136,858			78,137,493			78,449,071			78,465,053			78,562,547
Treasury Stock shares	9,640,102			10,639,467			10,327,889			10,311,907			10,214,413

(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 10/30/2013
			Page 6

Calculation of Operating Earnings Per Share

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

CALCULATION OF NET INCOME PER SHARE

Net income available to PLC’s common shareowners	$	60,480		$	66,796		$	78,291		$	103,199		$	93,061		$	235,656		$	274,551

Average shares outstanding - basic	80,662,745			79,652,495			79,139,392			79,404,770			79,492,274			81,541,462			79,346,771
Average shares outstanding - diluted	82,406,103			81,339,803			80,706,744			81,087,238			80,852,078			83,187,854			80,882,552

Net income available to PLC’s common shareowners per share-basic	$	0.75		$	0.84		$	0.99		$	1.30		$	1.17		$	2.89		$	3.46
Net income available to PLC’s common shareowners per share-diluted	$	0.73		$	0.82		$	0.97		$	1.27		$	1.15		$	2.83		$	3.39

Income from continuing operations	$	60,480		$	66,796		$	78,291		$	103,199		$	93,061		$	235,656		$	274,551

EPS (basic)	$	0.75		$	0.84		$	0.99		$	1.30		$	1.17		$	2.89		$	3.46
EPS (diluted)	$	0.73		$	0.82		$	0.97		$	1.27		$	1.15		$	2.83		$	3.39

CALCULATION OF REALIZED INVESTMENT GAINS (LOSSES) PER SHARE

RIGL - derivatives	$	(134,222	)	$	(26,081	)	$	7,385		$	143,881		$	41,326		$	(212,399	)	$	192,592
VA GMWB economic cost	9,641			11,265			12,923			14,588			15,782			25,236			43,293
RIGL - all other investments	113,999			(10,797		)	(8,729		)	(113,978		)	(28,189		)	182,946			(150,896		)
Amortization related to DAC/VOBA and benefits and settlement expenses	6,746			5,689			(1,027		)	(5,333		)	(8,093		)	8,348			(14,453		)
	(3,836		)	(19,924		)	10,552			39,158			20,826			4,131			70,536
Tax effect	1,342			6,974			(3,693		)	(13,706		)	(7,289		)	(1,445		)	(24,688		)
	$	(2,494	)	$	(12,950	)	$	6,859		$	25,452		$	13,537		$	2,686		$	45,848

RIGL - derivatives per share-diluted	$	(0.98	)	$	(0.12	)	$	0.16		$	1.27		$	0.46		$	(1.46	)	$	1.90
RIGL - all other investments per share-diluted	$	0.95		$	(0.04	)	$	(0.08	)	$	(0.96	)	$	(0.29	)	$	1.49		$	(1.33	)

OPERATING INCOME PER SHARE (1)

Net income available to PLC’s common shareowners per share-diluted	$	0.73		$	0.82		$	0.97		$	1.27		$	1.15		$	2.83		$	3.39
Less: RIGL - derivatives per share-diluted	(0.98		)	(0.12		)	0.16			1.27			0.46			(1.46		)	1.90
Less: RIGL - all other investments per share-diluted	0.95			(0.04		)	(0.08		)	(0.96		)	(0.29		)	1.49			(1.33		)
Operating income per share-diluted	$	0.76		$	0.98		$	0.89		$	0.96		$	0.98		$	2.80		$	2.82

NET OPERATING INCOME (1)

Net income available to PLC’s common shareowners	$	60,480		$	66,796		$	78,291		$	103,199		$	93,061		$	235,656		$	274,551
Less: RIGL - derivatives net of tax	(80,978		)	(9,630		)	13,200			103,004			37,120			(121,656		)	153,324
Less: RIGL - all other investments net of tax and amortization	78,484			(3,320		)	(6,341		)	(77,552		)	(23,583		)	124,342			(107,476		)
Net operating income	$	62,974		$	79,746		$	71,432		$	77,747		$	79,524		$	232,970		$	228,703

PRE-TAX OPERATING INCOME (2)

Income before income tax and discontinued operations	$	90,986		$	103,719		$	117,627		$	157,013		$	142,121		$	349,252		$	416,761
Less: RIGL - derivatives	(134,222		)	(26,081		)	7,385			143,881			41,326			(212,399		)	192,592
Less: VA GMWB economic cost	9,641			11,265			12,923			14,588			15,782			25,236			43,293
Less: RIGL - all other investments	113,999			(10,797		)	(8,729		)	(113,978		)	(28,189		)	182,946			(150,896		)
Less: Amortization related to DAC/VOBA and benefits and settlement expenses	6,746			5,689			(1,027		)	(5,333		)	(8,093		)	8,348			(14,453		)
Pre-tax operating income	$	94,822		$	123,643		$	107,075		$	117,855		$	121,295		$	345,121		$	346,225

(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 10/30/2013
			Page 7

Invested Asset Summary

(Dollars In Millions)	3RD QTR		4TH QTR		1ST QTR		2ND QTR		3RD QTR
(Unaudited)	2012		2012		2013		2013		2013

Total Portfolio

Fixed Maturities	$	29,607.2	$	30,088.0	$	30,380.5	$	29,258.0	$	28,673.2	81	%
Mortgage Loans	5,096.1		4,950.2		4,835.9		4,773.7		4,794.9		14	%
Investment Real Estate	19.8		19.8		18.9		16.2		18.8		0	%
Equity Securities	373.6		411.8		415.2		446.5		461.2		1	%
Policy Loans	869.6		865.4		862.2		855.8		856.3		2	%
Short-Term Investments	110.7		217.8		161.5		172.0		216.2		1	%
Other Long-Term Investments	347.1		361.8		348.4		430.0		482.4		1	%
Total Invested Assets	$	36,424.1	$	36,914.8	$	37,022.6	$	35,952.2	$	35,503.0	100	%

