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

Attached files

file	filename
8-K - 8-K - PROTECTIVE LIFE CORP	a14-5381_18k.htm
EX-99.1 - EX-99.1 - PROTECTIVE LIFE CORP	a14-5381_1ex99d1.htm

Exhibit 99.2

Draft 2/11/2014

Protective Life Corporation (“PLC”)

Supplemental Schedules

Fourth Quarter 2013

Draft 2/11/2014

Page 1

Quarterly Financial Highlights

(Dollars In Thousands)	4TH QTR		1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012		2013			2013			2013			2013			2012			2013

Pre-tax Operating Income (Loss) (1)

Life Marketing	$	15,642	$	23,707		$	24,673		$	29,218		$	32,700		$	105,032		$	110,298
Acquisitions	42,191		34,377			29,435			29,429			60,762			171,060			154,003
Annuities	45,348		43,398			36,382			50,866			53,484			119,092			184,130
Stable Value Products	18,675		17,844			22,464			19,206			21,047			60,329			80,561
Asset Protection	859		6,081			7,384			6,827			6,503			16,454			26,795
Corporate & Other	928		(18,332		)	(2,483		)	(14,251		)	(5,496		)	(3,203		)	(40,562		)
Total Pre-tax Operating Income	$	123,643	$	107,075		$	117,855		$	121,295		$	169,000		$	468,764		$	515,225

Balance Sheet Data

Total Assets	$	57,384,672	$	58,573,487		$	58,162,886		$	58,460,511		$	68,784,107
Total Protective Life Corporation’s Shareowners’ Equity	$	4,615,183	$	4,541,292		$	3,837,991		$	3,638,532		$	3,714,794
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (2)	$	2,878,461	$	2,941,969		$	3,036,797		$	3,112,444		$	3,220,728

Stock Data

Closing Price	$	28.58	$	35.80		$	38.41		$	42.55		$	50.66
Average Shares Outstanding
Basic	79,652,495		79,139,392			79,404,770			79,492,274			79,540,583			81,066,338			79,395,622
Diluted	81,339,803		80,706,744			81,087,238			80,852,078			81,053,787			82,723,016			80,925,713

(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 2/11/2014

Page 2

Financial Strength Ratings as of December 31, 2013

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

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-	—	—	—
MONY Life Insurance Company	A+	A	A+	A2

Draft 2/11/2014

Page 3

Consolidated Statements of Income

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	721,605		$	726,847		$	756,331		$	657,218		$	841,255		$	2,814,278		$	2,981,651
Reinsurance ceded	(375,546		)	(335,350		)	(390,490		)	(270,730		)	(380,625		)	(1,345,836		)	(1,377,195		)
Net premiums and policy fees	346,059			391,497			365,841			386,488			460,630			1,468,442			1,604,456
Net investment income	476,045			457,634			466,220			454,275			539,952			1,862,332			1,918,081
RIGL - derivatives	(26,081		)	7,385			143,881			41,326			(4,461		)	(238,480		)	188,131
RIGL - all other investments	7,161			(4,145		)	(109,978		)	(19,508		)	10,094			231,035			(123,537		)

OTTI losses	(16,422		)	(1,340		)	(1,789		)	(6,635		)	(1,177		)	(66,188		)	(10,941		)
Portion recognized in OCI (before taxes)	(1,536		)	(3,244		)	(2,211		)	(2,046		)	(4,005		)	7,302			(11,506		)
Net impairment losses recognized in earnings	(17,958		)	(4,584		)	(4,000		)	(8,681		)	(5,182		)	(58,886		)	(22,447		)
Other income	84,633			85,027			94,392			98,794			116,102			358,563			394,315
Total revenues	869,859			932,814			956,356			952,694			1,117,135			3,623,006			3,958,999

BENEFITS & EXPENSES
Benefits and settlement expenses	537,944			581,880			557,866			624,577			715,434			2,326,040			2,479,757
Amortization of deferred policy acquisition costs and value of business acquired	65,530			52,239			74,946			22,446			43,267			203,565			192,898
Other operating expenses	120,406			138,061			123,661			121,136			141,851			480,155			524,709
Interest expense - subsidiaries	10,336			11,105			11,511			12,169			12,707			28,796			47,492
Interest expense - holding company - other debt	23,481			23,434			22,891			21,777			21,796			93,882			89,898
Interest expense - holding company - subordinated debt	8,443			8,468			8,468			8,468			8,468			37,597			33,872
Total benefits and expenses	766,140			815,187			799,343			810,573			943,523			3,170,035			3,368,626

INCOME BEFORE INCOME TAX	103,719			117,627			157,013			142,121			173,612			452,971			590,373
Income tax expense	36,923			39,336			53,814			49,060			54,699			150,519			196,909
NET INCOME	66,796			78,291			103,199			93,061			118,913			302,452			393,464
Less: Net income (loss) attributable to noncontrolling interests	—			—			—			—			—			—			—
NET INCOME AVAILABLE TO PLC’S COMMON SHAREOWNERS	$	66,796		$	78,291		$	103,199		$	93,061		$	118,913		$	302,452		$	393,464

PER SHARE DATA FOR QUARTER
Operating income - diluted (1)	$	0.98		$	0.89		$	0.96		$	0.98		$	1.43
RIGL - derivatives	(0.12		)	0.16			1.27			0.46			0.10
RIGL - all other investments	(0.04		)	(0.08		)	(0.96		)	(0.29		)	(0.06		)
Net income available to PLC’s common shareowners-diluted	$	0.82		$	0.97		$	1.27		$	1.15		$	1.47
Average shares outstanding-diluted	81,339,803			80,706,744			81,087,238			80,852,078			81,053,787
Dividends paid	$	0.18		$	0.18		$	0.20		$	0.20		$	0.20
PER SHARE DATA FOR YTD
Operating income - diluted (1)	$	3.78		$	0.89		$	1.84		$	2.82		$	4.26
RIGL - derivatives	(1.59		)	0.16			1.44			1.90			1.99
RIGL - all other investments	1.47			(0.08		)	(1.04		)	(1.33		)	(1.39		)
Net income available to PLC’s common shareowners - diluted	$	3.66		$	0.97		$	2.24		$	3.39		$	4.86
Average shares outstanding - diluted	82,723,016			80,706,744			80,898,042			80,882,552			80,925,713
Dividends paid	$	0.70		$	0.18		$	0.38		$	0.58		$	0.78

