UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D. C. 20549
FORM
10-Q
|
|
[X] Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
|
|
For
the quarterly period ended September
30, 2006
|
|
or
|
|
[
] Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of
1934
For
the transition period from ________ to _______
|
|
Commission
File Number 001-11339
|
|
Protective
Life Corporation
|
|
(Exact
name of registrant as specified in its charter)
|
|
Delaware
(State
or other jurisdiction of incorporation or organization)
|
95-2492236
(IRS
Employer Identification No.)
|
2801
Highway 280 South
Birmingham,
Alabama 35223
(Address
of principal executive offices and zip code)
|
|
(205)
268-1000
(Registrant's
telephone number, including area code)
|
|
____________________
|
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter
period that the registrant was required to file such reports),
and
(2) has been subject to such filing requirements for the past 90
days.
Yes [
X ] No [ ]
|
|
Indicate
by check mark whether the registrant is a large accelerated filer,
an
accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the
Exchange Act. (Check one):
Large
accelerated filer ý
Accelerated Filer o
Non-accelerated filer o
Indicate
by check mark whether the registrant is a shell company (as defined
in
Rule 12b-2 of the Exchange Act). Yes [ ]
No [ X ]
|
|
Number
of shares of Common Stock, $0.50 par value, outstanding as of
November 8,
2006: 69,934,412
|
|
PROTECTIVE
LIFE CORPORATION
Quarterly
Report on Form 10-Q
For
Quarter Ended September 30, 2006
INDEX
|
|||
Page
|
|||
Part
I.
|
Financial
Information:
|
||
Item
1.
|
Financial
Statements (unaudited):
|
||
|
|||
2
|
|||
|
|||
3
|
|||
|
|||
4
|
|||
|
5
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition
|
||
and
Results of Operations
|
17
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
46
|
|
Item
4.
|
Controls
and Procedures
|
46
|
|
Part
II.
|
Other
Information:
|
||
Item
1A.
|
Risk
Factors
|
47
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
51
|
|
Item
6.
|
51
|
||
Signature
|
52
|
||
Three
Months Ended
|
Nine
Months Ended
|
||||||||||||
September
30
|
September
30
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Revenues
|
|||||||||||||
Gross
premiums and policy fees
|
$
|
637,457
|
$
|
486,660
|
$
|
1,651,362
|
$
|
1,439,817
|
|||||
Reinsurance
ceded
|
(371,688
|
)
|
(282,919
|
)
|
(960,127
|
)
|
(877,582
|
)
|
|||||
Net
premiums and policy fees
|
265,769
|
203,741
|
691,235
|
562,235
|
|||||||||
Net
investment income
|
410,746
|
306,885
|
1,010,545
|
877,212
|
|||||||||
Realized
investment gains (losses):
|
|||||||||||||
Derivative
financial instruments
|
(55,302
|
)
|
7,662
|
(46,764
|
)
|
(24,727
|
)
|
||||||
All
other investments
|
78,645
|
3,612
|
98,461
|
43,970
|
|||||||||
Other
income
|
62,355
|
47,377
|
164,490
|
137,166
|
|||||||||
Total
revenues
|
762,213
|
569,277
|
1,917,967
|
1,595,856
|
|||||||||
Benefits
and expenses
|
|||||||||||||
Benefits
and settlement expenses, net of reinsurance ceded:
|
|||||||||||||
(three
months: 2006 - $299,119; 2005 - $231,557
|
|||||||||||||
nine
months: 2006 - $846,244; 2005 - $776,404)
|
488,948
|
333,365
|
1,174,493
|
925,435
|
|||||||||
Amortization
of deferred policy acquisition costs and value of businesses
acquired
|
67,199
|
57,950
|
151,383
|
184,068
|
|||||||||
Other
operating expenses, net of reinsurance ceded:
|
|||||||||||||
(three
months: 2006 - $176,894; 2005 - $39,437
|
|||||||||||||
nine
months: 2006 - $271,888; 2005 - $130,800)