			Draft 10/30/2013
			Page 8

Invested Asset Summary - Fixed Income

(Dollars In Millions)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR
(Unaudited)	2012			2012			2013			2013			2013

Fixed Income

Corporate Bonds	$	21,580.4		$	22,054.4		$	22,417.5		$	21,610.4		$	21,253.0		74	%
Residential Mortgage-Backed Securities	2,393.9			2,197.1			2,072.4			1,907.1			1,772.4			6	%
Commercial Mortgage-Backed Securities	1,023.6			1,040.9			1,093.2			1,113.8			1,080.6			4	%
Other Asset-Backed Securities	1,091.7			1,133.0			1,109.0			1,181.4			1,138.9			4	%
U.S. Government-related Securities	1,659.9			1,475.8			1,503.8			1,382.5			1,417.3			5	%
Other Government-related Securities	160.2			164.2			152.2			122.9			98.6			0	%
States, Municipals and Political Subdivisions	1,697.5			1,722.6			1,717.4			1,604.9			1,562.4			6	%
Other	—			300.0			315.0			335.0			350.0			1	%
Total Fixed Income Portfolio	$	29,607.2		$	30,088.0		$	30,380.5		$	29,258.0		$	28,673.2		100	%

Fixed Income - Quality

AAA	15.9		%	14.6		%	14.4		%	14.4		%	14.4		%
AA	7.2		%	7.2		%	7.0		%	6.9		%	6.9		%
A	30.8		%	30.8		%	31.5		%	30.9		%	30.3		%
BBB	39.1		%	39.7		%	39.6		%	40.6		%	41.0		%
Below investment grade	7.0		%	6.7		%	6.5		%	6.1		%	6.2		%
Not rated	0.0		%	1.0		%	1.0		%	1.1		%	1.2		%
	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 10/30/2013
			Page 9

Fixed Maturities by NAIC Rating

STAT Carry Value % of Total

	3RD QTR		4TH QTR		1ST QTR		2ND QTR		3RD QTR
(Unaudited)	2012		2012		2013		2013		2013

NAIC Rating
1	56.82	%	56.77	%	56.91	%	56.17	%	55.13	%
2	38.16	%	38.52	%	38.74	%	39.67	%	39.57	%
3	3.32	%	3.23	%	3.22	%	3.04	%	4.01	%
4	0.70	%	0.62	%	0.58	%	0.64	%	0.82	%
5	0.91	%	0.70	%	0.46	%	0.39	%	0.38	%
6	0.09	%	0.16	%	0.09	%	0.09	%	0.09	%

	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Below investment grade (using NAIC 3-6)	5.02	%	4.71	%	4.35	%	4.16	%	5.30	%

Note: NAIC Ratings reflect statutory carrying values

			Draft 10/30/2013
			Page 10

Invested Asset Summary - Mortgages

(Dollars In Millions)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR
(Unaudited)	2012			2012			2013			2013			2013

Mortgage Loans - Type

Retail	68.0		%	67.3		%	68.0		%	67.8		%	67.1		%
Apartments	8.9		%	9.5		%	8.7		%	9.0		%	9.0		%
Office Buildings	13.6		%	13.7		%	13.9		%	13.8		%	13.6		%
Warehouses	7.3		%	7.4		%	7.3		%	7.4		%	8.2		%
Miscellaneous	2.2		%	2.1		%	2.1		%	2.0		%	2.1		%
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Delinquent Loans & Foreclosed Properties

60 Days Past Due	$	1.6		$	2.3		$	1.7		$	3.0		$	—
90 Days Past Due	21.8			17.2			19.5			14.6			9.3
Foreclosed Real Estate	2.4			4.4			—			—			3.9
	$	25.8		$	23.9		$	21.2		$	17.6		$	13.2	(1)

% of Commercial Mortgage Loan Portfolio	0.5		%	0.5		%	0.4		%	0.4		%	0.3		%

(1) Includes $5.7 million of nonperforming loans subject to a pooling and servicing agreement as of September 30, 2013.

			Draft 10/30/2013
			Page 11

Invested Asset Summary - Trading Portfolios

(Dollars In Millions)	3RD QTR		4TH QTR		1ST QTR		2ND QTR		3RD QTR
(Unaudited)	2012		2012		2013		2013		2013

Trading Portfolio Composition (excl. Modco Trading Portfolio)

Rating
AAA	$	0.9	$	0.5	$	0.1	$	—	$	—
AA	—		—		—		—		—
A	—		—		—		—		—
BBB	—		—		—		—		—
Below investment grade	15.4		14.1		12.8		11.0		9.8
Total	$	16.3	$	14.6	$	12.9	$	11.0	$	9.8

Modco Trading Portfolio

Rating
AAA	$	590.3	$	559.4	$	546.7	$	440.1	$	430.9
AA	267.6		239.8		233.2		286.0		265.5
A	801.8		801.6		828.2		847.1		836.2
BBB	1,055.4		1,038.9		992.5		922.8		920.2
Below investment grade	364.5		353.1		354.7		345.5		320.2
Short-term investments	56.0		118.9		110.6		91.6		106.4
Total	$	3,135.6	$	3,111.7	$	3,065.9	$	2,933.1	$	2,879.4

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

	Draft 10/30/2013
	Page 12

Invested Asset Summary - MBS - Alt-A

Mortgage-backed Securities Collateralized by Alt-A Mortgage Loans as of September 30, 2013:

(Dollars In Millions)	2009 and
(Unaudited)	Prior		2010		2011		2012		2013		Total

Estimated Fair Value of Security by Year of Security Origination

Rating
BBB	$	0.8	$	—	$	—	$	—	$	—	$	0.8
Below investment grade	396.5		—		—		—		—		396.5
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	397.3	$	—	$	—	$	—	$	—	$	397.3