(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 2/11/2014

Page 4

Consolidated Balance Sheets

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

ASSETS
Fixed maturities, at fair value	$	29,787,959	$	30,065,491	$	28,922,966	$	28,323,215	$	34,815,931
Fixed maturities, at amortized cost	300,000		315,000		335,000		350,000		365,000
Equity securities	411,786		415,176		446,518		461,231		646,027
Mortgage loans	4,950,201		4,835,917		4,773,709		4,794,924		5,486,417
Investment real estate	19,816		18,952		16,178		18,750		20,413
Policy loans	865,391		862,202		855,780		856,333		1,815,744
Other long-term investments	361,837		348,394		429,987		482,367		521,811
Long-term investments	36,696,990		36,861,132		35,780,138		35,286,820		43,671,343
Short-term investments	217,812		161,506		172,011		216,224		134,146
Total investments	36,914,802		37,022,638		35,952,149		35,503,044		43,805,489
Cash	368,801		275,103		255,712		354,449		466,542
Accrued investment income	357,368		361,463		365,483		364,233		465,333
Accounts and premiums receivable	85,500		104,539		96,819		76,138		127,830
Reinsurance receivable	5,805,401		5,842,124		5,832,194		5,744,801		6,175,115
Deferred policy acquisition costs and value of business acquired	3,239,519		3,262,029		3,414,988		3,307,513		3,584,199
Goodwill	108,561		107,786		107,012		106,237		105,463
Property and equipment, net	47,607		48,590		49,492		51,806		52,403
Other assets	262,052		272,760		305,752		343,015		426,677
Current/Deferred income tax	30,827		—		—		23,970		—
Assets related to separate accounts
Variable annuity	9,601,417		10,670,833		11,162,856		11,921,925		12,791,438
Variable universal life	562,817		605,622		620,429		663,380		783,618

TOTAL ASSETS	$	57,384,672	$	58,573,487	$	58,162,886	$	58,460,511	$	68,784,107

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Page 5

Consolidated Balance Sheets - Continued

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

LIABILITIES
Policy liabilities and accruals
Future policy benefits and claims	$	21,626,386		$	21,793,320		$	21,932,062		$	22,029,491		$	29,699,025
Unearned premiums	1,396,026			1,426,496			1,454,003			1,512,909			1,549,815
Stable value product account balances	2,510,559			2,544,609			2,579,172			2,531,262			2,559,552
Annuity account balances	10,658,463			10,524,393			10,509,829			10,431,938			11,207,553
Other policyholders’ funds	566,985			569,533			577,821			602,978			1,214,380
Repurchase program borrowings	150,000			300,000			340,000			100,000			350,000
Other liabilities	1,434,604			1,375,962			1,225,042			1,177,807			1,142,887
Deferred income taxes	1,736,389			1,690,052			1,318,175			1,239,796			1,069,530
Income tax payable	—			4,782			13			—			13,474
Non-recourse funding obligations	586,000			596,000			604,900			619,900			562,448
Debt	1,400,000			1,390,000			1,460,000			1,450,000			1,585,000
Subordinated debt securities	540,593			540,593			540,593			540,593			540,593
Liabilities related to separate accounts
Variable annuity	9,601,417			10,670,833			11,162,856			11,921,925			12,791,438
Variable universal life	562,817			605,622			620,429			663,380			783,618
TOTAL LIABILITIES	52,770,239			54,032,195			54,324,895			54,821,979			65,069,313

SHAREOWNERS’ EQUITY
Common stock	44,388			44,388			44,388			44,388			44,388
Additional paid-in-capital	606,369			599,514			606,523			602,072			606,934
Treasury stock	(209,840		)	(203,698		)	(203,385		)	(200,637		)	(200,416		)
Retained earnings	2,437,544			2,501,765			2,589,271			2,666,621			2,769,822
Accumulated other comprehensive income (loss)	1,736,722			1,599,323			801,194			526,088			494,066
TOTAL PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY	4,615,183			4,541,292			3,837,991			3,638,532			3,714,794
Noncontrolling interest	(750		)	—			—			—			—
TOTAL EQUITY	4,614,433			4,541,292			3,837,991			3,638,532			3,714,794
TOTAL LIABILITIES AND SHAREOWNERS’ EQUITY	$	57,384,672		$	58,573,487		$	58,162,886		$	58,460,511		$	68,784,107

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	59.06		$	57.89		$	48.91		$	46.31		$	47.28
Less: Accumulated other comprehensive income (loss)	22.22			20.39			10.21			6.69			6.29
Excluding accumulated other comprehensive income (loss) (1)	$	36.84		$	37.50		$	38.70		$	39.62		$	40.99

Total Protective Life Corporation’s Shareowners’ Equity	$	4,615,183		$	4,541,292		$	3,837,991		$	3,638,532		$	3,714,794
Less: Accumulated other comprehensive income (loss)	1,736,722			1,599,323			801,194			526,088			494,066
Total Protective Life Corporation’s Shareowners’ Equity (excluding accumulated other comprehensive income (loss)) (1)	$	2,878,461		$	2,941,969		$	3,036,797		$	3,112,444		$	3,220,728

Common shares outstanding	78,137,493			78,449,071			78,465,053			78,562,547			78,577,446
Treasury Stock shares	10,639,467			10,327,889			10,311,907			10,214,413			10,199,514

(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 2/11/2014

Page 6

Calculation of Operating Earnings Per Share

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013			2013			2013			2013			2012			2013

CALCULATION OF NET INCOME PER SHARE

Net income available to PLC’s common shareowners	$	66,796		$	78,291		$	103,199		$	93,061		$	118,913		$	302,452		$	393,464