|
118,168
|
71,095
|
290,850
|
214,174
|
|||||||||
Total
benefits and expenses
|
674,315
|
462,410
|
1,616,726
|
1,323,677
|
|||||||||
Income
before income tax
|
87,898
|
106,867
|
301,241
|
272,179
|
|||||||||
Income
tax expense
|
30,597
|
36,976
|
104,862
|
94,174
|
|||||||||
Net
income
|
$
|
57,301
|
$
|
69,891
|
$
|
196,379
|
$
|
178,005
|
|||||
Net
income per share - basic
|
$
|
0.81
|
$
|
0.99
|
$
|
2.77
|
$
|
2.52
|
|||||
Net
income per share - diluted
|
$
|
0.80
|
$
|
0.98
|
$
|
2.75
|
$
|
2.50
|
|||||
Cash
dividends paid per share
|
$
|
0.215
|
$
|
0.195
|
$
|
0.625
|
$
|
0.565
|
|||||
Average
shares outstanding - basic
|
70,811,292
|
70,582,016
|
70,789,982
|
70,525,004
|
|||||||||
Average
shares outstanding - diluted
|
71,355,221
|
71,350,044
|
71,431,304
|
71,301,335
|
September
30
|
December
31
|
||||||
2006
|
2005
|
||||||
Assets
|
|||||||
Investments:
|
|||||||
Fixed
maturities, at market (amortized cost: 2006 - $20,937,809;
2005 -
$15,172,482)
|
$
|
21,146,307
|
$
|
15,472,386
|
|||
Equity
securities, at market (cost: 2006 - $117,604; 2005 -
$114,994)
|
124,495
|
121,012
|
|||||
Mortgage
loans on real estate
|
3,650,356
|
3,287,745
|
|||||
Investment
in real estate, net of accumulated depreciation (2006 - $9,231;
2005 -
$14,684)
|
52,263
|
72,932
|
|||||
Policy
loans
|
835,817
|
458,825
|
|||||
Other
long-term investments
|
290,304
|
279,676
|
|||||
Short-term
investments
|
1,377,210
|
776,139
|
|||||
Total
investments
|
27,476,752
|
20,468,715
|
|||||
Cash
|
39,285
|
83,670
|
|||||
Accrued
investment income
|
266,688
|
189,038
|
|||||
Accounts
and premiums receivable, net of allowance for uncollectible
amounts
(2006
- $3,876; 2005 - $3,296)
|
130,427
|
82,080
|
|||||
Reinsurance
receivables
|
4,541,415
|
3,020,685
|
|||||
Deferred
policy acquisition costs and value of businesses acquired
|
3,099,726
|
2,171,988
|
|||||
Goodwill
|
68,472
|
49,423
|
|||||
Property
and equipment, net
|
44,569
|
47,010
|
|||||
Other
assets
|
248,197
|
140,124
|
|||||
Income
tax receivable
|
0
|
85,807
|
|||||
Assets
related to separate accounts
|
|||||||
Variable
annuity
|
2,604,488
|
2,377,124
|
|||||
Variable
universal life
|
285,954
|
251,329
|
|||||
$
|
38,805,973
|
$
|
28,966,993
|
||||
Liabilities
|
|||||||
Policy
liabilities and accruals
|
$
|
15,667,970
|
$
|
11,895,145
|
|||
Stable
value product account balances
|
5,515,633
|
6,057,721
|
|||||
Annuity
account balances
|
8,943,078
|
3,388,005
|
|||||
Other
policyholders' funds
|
340,756
|
147,921
|
|||||
Other
liabilities
|
1,123,252
|
968,403
|
|||||
Accrued
income taxes
|
99,428
|
0
|
|||||
Deferred
income taxes
|
271,894
|
317,317
|
|||||
Non-recourse
funding obligations
|
250,000
|
125,000
|
|||||
Liabilities
related to variable interest entities
|
435,756
|
448,093
|
|||||
Long-term
debt
|
471,132
|
482,532
|
|||||
Subordinated
debt securities
|
524,743
|
324,743
|
|||||
Liabilities
related to separate accounts
|
|||||||
Variable
annuity
|
2,604,488
|
2,377,124
|
|||||
Variable
universal life
|
285,954
|
251,329
|
|||||
36,534,084
|
26,783,333
|
||||||
Commitments
and contingent liabilities - Note 2
|
|||||||
Share-owners'
equity
|
|||||||
Preferred
Stock, $1 par value, shares authorized: 4,000,000; Issued:
None
|
|||||||
Common
Stock, $.50 par value, shares authorized: 2006 and 2005
-160,000,000
shares
issued: 2006 and 2005 - 73,251,960
|
36,626
|
36,626
|
|||||
Additional
paid-in capital
|
441,589
|
440,475
|
|||||
Treasury
stock, at cost (2006 - 3,317,683 shares; 2005 - 3,557,911