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

Rating
BBB	$	—	$	—	$	—	$	—	$	—	$	—
Below investment grade	22.4		—		—		—		—		22.4
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	22.4	$	—	$	—	$	—	$	—	$	22.4

	Draft 10/30/2013
	Page 13

Invested Asset Summary - MBS - Prime

Mortgage-backed Securities Collateralized by Prime Loans as of September 30, 2013:

(Dollars In Millions)	2009 and
(Unaudited)	Prior		2010		2011		2012			2013			Total

Estimated Fair Value of Security by Year of Security Origination

Rating
AAA	$	345.3	$	299.7	$	321.0	$	5.3		$	66.2		$	1,037.5
AA	0.3		—		—		—			—			0.3
A	21.9		—		—		—			—			21.9
BBB	11.2		—		—		—			—			11.2
Below investment grade	302.1		—		—		—			—			302.1
Total mortgage-backed securities collateralized by prime loans	$	680.8	$	299.7	$	321.0	$	5.3		$	66.2		$	1,373.0

Includes $985.6 million of agency mortgage backed securities.

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

Rating
AAA	$	21.5	$	10.9	$	7.6	$	(0.3	)	$	(1.4	)	$	38.3
AA	—		—		—		—			—			—
A	0.6		—		—		—			—			0.6
BBB	0.6		—		—		—			—			0.6
Below investment grade	7.2		—		—		—			—			7.2
Total mortgage-backed securities collateralized by prime loans	$	29.9	$	10.9	$	7.6	$	(0.3	)	$	(1.4	)	$	46.7

	Draft 10/30/2013
	Page 14

Invested Asset Summary - CMBS

Commercial Mortgage-backed Securities as of September 30, 2013:

(Dollars In Millions)	2009 and
(Unaudited)	Prior		2010		2011			2012			2013			Total

Estimated Fair Value of Security by Year of Security Origination

Rating
AAA	$	61.2	$	81.2	$	212.9		$	296.0		$	109.6		$	760.9
AA	—		33.3		37.7			40.9			28.5			140.4
A	43.0		33.6		53.1			13.4			18.9			162.0
BBB	17.3		—		—			—			—			17.3
Total commercial mortgage-backed securities	$	121.5	$	148.1	$	303.7		$	350.3		$	157.0		$	1,080.6

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

Rating
AAA	$	1.5	$	6.5	$	15.7		$	(7.5	)	$	(5.0	)	$	11.2
AA	—		2.1		2.6			(3.1		)	(1.6		)	—
A	1.2		1.2		(0.4		)	(1.0		)	(1.5		)	(0.5		)
BBB	0.5		—		—			—			—			0.5
Total commercial mortgage-backed securities	$	3.2	$	9.8	$	17.9		$	(11.6	)	$	(8.1	)	$	11.2

	Draft 10/30/2013
	Page 15

Invested Asset Summary - ABS(1)

Other Asset-backed Securities(1) as of September 30, 2013:

(Dollars In Millions)	2009 and
(Unaudited)	Prior			2010		2011		2012			2013			Total

Estimated Fair Value of Security by Year of Security Origination

Rating
AAA	$	485.9		$	7.0	$	25.6	$	33.0		$	2.3		$	553.8
AA	149.7			—		—		63.8			—			213.5
A	54.9			—		71.9		96.7			9.9			233.4
BBB	5.6			—		—		—			—			5.6
Below investment grade	132.6			—		—		—			—			132.6
Total other asset-backed securities	$	828.7		$	7.0	$	97.5	$	193.5		$	12.2		$	1,138.9

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

Rating
AAA	$	(37.6	)	$	—	$	1.0	$	(0.4	)	$	(0.1	)	$	(37.1	)
AA	(14.2		)	—		—		—			—			(14.2		)
A	6.4			—		5.2		0.1			(0.1		)	11.6
BBB	0.1			—		—		—			—			0.1
Below investment grade	8.7			—		—		—			—			8.7
Total other asset-backed securities	$	(36.6	)	$	—	$	6.2	$	(0.3	)	$	(0.2	)	$	(30.9	)

(1) Excludes Residential and Commercial mortgage-backed securities

	Draft 10/30/2013
	Page 16

Life Marketing Quarterly Trends

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	379,207		$	410,105		$	418,705		$	442,338		$	356,809		$	1,164,969		$	1,217,852
Reinsurance ceded	(190,099		)	(239,056		)	(207,662		)	(255,180		)	(145,075		)	(592,657		)	(607,917		)
Net premiums and policy fees	189,108			171,049			211,043			187,158			211,734			572,312			609,935
Net investment income	123,647			122,507			127,248			130,054			129,935			363,956			387,237
Other income	28,280			29,709			29,335			29,809			32,144			87,400			91,288
Total operating revenues	341,035			323,265			367,626			347,021			373,813			1,023,668			1,088,460
RIGL - investments	—			—			—			—			3,603			—			3,603
RIGL - derivatives	—			—			—			—			—			—			—
Total revenues	341,035			323,265			367,626			347,021			377,416			1,023,668			1,092,063

BENEFITS & EXPENSES
Benefits and settlement expenses	305,281			243,276			280,766			256,073			330,156			811,369			866,995
Amortization of deferred policy acquisition costs and value of business acquired	(26,464		)	29,495			14,022			27,066			(24,284		)	15,584			16,804
Other operating expenses	33,545			34,852			49,131			39,209			38,723			107,325			127,063
Operating benefits and expenses	312,362			307,623			343,919			322,348			344,595			934,278			1,010,862
Amortization related to benefits and settlement expenses	—			—			—			—			483			—			483
Amortization of DAC/VOBA related to realized gains (losses) - investments	—			—			—			—			819			—			819
Total benefits and expenses	312,362			307,623			343,919			322,348			345,897			934,278			1,012,164