Average shares outstanding - basic	79,652,495			79,139,392			79,404,770			79,492,274			79,540,583			81,066,338			79,395,622
Average shares outstanding - diluted	81,339,803			80,706,744			81,087,238			80,852,078			81,053,787			82,723,016			80,925,713

Net income available to PLC’s common shareowners per share-basic	$	0.84		$	0.99		$	1.30		$	1.17		$	1.50		$	3.73		$	4.96
Net income available to PLC’s common shareowners per share-diluted	$	0.82		$	0.97		$	1.27		$	1.15		$	1.47		$	3.66		$	4.86

Income from continuing operations	$	66,796		$	78,291		$	103,199		$	93,061		$	118,913		$	302,452		$	393,464
EPS (basic)	$	0.84		$	0.99		$	1.30		$	1.17		$	1.50		$	3.73		$	4.96
EPS (diluted)	$	0.82		$	0.97		$	1.27		$	1.15		$	1.47		$	3.66		$	4.86

CALCULATION OF REALIZED INVESTMENT GAINS (LOSSES) PER SHARE

RIGL - derivatives	$	(26,081	)	$	7,385		$	143,881		$	41,326		$	(4,461	)	$	(238,480	)	$	188,131
VA GMWB economic cost	11,265			12,923			14,588			15,782			16,444			36,501			59,737
RIGL - all other investments	(10,797		)	(8,729		)	(113,978		)	(28,189		)	4,912			172,149			(145,984		)
Amortization related to DAC/VOBA and benefits and settlement expenses	5,689			(1,027		)	(5,333		)	(8,093		)	(12,283		)	14,037			(26,736		)
	(19,924		)	10,552			39,158			20,826			4,612			(15,793		)	75,148
Tax effect	6,974			(3,693		)	(13,706		)	(7,289		)	(1,614		)	5,529			(26,302		)
	$	(12,950	)	$	6,859		$	25,452		$	13,537		$	2,998		$	(10,264	)	$	48,846

RIGL - derivatives per share-diluted	$	(0.12	)	$	0.16		$	1.27		$	0.46		$	0.10		$	(1.59	)	$	1.99
RIGL - all other investments per share-diluted	$	(0.04	)	$	(0.08	)	$	(0.96	)	$	(0.29	)	$	(0.06	)	$	1.47		$	(1.39	)

OPERATING INCOME PER SHARE (1)

Net income available to PLC’s common shareowners per share-diluted	$	0.82		$	0.97		$	1.27		$	1.15		$	1.47		$	3.66		$	4.86
Less: RIGL - derivatives per share-diluted	(0.12		)	0.16			1.27			0.46			0.10			(1.59		)	1.99
Less: RIGL - all other investments per share-diluted	(0.04		)	(0.08		)	(0.96		)	(0.29		)	(0.06		)	1.47			(1.39		)
Operating income per share-diluted	$	0.98		$	0.89		$	0.96		$	0.98		$	1.43		$	3.78		$	4.26

NET OPERATING INCOME (1)

Net income available to PLC’s common shareowners	$	66,796		$	78,291		$	103,199		$	93,061		$	118,913		$	302,452		$	393,464
Less: RIGL - derivatives net of tax	(9,630		)	13,200			103,004			37,120			7,789			(131,286		)	161,113
Less: RIGL - all other investments net of tax and amortization	(3,320		)	(6,341		)	(77,552		)	(23,583		)	(4,791		)	121,022			(112,267		)
Net operating income	$	79,746		$	71,432		$	77,747		$	79,524		$	115,915		$	312,716		$	344,618

PRE-TAX OPERATING INCOME (2)

Income before income tax and discontinued operations	$	103,719		$	117,627		$	157,013		$	142,121		$	173,612		$	452,971		$	590,373
Less: RIGL - derivatives	(26,081		)	7,385			143,881			41,326			(4,461		)	(238,480		)	188,131
Less: VA GMWB economic cost	11,265			12,923			14,588			15,782			16,444			36,501			59,737
Less: RIGL - all other investments	(10,797		)	(8,729		)	(113,978		)	(28,189		)	4,912			172,149			(145,984		)
Less: Amortization related to DAC/VOBA and benefits and settlement expenses	5,689			(1,027		)	(5,333		)	(8,093		)	(12,283		)	14,037			(26,736		)
Pre-tax operating income	$	123,643		$	107,075		$	117,855		$	121,295		$	169,000		$	468,764		$	515,225

(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 2/11/2014

Page 7

Invested Asset Summary

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

Total Portfolio

Fixed Maturities	$	30,088.0	$	30,380.5	$	29,258.0	$	28,673.2	$	35,180.9	80	%
Mortgage Loans	4,950.2		4,835.9		4,773.7		4,794.9		5,486.4		13	%
Investment Real Estate	19.8		18.9		16.2		18.8		20.4		0	%
Equity Securities	411.8		415.2		446.5		461.2		646.0		2	%
Policy Loans	865.4		862.2		855.8		856.3		1,815.8		4	%
Short-Term Investments	217.8		161.5		172.0		216.2		134.2		0	%
Other Long-Term Investments	361.8		348.4		430.0		482.4		521.8		1	%
Total Invested Assets	$	36,914.8	$	37,022.6	$	35,952.2	$	35,503.0	$	43,805.5	100	%

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Page 8

Invested Asset Summary - Fixed Income

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

Fixed Income

Corporate Bonds	$	22,054.4		$	22,417.5		$	21,610.4		$	21,253.0		$	27,286.2		78	%
Residential Mortgage-Backed Securities	2,197.1			2,072.4			1,907.1			1,772.4			1,756.0			5	%
Commercial Mortgage-Backed Securities	1,040.9			1,093.2			1,113.8			1,080.6			1,129.2			3	%
Other Asset-Backed Securities	1,133.0			1,109.0			1,181.4			1,138.9			1,160.2			3	%
U.S. Government-related Securities	1,475.8			1,503.8			1,382.5			1,417.3			1,704.1			5	%
Other Government-related Securities	164.2			152.2			122.9			98.6			108.5			0	%
States, Municipals and Political Subdivisions	1,722.6			1,717.4			1,604.9			1,562.4			1,671.7			5	%
Other	300.0			315.0			335.0			350.0			365.0			1	%
Total Fixed Income Portfolio	$	30,088.0		$	30,380.5		$	29,258.0		$	28,673.2		$	35,180.9		100	%