INCOME BEFORE INCOME TAX	28,673			15,642			23,707			24,673			31,519			89,390			79,899

Adjustments to Reconcile to Operating Income:
Less: RIGL	—			—			—			—			3,603			—			3,603
Less: amortization related to benefits and settlement expenses	—			—			—			—			(483		)	—			(483		)
Less: Related amortization of DAC/VOBA	—			—			—			—			(819		)	—			(819		)

PRE-TAX OPERATING INCOME	$	28,673		$	15,642		$	23,707		$	24,673		$	29,218		$	89,390		$	77,598

Life Marketing Key Data

	3RD QTR		4TH QTR		1ST QTR		2ND QTR		3RD QTR		9 MOS
	2012		2012		2013		2013		2013		2012		2013

SALES BY PRODUCT
Traditional	$	326	$	195	$	292	$	409	$	390	$	920	$	1,091
Universal life	30,779		41,216		46,995		44,181		32,261		75,883		123,437
Bank-owned life insurance	33		499		—		—		—		2,754		—
Total	$	31,138	$	41,910	$	47,287	$	44,590	$	32,651	$	79,557	$	124,528

SALES BY DISTRIBUTION
Independent agents	$	18,373	$	26,561	$	31,537	$	31,108	$	23,395	$	47,131	$	86,040
Stockbrokers/banks	12,315		14,491		15,303		12,920		8,608		28,482		36,831
BOLI/other	450		858		447		562		648		3,944		1,657
Total	$	31,138	$	41,910	$	47,287	$	44,590	$	32,651	$	79,557	$	124,528

AVERAGE LIFE INSURANCE IN-FORCE
Traditional	$	449,416,242	$	443,238,635	$	437,245,336	$	430,900,880	$	423,831,748	$	455,635,914	$	430,538,542
Universal life	79,452,404		84,396,938		91,692,734		101,045,737		109,933,560		76,678,629		100,813,147
Total	$	528,868,646	$	527,635,573	$	528,938,070	$	531,946,617	$	533,765,308	$	532,314,543	$	531,351,689

AVERAGE ACCOUNT VALUES
Universal life	$	6,466,699	$	6,608,067	$	6,726,549	$	6,866,731	$	7,003,612	$	6,398,672	$	6,865,081
Variable universal life	388,002		391,767		411,880		446,231		468,595		379,947		440,238
Total	$	6,854,701	$	6,999,834	$	7,138,429	$	7,312,962	$	7,472,207	$	6,778,619	$	7,305,319

	Draft 10/30/2013
	Page 17

Acquisitions Quarterly Trends

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	207,305		$	211,945		$	208,726		$	208,194		$	194,379		$	635,135		$	611,299
Reinsurance ceded	(99,496		)	(104,804		)	(96,605		)	(102,654		)	(92,970		)	(282,441		)	(292,229		)
Net premiums and policy fees	107,809			107,141			112,121			105,540			101,409			352,694			319,070
Net investment income	136,466			137,055			134,669			134,686			133,695			413,279			403,050
Other income	1,397			787			1,014			1,015			1,004			5,216			3,033
Total operating revenues	245,672			244,983			247,804			241,241			236,108			771,189			725,153
RIGL - investments	107,500			(1,209		)	(14,043		)	(124,691		)	(24,992		)	180,150			(163,726		)
RIGL - derivatives	(101,622		)	8,166			16,726			145,143			28,951			(138,984		)	190,820
Total revenues	251,550			251,940			250,487			261,693			240,067			812,355			752,247

BENEFITS & EXPENSES
Benefits and settlement expenses	169,441			172,791			179,449			177,901			173,423			544,102			530,773
Amortization of deferred policy acquisition costs and value of business acquired	17,707			17,891			18,213			18,661			18,030			58,614			54,904
Other operating expenses	12,369			12,110			15,765			15,244			15,226			39,604			46,235
Operating benefits and expenses	199,517			202,792			213,427			211,806			206,679			642,320			631,912
Amortization related to benefits and settlement expenses	—			—			—			—			104			—			104
Amortization of DAC/VOBA related to realized gains (losses) - investments	109			462			173			943			398			284			1,514
Total benefits and expenses	199,626			203,254			213,600			212,749			207,181			642,604			633,530

INCOME BEFORE INCOME TAX	51,924			48,686			36,887			48,944			32,886			169,751			118,717

Adjustments to Reconcile to Operating Income:
Less: RIGL	5,878			6,957			2,683			20,452			3,959			41,166			27,094
Less: amortization related to benefits and settlement expenses	—			—			—			—			(104		)	—			(104		)
Less: Related amortization of DAC/VOBA	(109		)	(462		)	(173		)	(943		)	(398		)	(284		)	(1,514		)

PRE-TAX OPERATING INCOME	$	46,155		$	42,191		$	34,377		$	29,435		$	29,429		$	128,869		$	93,241

	Draft 10/30/2013
	Page 18

Annuities Quarterly Trends

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	24,870		$	27,878		$	28,552		$	32,965		$	34,870		$	70,050		$	96,387
Reinsurance ceded	(5		)	(1		)	—			—			—			(25		)	—
Net premiums and policy fees	24,865			27,877			28,552			32,965			34,870			70,025			96,387
Net investment income	123,933			130,268			118,557			116,789			116,699			374,077			352,045
RIGL - derivatives	(9,641		)	(11,265		)	(12,923		)	(14,588		)	(15,782		)	(25,236		)	(43,293		)
Other income	22,276			25,143			26,795			30,600			33,295			59,174			90,690
Total operating revenues	161,433			172,023			160,981			165,766			169,082			478,040			495,829
RIGL - investments	2,475			609			1,773			8,218			236			27,861			10,227
RIGL - derivatives, net of economic cost	(22,893		)	(22,461		)	2,175			12,041			26,987			(43,870		)	41,203
Total Revenues	141,015			150,171			164,929			186,025			196,305			462,031			547,259

BENEFITS & EXPENSES
Benefits and settlement expenses	107,253			83,585			80,671			82,170			80,963			286,107			243,804
Amortization of deferred policy acquisition costs and value of business acquired	19,022			15,955			10,654			15,763			11,246			44,077			37,663
Other operating expenses	25,750			27,135			26,258			31,451			26,007			74,112			83,716
Operating benefits and expenses	152,025			126,675			117,583			129,384			118,216			404,296			365,183
Amortization related to benefits and settlement expenses	(1,124		)	198			(601		)	(255		)	(2,276		)	(268		)	(3,132		)
Amortization of DAC related to realized gains (losses) - investments	(5,731		)	(6,349		)	1,455			4,645			8,565			(8,364		)	14,665
Total benefits and expenses	145,170			120,524			118,437			133,774			124,505			395,664			376,716

INCOME (LOSS) BEFORE INCOME TAX	(4,155		)	29,647			46,492			52,251			71,800			66,367			170,543

Adjustments to Reconcile to Operating Income:
Less: RIGL - investments	2,475			609			1,773			8,218			236			27,861			10,227
Less: RIGL - derivatives, net of economic cost	(22,893		)	(22,461		)	2,175			12,041			26,987			(43,870		)	41,203
Less: amortization related to benefits and settlement expenses	1,124			(198		)	601			255			2,276			268			3,132
Less: related amortization of DAC	5,731			6,349			(1,455		)	(4,645		)	(8,565		)	8,364			(14,665		)

PRE-TAX OPERATING INCOME	$	9,408		$	45,348		$	43,398		$	36,382		$	50,866		$	73,744		$	130,646

Annuities Key Data

	3RD QTR			4TH QTR		1ST QTR		2ND QTR		3RD QTR		9 MOS
	2012			2012		2013		2013		2013		2012		2013

SALES
Variable Annuity	$	761,011		$	733,228	$	579,698	$	718,884	$	357,484	$	2,001,757	$	1,656,066
Immediate Annuity	14,311			11,508		10,112		15,080		17,110		44,318		42,302
Single Premium Deferred Annuity	136,540			117,127		103,590		93,385		40,764		412,898		237,739
Market Value Adjusted Annuity	1,102			1,817		1,333		2,986		13,459		3,222		17,778
Fixed Indexed Annuity	215			214		318		26,647		109,381		607		136,346
Total	$	913,179		$	863,894	$	695,051	$	856,982	$	538,198	$	2,462,802	$	2,090,231

PRE-TAX OPERATING INCOME (LOSS)
Variable Annuity	$	(2,920	)	$	18,917	$	25,877	$	23,812	$	32,929	$	22,467	$	82,618
Fixed Annuity	12,328			26,431		17,521		12,570		17,937		51,277		48,028
Total	$	9,408		$	45,348	$	43,398	$	36,382	$	50,866	$	73,744	$	130,646

DEPOSIT BALANCE
VA Fixed Annuity	$	581,243		$	551,098	$	470,656	$	483,958	$	398,150
VA Separate Account Annuity	8,309,426			9,037,748		10,078,475		10,594,528		11,323,019
Sub-total	8,890,669			9,588,846		10,549,131		11,078,486		11,721,169
Fixed Annuity	7,940,514			7,904,746		7,878,568		7,865,892		7,900,577
Total	$	16,831,183		$	17,493,592	$	18,427,699	$	18,944,378	$	19,621,746

	Draft 10/30/2013
	Page 19

Stable Value Products Quarterly Trends

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR		2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013		2013			2013			2012			2013

REVENUES
Net investment income	$	29,851		$	31,030		$	30,074	$	33,651		$	29,478		$	97,209		$	93,203
Other income	—			—			—		—			—			1			—
Total operating revenues	29,851			31,030			30,074		33,651			29,478			97,210			93,203
RIGL - derivatives	221			(174		)	368		(558		)	(63		)	(3		)	(253		)
RIGL - investments	(3,139		)	(3,956		)	1,478		1,375			(4,207		)	(1,258		)	(1,354		)
Total revenues	26,933			26,900			31,920		34,468			25,208			95,949			91,596

BENEFITS & EXPENSES
Benefits and settlement expenses	16,002			11,610			11,603		10,683			9,639			53,180			31,925
Amortization of deferred policy acquisition costs and value of business acquired	410			111			81		96			110			836			287
Other operating expenses	389			634			546		408			523			1,540			1,477
Total benefits and expenses	16,801			12,355			12,230		11,187			10,272			55,556			33,689

INCOME BEFORE INCOME TAX	10,132			14,545			19,690		23,281			14,936			40,393			57,907

Adjustments to Reconcile to Operating Income:
Less: RIGL - derivatives	221			(174		)	368		(558		)	(63		)	(3		)	(253		)
Less: RIGL - investments	(3,139		)	(3,956		)	1,478		1,375			(4,207		)	(1,258		)	(1,354		)

PRE-TAX OPERATING INCOME	$	13,050		$	18,675		$	17,844	$	22,464		$	19,206		$	41,654		$	59,514

Stable Value Products Key Data

	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
	2012			2012			2013			2013			2013			2012		2013

SALES
GIC	$	101,954		$	272,150		$	112,020		$	205,284		$	80,200		$	127,954	$	397,504
GFA - Direct Institutional	45,000			—			—			—			—			221,500		—
Total	$	146,954		$	272,150		$	112,020		$	205,284		$	80,200		$	349,454	$	397,504