Fixed Income - Quality

AAA	14.6		%	14.4		%	14.4		%	14.4		%	12.5		%
AA	7.2		%	7.0		%	6.9		%	6.9		%	7.0		%
A	30.8		%	31.5		%	30.9		%	30.3		%	32.2		%
BBB	39.7		%	39.6		%	40.6		%	41.0		%	41.7		%
Below investment grade	6.7		%	6.5		%	6.1		%	6.2		%	5.6		%
Not rated	1.0		%	1.0		%	1.1		%	1.2		%	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.

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Page 9

Fixed Maturities by NAIC Rating

	STAT Carry Value % of Total
	4TH QTR		1ST QTR		2ND QTR		3RD QTR		4TH QTR
(Unaudited)	2012		2013		2013		2013		2013

NAIC Rating
1	55.68	%	55.78	%	54.98	%	53.87	%	53.24	%
2	38.52	%	38.74	%	39.67	%	39.57	%	41.27	%
3	3.23	%	3.22	%	3.04	%	4.01	%	3.60	%
4	0.62	%	0.58	%	0.64	%	0.82	%	0.53	%
5	0.70	%	0.46	%	0.39	%	0.38	%	0.25	%
6	0.16	%	0.09	%	0.09	%	0.09	%	0.04	%
Not Rated (1)	1.09	%	1.13	%	1.19	%	1.26	%	1.07	%

	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%

Below investment grade (using NAIC 3-6)	4.71	%	4.35	%	4.16	%	5.30	%	4.42	%

Note: NAIC Ratings reflect statutory carrying values

(1) Special purpose vehicle note held in Golden Gate V

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Page 10

Invested Asset Summary - Mortgages

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

Mortgage Loans - Type

Retail	67.3		%	68.0		%	67.8		%	67.1		%	60.6		%
Apartments	9.5		%	8.7		%	9.0		%	9.0		%	11.8		%
Office Buildings	13.7		%	13.9		%	13.8		%	13.6		%	14.9		%
Warehouses	7.4		%	7.3		%	7.4		%	8.2		%	7.4		%
Miscellaneous	2.1		%	2.1		%	2.0		%	2.1		%	5.3		%
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Delinquent Loans & Foreclosed Properties

60 Days Past Due	$	2.3		$	1.7		$	3.0		$	—		$	—
90 Days Past Due	17.2			19.5			14.6			9.3			2.2
Foreclosed Real Estate	4.4			—			—			3.9			10.5
	$	23.9		$	21.2		$	17.6		$	13.2		$	12.7	(1)

% of Commercial Mortgage Loan Portfolio	0.5		%	0.4		%	0.4		%	0.3		%	0.2		%

(1) Includes $2.2 million of nonperforming loans subject to a pooling and servicing agreement as of December 31, 2013.

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Page 11

Invested Asset Summary - Trading Portfolios

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

Trading Portfolio Composition (excl. Modco Trading Portfolio)

Rating
AAA	$	0.5	$	0.1	$	—	$	—	$	—
AA	—		—		—		—		—
A	—		—		—		—		—
BBB	—		—		—		—		—
Below investment grade	14.1		12.8		11.0		9.8		9.4
Total	$	14.6	$	12.9	$	11.0	$	9.8	$	9.4

Modco Trading Portfolio

Rating
AAA	$	559.4	$	546.7	$	440.1	$	430.9	$	419.9
AA	239.8		233.2		286.0		265.5		266.2
A	801.6		828.2		847.1		836.2		854.0
BBB	1,038.9		992.5		922.8		920.2		924.5
Below investment grade	353.1		354.7		345.5		320.2		324.5
Short-term investments	118.9		110.6		91.6		106.4		52.4
Total	$	3,111.7	$	3,065.9	$	2,933.1	$	2,879.4	$	2,841.5

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

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Page 12

Invested Asset Summary - MBS - Alt-A

Mortgage-backed Securities Collateralized by Alt-A Mortgage Loans as of December 31, 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	394.2		—		—		—		—		394.2
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	395.0	$	—	$	—	$	—	$	—	$	395.0

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

Rating
BBB	$	—	$	—	$	—	$	—	$	—	$	—
Below investment grade	32.9		—		—		—		—		32.9
Total mortgage-backed securities collateralized by Alt-A mortgage loans	$	32.9	$	—	$	—	$	—	$	—	$	32.9

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Page 13

Invested Asset Summary - MBS - Prime

Mortgage-backed Securities Collateralized by Prime Loans as of December 31, 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	$	280.4	$	292.0	$	315.1	$	24.4	$	145.3	$	1,057.2
AA	0.3		—		—		—		—		0.3
A	18.6		—		—		—		—		18.6
BBB	9.0		—		—		—		—		9.0
Below investment grade	273.9		—		—		—		—		273.9
Total mortgage-backed securities collateralized by prime loans	$	582.2	$	292.0	$	315.1	$	24.4	$	145.3	$	1,359.0

Includes $955.8 million of agency mortgage backed securities.