DEPOSIT BALANCE
Quarter End Balance	$	2,328,237		$	2,510,559		$	2,544,609		$	2,579,172		$	2,531,262
Average Daily Balance	$	2,591,485		$	2,437,851		$	2,543,906		$	2,542,096		$	2,503,294

OPERATING SPREAD	2.01		%	3.06		%	2.81		%	3.53		%	3.07		%

ADJUSTED OPERATING SPREAD (1)	2.00		%	2.60		%	2.55		%	2.67		%	2.69		%

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

								Draft 10/30/2013
								Page 20

Asset Protection Quarterly Trends

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	68,729		$	67,081		$	66,186		$	68,203		$	66,604		$	207,548		$	200,993
Reinsurance ceded	(31,456		)	(31,681		)	(31,083		)	(32,652		)	(32,681		)	(95,143		)	(96,416		)
Net premiums and policy fees	37,273			35,400			35,103			35,551			33,923			112,405			104,577
Net investment income	5,972			5,913			5,854			5,782			5,804			18,397			17,440
Other income	29,247			25,821			26,614			30,480			31,768			85,361			88,862
Total operating revenues	72,492			67,134			67,571			71,813			71,495			216,163			210,879

BENEFITS & EXPENSES
Benefits and settlement expenses	27,492			23,910			24,658			25,964			26,384			76,787			77,006
Amortization of deferred policy acquisition costs and value of business acquired	8,705			7,740			7,462			7,607			7,402			26,211			22,471
Other operating expenses	32,145			34,625			29,370			30,858			30,882			97,570			91,110
Total benefits and expenses	68,342			66,275			61,490			64,429			64,668			200,568			190,587

INCOME BEFORE INCOME TAX	4,150			859			6,081			7,384			6,827			15,595			20,292
PRE-TAX OPERATING INCOME	$	4,150		$	859		$	6,081		$	7,384		$	6,827		$	15,595		$	20,292

Asset Protection Key Data

	3RD QTR		4TH QTR		1ST QTR		2ND QTR		3RD QTR		9 MOS
	2012		2012		2013		2013		2013		2012		2013

SALES
Credit insurance	$	9,558	$	6,913	$	7,334	$	9,852	$	9,105	$	28,426	$	26,291
Service contracts	92,890		83,821		82,035		99,153		102,796		269,812		283,984
GAP products	14,868		14,116		14,766		17,453		18,140		48,226		50,359
Total	$	117,316	$	104,850	$	104,135	$	126,458	$	130,041	$	346,464	$	360,634

	Draft 10/30/2013
	Page 21

Corporate & Other Quarterly Trends

(Dollars In Thousands)	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	4,828		$	4,596		$	4,678		$	4,631		$	4,556		$	14,971		$	13,865
Reinsurance ceded	(3		)	(4		)	—			(4		)	(4		)	(24		)	(8		)
Net premiums and policy fees	4,825			4,592			4,678			4,627			4,552			14,947			13,857
Net investment income	48,075			49,272			41,232			45,258			38,664			119,369			125,154
Other income	(10		)	3,173			1,269			2,488			583			36,778			4,340
Total operating revenues	52,890			57,037			47,179			52,373			43,799			171,094			143,351
RIGL - investments	7,163			(6,241		)	2,063			1,120			(2,829		)	(23,807		)	354
RIGL - derivatives	(287		)	(347		)	1,039			1,843			1,233			(4,306		)	4,115
Total revenues	59,766			50,449			50,281			55,336			42,203			142,981			147,820

BENEFITS & EXPENSES
Benefits and settlement expenses	5,600			2,574			5,334			5,330			5,701			16,819			16,365
Amortization of deferred policy acquisition costs and value of business acquired	253			225			179			165			160			793			504
Other operating expenses	53,651			53,310			59,998			49,361			52,189			157,613			161,548
Total benefits and expenses	59,504			56,109			65,511			54,856			58,050			175,225			178,417

INCOME (LOSS) BEFORE INCOME TAX	262			(5,660		)	(15,230		)	480			(15,847		)	(32,244		)	(30,597		)

Adjustments to Reconcile to Operating Income:
Less: RIGL - investments	7,163			(6,241		)	2,063			1,120			(2,829		)	(23,807		)	354
Less: RIGL - derivatives	(287		)	(347		)	1,039			1,843			1,233			(4,306		)	4,115

PRE-TAX OPERATING INCOME (LOSS)	$	(6,614	)	$	928		$	(18,332	)	$	(2,483	)	$	(14,251	)	$	(4,131	)	$	(35,066	)

	Draft 10/30/2013
	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 realized gains and losses on investments and derivatives net of the amortization related to deferred acquisition costs (“DAC”), value of business acquired (“VOBA”), and benefits and settlement expenses. 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.

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 10/30/2013
	Page 23

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

(Dollars In Thousands)	3RD QTR			3RD QTR			9 MOS
(Unaudited)	2012			2013			2012			2013

Life Marketing	$	28,673		$	29,218		$	89,390		$	77,598
Acquisitions	46,155			29,429			128,869			93,241
Annuities	9,408			50,866			73,744			130,646
Stable Value Products	13,050			19,206			41,654			59,514
Asset Protection	4,150			6,827			15,595			20,292
Corporate & Other	(6,614		)	(14,251		)	(4,131		)	(35,066		)
Total Pre-tax operating income	94,822			121,295			345,121			346,225

Realized Investment Gains (Losses) - Investments	120,745			(36,282		)	191,294			(165,349		)
Realized Investment Gains (Losses) - Derivatives	(124,581		)	57,108			(187,163		)	235,885
Income Tax Expense	(30,506		)	(49,060		)	(113,596		)	(142,210		)

Net income available to PLC’s common shareowners	$	60,480		$	93,061		$	235,656		$	274,551