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

Rating
AAA	$	14.0	$	6.3	$	3.3	$	(1.1	)	$	(5.0	)	$	17.5
AA	—		—		—		—			—			—
A	0.6		—		—		—			—			0.6
BBB	0.5		—		—		—			—			0.5
Below investment grade	7.2		—		—		—			—			7.2
Total mortgage-backed securities collateralized by prime loans	$	22.3	$	6.3	$	3.3	$	(1.1	)	$	(5.0	)	$	25.8

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Page 14

Invested Asset Summary - CMBS

Commercial Mortgage-backed Securities as of December 31, 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	$	64.8	$	80.2	$	207.4		$	294.0		$	128.9		$	775.3
AA	16.9		33.0		37.3			40.5			28.4			156.1
A	48.0		31.9		52.8			13.0			18.4			164.1
BBB	33.7		—		—			—			—			33.7
Total commercial mortgage-backed securities	$	163.4	$	145.1	$	297.5		$	347.5		$	175.7		$	1,129.2

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

Rating
AAA	$	1.2	$	5.7	$	14.2		$	(9.4	)	$	(5.6	)	$	6.1
AA	0.2		1.8		2.3			(3.5		)	(1.8		)	(1.0		)
A	1.0		0.9		(0.7		)	(1.4		)	(2.0		)	(2.2		)
BBB	0.4		—		—			—			—			0.4
Total commercial mortgage-backed securities	$	2.8	$	8.4	$	15.8		$	(14.3	)	$	(9.4	)	$	3.3

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Page 15

Invested Asset Summary - ABS(1)

Other Asset-backed Securities(1) as of December 31, 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	$	474.2		$	4.7	$	24.8	$	32.1		$	18.7		$	554.5
AA	153.7			—		—		63.5			—			217.2
A	63.9			—		51.9		93.8			34.3			243.9
BBB	9.3			—		—		—			—			9.3
Below investment grade	135.3			—		—		—			—			135.3
Total other asset-backed securities	$	836.4		$	4.7	$	76.7	$	189.4		$	53.0		$	1,160.2

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

Rating
AAA	$	(41.1	)	$	—	$	0.7	$	(0.8	)	$	(0.4	)	$	(41.6	)
AA	(15.1		)	—		—		(0.3		)	—			(15.4		)
A	5.7			—		4.2		0.6			(0.5		)	10.0
BBB	0.1			—		—		—			—			0.1
Below investment grade	11.2			—		—		—			—			11.2
Total other asset-backed securities	$	(39.2	)	$	—	$	4.9	$	(0.5	)	$	(0.9	)	$	(35.7	)

(1) Excludes Residential and Commercial mortgage-backed securities

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Page 16

Life Marketing Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013			2013			2013			2013			2012			2013
REVENUES
Gross premiums and policy fees	$	410,105		$	418,705		$	442,338		$	356,809		$	416,280		$	1,575,074		$	1,634,132
Reinsurance ceded	(239,056		)	(207,662		)	(255,180		)	(145,075		)	(230,106		)	(831,713		)	(838,023		)
Net premiums and policy fees	171,049			211,043			187,158			211,734			186,174			743,361			796,109
Net investment income	122,507			127,248			130,054			129,935			134,428			486,463			521,665
Other income	29,709			29,335			29,809			32,144			31,867			117,109			123,155
Total operating revenues	323,265			367,626			347,021			373,813			352,469			1,346,933			1,440,929
RIGL - investments	—			—			—			3,603			274			—			3,877
RIGL - derivatives	—			—			—			—			—			—			—
Total revenues	323,265			367,626			347,021			377,416			352,743			1,346,933			1,444,806

BENEFITS & EXPENSES
Benefits and settlement expenses	243,276			280,766			256,073			330,156			275,624			1,054,645			1,142,619
Amortization of deferred policy acquisition costs and value of business acquired	29,495			14,022			27,066			(24,284		)	8,034			45,079			24,838
Other operating expenses	34,852			49,131			39,209			38,723			36,111			142,177			163,174
Operating benefits and expenses	307,623			343,919			322,348			344,595			319,769			1,241,901			1,330,631
Amortization related to benefits and settlement expenses	—			—			—			483			30			—			513
Amortization of DAC/VOBA related to realized gains (losses) - investments	—			—			—			819			117			—			936
Total benefits and expenses	307,623			343,919			322,348			345,897			319,916			1,241,901			1,332,080

INCOME BEFORE INCOME TAX	15,642			23,707			24,673			31,519			32,827			105,032			112,726

Adjustments to Reconcile to Operating Income:
Less: RIGL	—			—			—			3,603			274			—			3,877
Less: amortization related to benefits and settlement expenses	—			—			—			(483		)	(30		)	—			(513		)
Less: Related amortization of DAC/VOBA	—			—			—			(819		)	(117		)	—			(936		)

PRE-TAX OPERATING INCOME	$	15,642		$	23,707		$	24,673		$	29,218		$	32,700		$	105,032		$	110,298

Life Marketing Key Data

	4TH QTR		1ST QTR		2ND QTR		3RD QTR		4TH QTR		12 MOS
	2012		2013		2013		2013		2013		2012		2013
SALES BY PRODUCT
Traditional	$	195	$	292	$	409	$	390	$	202	$	1,115	$	1,293
Universal life	41,216		46,995		44,181		32,261		29,991		117,099		153,428
Bank-owned life insurance	499		—		—		—		—		3,253		—
Total	$	41,910	$	47,287	$	44,590	$	32,651	$	30,193	$	121,467	$	154,721

SALES BY DISTRIBUTION
Independent agents	$	26,561	$	31,537	$	31,108	$	23,395	$	22,140	$	73,692	$	108,180
Stockbrokers/banks	14,491		15,303		12,920		8,608		7,512		42,973		44,343
BOLI/other	858		447		562		648		541		4,802		2,198
Total	$	41,910	$	47,287	$	44,590	$	32,651	$	30,193	$	121,467	$	154,721

AVERAGE LIFE INSURANCE IN-FORCE
Traditional	$	443,238,635	$	437,245,336	$	430,900,880	$	423,831,748	$	417,123,348	$	449,462,487	$	424,012,114
Universal life	84,396,938		91,692,734		101,045,737		109,933,560		117,217,198		80,331,839		109,131,467
Total	$	527,635,573	$	528,938,070	$	531,946,617	$	533,765,308	$	534,340,546	$	529,794,326	$	533,143,581

AVERAGE ACCOUNT VALUES
Universal life	$	6,608,067	$	6,726,549	$	6,866,731	$	7,003,612	$	7,064,117	$	6,501,025	$	6,965,424
Variable universal life	391,767		411,880		446,231		468,595		503,897		387,424		475,064
Total	$	6,999,834	$	7,138,429	$	7,312,962	$	7,472,207	$	7,568,014	$	6,888,449	$	7,440,488

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Page 17

Acquisitions Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013			2013			2013			2013			2012			2013
REVENUES
Gross premiums and policy fees	$	211,945		$	208,726		$	208,194		$	194,379		$	317,826		$	847,080		$	929,125
Reinsurance ceded	(104,804		)	(96,605		)	(102,654		)	(92,970		)	(117,419		)	(387,245		)	(409,648		)
Net premiums and policy fees	107,141			112,121			105,540			101,409			200,407			459,835			519,477
Net investment income	137,055			134,669			134,686			133,695			214,248			550,334			617,298
Other income	787			1,014			1,015			1,004			3,891			6,003			6,924
Total operating revenues	244,983			247,804			241,241			236,108			418,546			1,016,172			1,143,699
RIGL - investments	(1,209		)	(14,043		)	(124,691		)	(24,992		)	3,661			178,941			(160,065		)
RIGL - derivatives	8,166			16,726			145,143			28,951			12,125			(130,818		)	202,945
Total revenues	251,940			250,487			261,693			240,067			434,332			1,064,295			1,186,579

BENEFITS & EXPENSES
Benefits and settlement expenses	172,791			179,449			177,901			173,423			308,843			716,893			839,616
Amortization of deferred policy acquisition costs and value of business acquired	17,891			18,213			18,661			18,030			16,932			76,505			71,836
Other operating expenses	12,110			15,765			15,244			15,226			32,009			51,714			78,244
Operating benefits and expenses	202,792			213,427			211,806			206,679			357,784			845,112			989,696
Amortization related to benefits and settlement expenses	—			—			—			104			11,666			—			11,770
Amortization of DAC/VOBA related to realized gains (losses) - investments	462			173			943			398			(588		)	746			926
Total benefits and expenses	203,254			213,600			212,749			207,181			368,862			845,858			1,002,392

INCOME BEFORE INCOME TAX	48,686			36,887			48,944			32,886			65,470			218,437			184,187

Adjustments to Reconcile to Operating Income:
Less: RIGL	6,957			2,683			20,452			3,959			15,786			48,123			42,880
Less: amortization related to benefits and settlement expenses	—			—			—			(104		)	(11,666		)	—			(11,770		)
Less: Related amortization of DAC/VOBA	(462		)	(173		)	(943		)	(398		)	588			(746		)	(926		)

PRE-TAX OPERATING INCOME	$	42,191		$	34,377		$	29,435		$	29,429		$	60,762		$	171,060		$	154,003

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Page 18

Annuities Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013			2013			2013			2013			2012			2013
REVENUES
Gross premiums and policy fees	$	27,878		$	28,552		$	32,965		$	34,870		$	35,930		$	97,928		$	132,317
Reinsurance ceded	(1		)	—			—			—			—			(26		)	—
Net premiums and policy fees	27,877			28,552			32,965			34,870			35,930			97,902			132,317
Net investment income	130,268			118,557			116,789			116,699			116,277			504,345			468,322
RIGL - derivatives	(11,265		)	(12,923		)	(14,588		)	(15,782		)	(16,444		)	(36,501		)	(59,737		)
Other income	25,143			26,795			30,600			33,295			34,821			84,317			125,511
Total operating revenues	172,023			160,981			165,766			169,082			170,584			650,063			666,413
RIGL - investments	609			1,773			8,218			236			(1,809		)	28,470			8,418
RIGL - derivatives, net of economic cost	(22,461		)	2,175			12,041			26,987			(1,482		)	(66,331		)	39,721
Total Revenues	150,171			164,929			186,025			196,305			167,293			612,202			714,552

BENEFITS & EXPENSES
Benefits and settlement expenses	83,585			80,671			82,170			80,963			77,652			369,692			321,456
Amortization of deferred policy acquisition costs and value of business acquired	15,955			10,654			15,763			11,246			10,544			60,032			48,207
Other operating expenses	27,135			26,258			31,451			26,007			28,904			101,247			112,620
Operating benefits and expenses	126,675			117,583			129,384			118,216			117,100			530,971			482,283
Amortization related to benefits and settlement expenses	198			(601		)	(255		)	(2,276		)	1,096			(70		)	(2,036		)
Amortization of DAC related to realized gains (losses) - investments	(6,349		)	1,455			4,645			8,565			(38		)	(14,713		)	14,627
Total benefits and expenses	120,524			118,437			133,774			124,505			118,158			516,188			494,874

INCOME BEFORE INCOME TAX	29,647			46,492			52,251			71,800			49,135			96,014			219,678

Adjustments to Reconcile to Operating Income:
Less: RIGL - investments	609			1,773			8,218			236			(1,809		)	28,470			8,418
Less: RIGL - derivatives, net of economic cost	(22,461		)	2,175			12,041			26,987			(1,482		)	(66,331		)	39,721
Less: amortization related to benefits and settlement expenses	(198		)	601			255			2,276			(1,096		)	70			2,036
Less: related amortization of DAC	6,349			(1,455		)	(4,645		)	(8,565		)	38			14,713			(14,627		)

PRE-TAX OPERATING INCOME	$	45,348		$	43,398		$	36,382		$	50,866		$	53,484		$	119,092		$	184,130

Annuities Key Data

	4TH QTR		1ST QTR		2ND QTR		3RD QTR		4TH QTR		12 MOS
	2012		2013		2013		2013		2013		2012		2013
SALES
Variable Annuity	$	733,228	$	579,698	$	718,884	$	357,484	$	210,428	$	2,734,985	$	1,866,494
Immediate Annuity	11,508		10,112		15,080		17,110		15,715		55,826		58,017
Single Premium Deferred Annuity	117,127		103,590		93,385		40,764		27,487		530,025		265,226
Market Value Adjusted Annuity	1,817		1,333		2,986		13,459		12,432		5,039		30,210
Fixed Indexed Annuity	214		318		26,647		109,381		203,329		821		339,675
Total	$	863,894	$	695,051	$	856,982	$	538,198	$	469,391	$	3,326,696	$	2,559,622