	Draft 10/30/2013
	Page 24

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

	3RD QTR			4TH QTR			1ST QTR			2ND QTR			3RD QTR			9 MOS
(Unaudited)	2012			2012			2013			2013			2013			2012			2013

OPERATING INCOME PER SHARE

Operating income per share-diluted	$	0.76		$	0.98		$	0.89		$	0.96		$	0.98		$	2.80		$	2.82
RIGL - Derivatives per share-diluted	(0.98		)	(0.12		)	0.16			1.27			0.46			(1.46		)	1.90
RIGL - All Other Investments-diluted	0.95			(0.04		)	(0.08		)	(0.96		)	(0.29		)	1.49			(1.33		)
Net income available to PLC’s common shareowners per share-diluted	$	0.73		$	0.82		$	0.97		$	1.27		$	1.15		$	2.83		$	3.39

	Draft 10/30/2013
	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

	3RD QTR		4TH QTR		1ST QTR		2ND QTR		3RD QTR
(Unaudited)	2012		2012		2013		2013		2013

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	57.70	$	59.06	$	57.89	$	48.91	$	46.31
Less: Accumulated other comprehensive income (loss)	21.70		22.22		20.39		10.21		6.69
Excluding accumulated other comprehensive income (loss)	$	36.00	$	36.84	$	37.50	$	38.70	$	39.62

	Draft 10/30/2013
	Page 26

Calculation of Operating Income Return on Average Equity Rolling Twelve Months Ended September 30, 2013

(Dollars In Thousands)
(Unaudited)	Three Months												Twelve Months
	12/31/2012			3/31/2012			6/30/2013			9/30/2013			9/30/2013
NUMERATOR:
Net income available to PLC’s common shareowners	$	66,796		$	78,291		$	103,199		$	93,061		$	341,347
Less:
Realized investment gains (losses), net of income tax
Investments	(7,018		)	(5,674		)	(74,086		)	(18,323		)	(105,101		)
Derivatives	(9,630		)	13,200			103,004			37,120			143,694
Related amortization of DAC and VOBA, net of income tax	3,698			(667		)	(3,466		)	(5,260		)	(5,695		)

Operating Income	$	79,746		$	71,432		$	77,747		$	79,524		$	308,449

					Total Protective Life
	Total				Corporation’s Shareowners’
	Protective Life Corporation’s		Accumulated Other		Equity Excluding Accumulated Other
	Shareowners’ Equity		Comprehensive Income (Loss)		Comprehensive Income (Loss)
DENOMINATOR:
September 30, 2012	$	4,565,855	$	1,716,766	$	2,849,089
December 31, 2012	4,615,183		1,736,722		2,878,461
March 31, 2013	4,541,292		1,599,323		2,941,969
June 30, 2013	3,837,991		801,194		3,036,797
September 30, 2013	3,638,532		526,088		3,112,444
Total					$	14,818,760

Average					$	2,963,752

Operating Income Return on Average Equity					10.4		%

	Draft 10/30/2013
	Page 27

Calculation of Operating Income Return on Average Equity Rolling Twelve Months Ended September 30, 2012


(Dollars In Thousands)	Three Months												Twelve Months
(Unaudited)	12/31/2011			3/31/2012			6/30/2012			9/30/2012			9/30/2012

NUMERATOR:
Net income available to PLC’s common shareowners	$	86,034		$	99,021		$	76,155		$	60,480		$	321,690
Less:
Realized investment gains (losses), net of income tax
Investments	7,041			11,025			33,790			74,099			125,955
Derivatives	(2,129		)	(14,734		)	(25,943		)	(80,978		)	(123,784		)
Related amortization of DAC and VOBA, net of income tax	(664		)	3,603			(2,561		)	4,385			4,763

Operating Income	$	81,786		$	99,127		$	70,869		$	62,974		$	314,756

					Total
					Protective Life Corporation’s
	Total Protective Life		Accumulated		Shareowners’ Equity Excluding
	Corporation’s Shareowners’ Equity		Other Comprehensive Income (Loss)		Accumulated Other Comprehensive Income (Loss)
DENOMINATOR:
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
June 30, 2012	4,147,234		1,318,336		2,828,898
September 30, 2012	4,565,855		1,716,766		2,849,089
Total					$	13,861,514

Average					$	2,772,303

Operating Income Return on Average Equity					11.4		%

	Draft 10/30/2013
	Page 28

Calculation of Net Income Available to PLC’s common shareowners Return on Average Equity Rolling Twelve Months Ended September 30, 2013

(Dollars In Thousands)	Three Months								Twelve Months
(Unaudited)	12/31/2012		3/31/2012		6/30/2013		9/30/2013		9/30/2013
NUMERATOR:
Net income available to PLC’s common shareowners	$	66,796	$	78,291	$	103,199	$	93,061	$	341,347

					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:
September 30, 2012	$	4,565,855	$	1,716,766	$	2,849,089
December 31, 2012	4,615,183		1,736,722		2,878,461
March 31, 2013	4,541,292		1,599,323		2,941,969
June 30, 2013	3,837,991		801,194		3,036,797
September 30, 2013	3,638,532		526,088		3,112,444
Total					$	14,818,760

Average					$	2,963,752

Net income available to PLC’s common shareowners Return on Average Equity					11.5		%

	Draft 10/30/2013
	Page 29

Calculation of Net Income Available to PLC’s common shareowners Return on Average Equity Rolling Twelve Months Ended September 30, 2012

(Dollars In Thousands)	Three Months								Twelve Months
(Unaudited)	12/31/2011		3/31/2012		6/30/2012		9/30/2012		9/30/2012
NUMERATOR:
Net income available to PLC’s common shareowners	$	86,034	$	99,021	$	76,155	$	60,480	$	321,690

					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:
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
June 30, 2012	4,147,234		1,318,336		2,828,898
September 30, 2012	4,565,855		1,716,766		2,849,089
Total					$	13,861,514

Average					$	2,772,303

Net income available to PLC’s common shareowners Return on Average Equity					11.6		%

	Draft 10/30/2013
	Page 30

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.

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).

	Draft 10/30/2013
	Page 31

Summary of Impact of DAC Accounting & Operating Definition Change

(Dollars In Thousands)
(Unaudited)	2007			2008			2009			2010			2011

Consolidated Statement of Income Data:
Pre-tax Operating Income (Loss) (1)
Life Marketing as originally reported	$	189,186		$	188,535		$	137,826		$	147,470		$	116,274
DAC change	(48,411		)	(42,714		)	(30,018		)	(23,606		)	(20,151		)
Life Marketing as adjusted	140,775			145,821			107,808			123,864			96,123

Asset Protection as originally reported	41,559			30,789			23,229			29,897			24,662
DAC change	244			1,729			3,019			1,594			745
Asset Protection as adjusted	41,803			32,518			26,248			31,491			25,407

Annuities as originally reported	23,051			18,707			56,642			53,901			110,726
DAC change	(18,201		)	(27,212		)	(15,997		)	(22,689		)	(18,802		)
VA change to operating income	—			16,744			(18,591		)	20,951			(11,700		)
Annuities as adjusted	4,850			8,239			22,054			52,163			80,224

Stable Value Products	50,231			89,811			61,963			39,207			56,780
Acquisitions	129,247			136,479			133,760			111,143			157,393
Corporate & Other	(3,416		)	(105,986		)	81,980			(25,053		)	5,767

Total Pre-tax Operating Income as originally reported	429,858			358,335			495,400			356,565			471,602
DAC change	(66,368		)	(68,197		)	(42,996		)	(44,701		)	(38,208		)
VA change to operating income	—			16,744			(18,591		)	20,951			(11,700		)
Total Pre-tax Operating Income as adjusted	363,490			306,882			433,813			332,815			421,694

Income before income tax as originally reported	436,088			(75,131		)	416,778			388,863			507,152
DAC change	(66,368		)	(68,197		)	(34,593		)	(54,091		)	(36,676		)
Income before income tax as adjusted	369,720			(143,328		)	382,185			334,772			470,476

Net Income Available to PLC’s Common Shareowners as originally reported	289,566			(41,855		)	271,488			260,241			339,070
DAC change	(42,837		)	(44,031		)	(22,351		)	(34,927		)	(23,678		)
Net Income Available to PLC’s Common Shareowners as adjusted	246,729			(85,886		)	249,137			225,314			315,392

Per Share Data (Diluted):
Operating Earnings per Share as originally reported (1)	$	3.99		$	3.37		$	3.97		$	2.73		$	3.65
DAC change	(0.60		)	(0.62		)	(0.34		)	(0.33		)	(0.28		)
VA change to operating income	—			0.15			(0.15		)	0.15			(0.09		)
Operating Earnings per Share as adjusted	$	3.39		$	2.90		$	3.48		$	2.55		$	3.28

Net Income Available to PLC’s Common Shareowners as originally reported	$	4.05		$	(0.59	)	$	3.34		$	2.97		$	3.92
DAC change	(0.60		)	(0.62		)	(0.27		)	(0.40		)	(0.27		)
Net Income Available to PLC’s Common Shareowners as adjusted	$	3.45		$	(1.21	)	$	3.07		$	2.57		$	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 10/30/2013
	Page 32

Summary of Impact of DAC Accounting Change

(Dollars In Thousands)
(Unaudited)	2007			2008			2009			2010			2011

Consolidated Balance Sheet Data:

Total Assets as originally reported	$	41,786,041		$	39,572,449		$	42,311,587		$	47,562,786		$	52,932,085
DAC change	(624,656		)	(729,089		)	(728,036		)	(759,163		)	(788,716		)
Total Assets as adjusted	$	41,161,385		$	38,843,360		$	41,583,551		$	46,803,623		$	52,143,369

Total PLC’s Shareowners’ Equity as originally reported	2,456,761			761,095			2,478,821			3,331,087			4,220,465
DAC change	(403,135		)	(470,538		)	(469,892		)	(489,899		)	(508,948		)
Total PLC’s Shareowners’ Equity as adjusted	$	2,053,626		$	290,557		$	2,008,929		$	2,841,188		$	3,711,517

Total PLC’s Shareowners’ Equity Excluding AOCI as originally reported (1)	2,537,290			2,428,151			2,799,990			3,037,833			3,254,246
DAC change	(403,186		)	(447,217		)	(469,568		)	(504,495		)	(528,173		)
Total PLC’s Shareowners’ Equity Excluding AOCI as adjusted (1)	$	2,134,104		$	1,980,934		$	2,330,422		$	2,533,338		$	2,726,073

Per Share Data (Common Shares Outstanding):

Total PLC’s Shareowners’ Equity as originally reported	35.02			10.89			28.96			38.88			51.68
DAC change	(5.74		)	(6.73		)	(5.49		)	(5.71		)	(6.23		)
Total PLC’s Shareowners’ Equity as adjusted	$	29.28		$	4.16		$	23.47		$	33.17		$	45.45

Total PLC’s Shareowners’ Equity Excluding AOCI as originally reported (1)	36.17			34.74			32.72			35.46			39.85
DAC change	(5.75		)	(6.40		)	(5.49		)	(5.89		)	(6.47		)
Total PLC’s Shareowners’ Equity Excluding AOCI as adjusted (1)	$	30.42		$	28.34		$	27.23		$	29.57		$	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.

PROTECTIVE LIFE CORP - FORM 8-K - EX-99.2 - October 30, 2013

Attached files

PROTECTIVE LIFE CORP Reports