PRE-TAX OPERATING INCOME (LOSS)
Variable Annuity	$	18,917	$	25,877	$	23,812	$	32,929	$	35,268	$	41,384	$	117,886
Fixed Annuity	26,431		17,521		12,570		17,937		18,216		77,708		66,244
Total	$	45,348	$	43,398	$	36,382	$	50,866	$	53,484	$	119,092	$	184,130

DEPOSIT BALANCE
VA Fixed Annuity	$	551,098	$	470,656	$	483,958	$	398,150	$	292,297
VA Separate Account Annuity	9,037,748		10,078,475		10,594,528		11,323,019		12,024,883
Sub-total	9,588,846		10,549,131		11,078,486		11,721,169		12,317,180
Fixed Annuity	7,904,746		7,878,568		7,865,892		7,899,040		7,983,406
Total	$	17,493,592	$	18,427,699	$	18,944,378	$	19,620,209	$	20,300,586

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Stable Value Products Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR		2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013		2013			2013			2013			2012			2013

REVENUES
Net investment income	$	31,030		$	30,074	$	33,651		$	29,478		$	30,595		$	128,239		$	123,798
Other income	—			—		—			—			759			1			759
Total operating revenues	31,030			30,074		33,651			29,478			31,354			128,240			124,557
RIGL - derivatives	(174		)	368		(558		)	(63		)	63			(177		)	(190		)
RIGL - investments	(3,956		)	1,478		1,375			(4,207		)	(223		)	(5,214		)	(1,577		)
Total revenues	26,900			31,920		34,468			25,208			31,194			122,849			122,790

BENEFITS & EXPENSES
Benefits and settlement expenses	11,610			11,603		10,683			9,639			9,868			64,790			41,793
Amortization of deferred policy acquisition costs and value of business acquired	111			81		96			110			111			947			398
Other operating expenses	634			546		408			523			328			2,174			1,805
Total benefits and expenses	12,355			12,230		11,187			10,272			10,307			67,911			43,996

INCOME BEFORE INCOME TAX	14,545			19,690		23,281			14,936			20,887			54,938			78,794

Adjustments to Reconcile to Operating Income:
Less: RIGL - derivatives	(174		)	368		(558		)	(63		)	63			(177		)	(190		)
Less: RIGL - investments	(3,956		)	1,478		1,375			(4,207		)	(223		)	(5,214		)	(1,577		)

PRE-TAX OPERATING INCOME	$	18,675		$	17,844	$	22,464		$	19,206		$	21,047		$	60,329		$	80,561

Stable Value Products Key Data

	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
	2012			2013			2013			2013			2013			2012		2013

SALES
GIC	$	272,150		$	112,020		$	205,284		$	80,200		$	97,078		$	400,104	$	494,582
GFA - Direct Institutional	—			—			—			—			—			221,500		—
Total	$	272,150		$	112,020		$	205,284		$	80,200		$	97,078		$	621,604	$	494,582

DEPOSIT BALANCE
Quarter End Balance	$	2,510,559		$	2,544,609		$	2,579,172		$	2,531,262		$	2,559,552
Average Daily Balance	$	2,437,851		$	2,543,906		$	2,542,096		$	2,503,294		$	2,560,588

OPERATING SPREAD	3.06		%	2.81		%	3.53		%	3.07		%	3.29		%

ADJUSTED OPERATING SPREAD (1)	2.60		%	2.55		%	2.67		%	2.69		%	2.77		%

(1) Excludes participating mortgage loan income and other income

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Asset Protection Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	67,081		$	66,186		$	68,203		$	66,604		$	66,924		$	274,629		$	267,917
Reinsurance ceded	(31,681		)	(31,083		)	(32,652		)	(32,681		)	(33,097		)	(126,824		)	(129,513		)
Net premiums and policy fees	35,400			35,103			35,551			33,923			33,827			147,805			138,404
Net investment income	5,913			5,854			5,782			5,804			5,739			24,310			23,179
Other income	25,821			26,614			30,480			31,768			27,872			111,182			116,734
Total operating revenues	67,134			67,571			71,813			71,495			67,438			283,297			278,317

BENEFITS & EXPENSES
Benefits and settlement expenses	23,910			24,658			25,964			26,384			24,690			100,697			101,696
Amortization of deferred policy acquisition costs and value of business acquired	7,740			7,462			7,607			7,402			8,034			33,951			30,505
Other operating expenses	34,625			29,370			30,858			30,882			28,211			132,195			119,321
Total benefits and expenses	66,275			61,490			64,429			64,668			60,935			266,843			251,522

INCOME BEFORE INCOME TAX	859			6,081			7,384			6,827			6,503			16,454			26,795
PRE-TAX OPERATING INCOME	$	859		$	6,081		$	7,384		$	6,827		$	6,503		$	16,454		$	26,795

Asset Protection Key Data

	4TH QTR		1ST QTR		2ND QTR		3RD QTR		4TH QTR		12 MOS
	2012		2013		2013		2013		2013		2012		2013

SALES
Credit insurance	$	6,913	$	7,334	$	9,852	$	9,105	$	7,346	$	35,339	$	33,637
Service contracts	83,821		82,035		99,153		102,796		85,530		353,633		369,514
GAP products	14,116		14,766		17,453		18,140		16,287		62,342		66,646
Total	$	104,850	$	104,135	$	126,458	$	130,041	$	109,163	$	451,314	$	469,797

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Corporate & Other Quarterly Trends

(Dollars In Thousands)	4TH QTR			1ST QTR			2ND QTR			3RD QTR			4TH QTR			12 MOS
(Unaudited)	2012			2013			2013			2013			2013			2012			2013

REVENUES
Gross premiums and policy fees	$	4,596		$	4,678		$	4,631		$	4,556		$	4,295		$	19,567		$	18,160
Reinsurance ceded	(4		)	—			(4		)	(4		)	(3		)	(28		)	(11		)
Net premiums and policy fees	4,592			4,678			4,627			4,552			4,292			19,539			18,149
Net investment income	49,272			41,232			45,258			38,664			38,665			168,641			163,819
Other income	3,173			1,269			2,488			583			16,892			39,951			21,232
Total operating revenues	57,037			47,179			52,373			43,799			59,849			228,131			203,200
RIGL - investments	(6,241		)	2,063			1,120			(2,829		)	3,009			(30,048		)	3,363
RIGL - derivatives	(347		)	1,039			1,843			1,233			1,277			(4,653		)	5,392
Total revenues	50,449			50,281			55,336			42,203			64,135			193,430			211,955

BENEFITS & EXPENSES
Benefits and settlement expenses	2,574			5,334			5,330			5,701			5,965			19,393			22,330
Amortization of deferred policy acquisition costs and value of business acquired	225			179			165			160			121			1,018			625
Other operating expenses	53,310			59,998			49,361			52,189			59,259			210,923			220,807
Total benefits and expenses	56,109			65,511			54,856			58,050			65,345			231,334			243,762

INCOME (LOSS) BEFORE INCOME TAX	(5,660		)	(15,230		)	480			(15,847		)	(1,210		)	(37,904		)	(31,807		)

Adjustments to Reconcile to Operating Income:
Less: RIGL - investments	(6,241		)	2,063			1,120			(2,829		)	3,009			(30,048		)	3,363
Less: RIGL - derivatives	(347		)	1,039			1,843			1,233			1,277			(4,653		)	5,392

PRE-TAX OPERATING INCOME (LOSS)	$	928		$	(18,332	)	$	(2,483	)	$	(14,251	)	$	(5,496	)	$	(3,203	)	$	(40,562	)

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Page 22

INFORMATION RELATED TO CERTAIN NON-GAAP DISCLOSURES

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

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

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

Consolidated and segment operating income (loss) and operating income per diluted share (hereinafter collectively referred to as “consolidated and segment operating income”) are defined as income before income tax, excluding 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.

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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)	2012			2013			2012			2013

Life Marketing	$	15,642		$	32,700		$	105,032		$	110,298
Acquisitions	42,191			60,762			171,060			154,003
Annuities	45,348			53,484			119,092			184,130
Stable Value Products	18,675			21,047			60,329			80,561
Asset Protection	859			6,503			16,454			26,795
Corporate & Other	928			(5,496		)	(3,203		)	(40,562		)
Total Pre-tax operating income	123,643			169,000			468,764			515,225

Realized Investment Gains (Losses) - Investments	(5,108		)	(7,371		)	186,186			(172,720		)
Realized Investment Gains (Losses) - Derivatives	(14,816		)	11,983			(201,979		)	247,868
Income Tax Expense	(36,923		)	(54,699		)	(150,519		)	(196,909		)

Net income available to PLC’s common shareowners	$	66,796		$	118,913		$	302,452		$	393,464

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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)	2012			2013			2013			2013			2013			2012			2013

OPERATING INCOME PER SHARE

Operating income per share-diluted	$	0.98		$	0.89		$	0.96		$	0.98		$	1.43		$	3.78		$	4.26
RIGL - Derivatives per share-diluted	(0.12		)	0.16			1.27			0.46			0.10			(1.59		)	1.99
RIGL - All Other Investments-diluted	(0.04		)	(0.08		)	(0.96		)	(0.29		)	(0.06		)	1.47			(1.39		)
Net income available to PLC’s common shareowners per share-diluted	$	0.82		$	0.97		$	1.27		$	1.15		$	1.47		$	3.66		$	4.86

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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)	2012		2013		2013		2013		2013

PROTECTIVE LIFE CORPORATION’S SHAREOWNERS’ EQUITY PER SHARE
Total Protective Life Corporation’s Shareowners’ Equity	$	59.06	$	57.89	$	48.91	$	46.31	$	47.28
Less: Accumulated other comprehensive income (loss)	22.22		20.39		10.21		6.69		6.29
Excluding accumulated other comprehensive income (loss)	$	36.84	$	37.50	$	38.70	$	39.62	$	40.99

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Calculation of Operating Income Return on Average Equity
Rolling Twelve Months Ended December 31, 2013

(Dollars In Thousands)	Three Months												Twelve Months
(Unaudited)	3/31/2012			6/30/2013			9/30/2013			12/31/2013			12/31/2013
NUMERATOR:
Net income available to PLC’s common shareowners	$	78,291		$	103,199		$	93,061		$	118,913		$	393,464
Less:
Realized investment gains (losses), net of income tax
Investments	(5,674		)	(74,086		)	(18,323		)	3,193			(94,890		)
Derivatives	13,200			103,004			37,120			7,789			161,113
Related amortization of DAC and VOBA, net of income tax	(667		)	(3,466		)	(5,260		)	(7,984		)	(17,377		)

Operating Income	$	71,432		$	77,747		$	79,524		$	115,915		$	344,618

					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, 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
December 31, 2013	3,714,794		494,066		3,220,728
Total					$	15,190,399

Average					$	3,038,080

Operating Income Return on Average Equity					11.3		%

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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		%

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Calculation of Net Income Available to PLC’s
common shareowners Return on Average Equity
Rolling Twelve Months Ended December 31, 2013

(Dollars In Thousands)	Three Months								Twelve Months
(Unaudited)	3/31/2012		6/30/2013		9/30/2013		12/31/2013		12/31/2013
NUMERATOR:
Net income available to PLC’s common shareowners	$	78,291	$	103,199	$	93,061	$	118,913	$	393,464

					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, 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
December 31, 2013	3,714,794		494,066		3,220,728
Total					$	15,190,399

Average					$	3,038,080

Net income available to PLC’s common shareowners Return on Average Equity					13.0		%

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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		%

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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 2/11/2014

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 2/11/2014

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 - February 11, 2014

Attached files

PROTECTIVE LIFE CORP Reports