shares)
|
(11,906
|
)
|
(12,765
|
)
|
|||
Unallocated
stock in Employee Stock Ownership Plan
(2006
- 369,854 shares; 2005 - 480,356 shares)
|
(1,231
|
)
|
(1,610
|
)
|
|||
Retained
earnings
|
1,768,416
|
1,615,714
|
|||||
Accumulated
other comprehensive income (loss):
|
|||||||
Net
unrealized gains (losses) on investments, net of income tax:
(2006
- $27,522; 2005 - $57,649)
|
51,541
|
104,489
|
|||||
Accumulated
gain (loss) - hedging, net of income tax: (2006 - $(5,881);
2005 -
$394)
|
(11,014
|
)
|
731
|
||||
Minimum
pension liability adjustment, net of income tax: (2006 - $(1,138);
2005 -
$0)
|
(2,132
|
)
|
0
|
||||
2,271,889
|
2,183,660
|
||||||
$
|
38,805,973
|
$
|
28,966,993
|
Nine
Months Ended
|
|||||||
September
30
|
|||||||
2006
|
2005
|
||||||
Cash
flows from operating activities
|
|||||||
Net
income
|
$
|
196,379
|
$
|
178,005
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Realized
investment (gains) losses
|
(51,697
|
)
|
(19,243
|
)
|
|||
Amortization
of deferred policy acquisition costs and value of businesses
acquired
|
151,383
|
184,068
|
|||||
Capitalization
of deferred policy acquisition costs
|
(270,310
|
)
|
(325,693
|
)
|
|||
Depreciation
expense
|
9,943
|
11,763
|
|||||
Deferred
income tax
|
(32,152
|
)
|
38,421
|
||||
Accrued
income tax
|
155,127
|
(64,978
|
)
|
||||
Interest
credited to universal life and investment products
|
631,131
|
532,337
|
|||||
Policy
fees assessed on universal life and investment products
|
(342,255
|
)
|
(308,330
|
)
|
|||
Change
in reinsurance receivables
|
(396,811
|
)
|
(112,414
|
)
|
|||
Change
in accrued investment income and other receivables
|
(11,320
|
)
|
(19,424
|
)
|
|||
Change
in policy liabilities and other policyholders' funds
of
traditional life and health products
|
897,463
|
577,425
|
|||||
Trading
securities:
|
|||||||
Maturities
and principal reductions of investments
|
104,558
|
0
|
|||||
Sale
of investments
|
2,487,491
|
0
|
|||||
Cost
of investments acquired
|
(2,181,807
|
)
|
0
|
||||
Other
net change in trading securities
|
(153,812
|
)
|
2,145
|
||||
Change
in other liabilities
|
84,737
|
15,653
|
|||||
Other,
net
|
495
|
(17,190
|
)
|
||||
Net
cash provided by operating activities
|
1,278,543
|
672,545
|
|||||
Cash
flows from investing activities
|
|||||||
Investments
available for sale:
|
|||||||
Maturities
and principal reductions of investments
|
|||||||
Fixed
maturities
|
876,495
|
1,314,338
|
|||||
Equity
securities
|
0
|
283
|
|||||
Sale
of investments
|
|||||||
Fixed
maturities
|
3,868,845
|
3,473,728
|
|||||
Equity
securities
|
3,627
|
9,298
|
|||||
Cost
of investments acquired
|
|||||||
Fixed
maturities
|
(4,314,116
|
)
|
(6,511,259
|
)
|
|||
Equity
securities
|
(3,343
|
)
|
(48,171
|
)
|
|||
Mortgage
loans:
|
|||||||
New
borrowings
|
(722,318
|
)
|
(447,717
|
)
|
|||
Repayments
|
357,627
|
346,056
|
|||||
Change
in investment real estate, net
|
42,258
|
3,249
|
|||||
Change
in policy loans, net
|
3,616
|
19,266
|
|||||
Change
in other long-term investments, net
|
11,787
|
12,036
|
|||||
Change
in short-term investments, net
|
(293,606
|
)
|
437,993
|
||||
Purchase
of property and equipment
|
(4,682
|
)
|
(8,822
|
)
|
|||
Payments
for business acquisitions, net of cash acquired of
$366,404
|
(567,180
|
)
|
0
|
||||
Net
cash used in investing activities
|
(740,990
|
)
|
(1,399,722
|
)
|
|||
Cash
flows from financing activities
|
|||||||
Borrowings
under line of credit arrangements and long-term debt
|
141,600
|
63,100
|
|||||
Principal
payments on line of credit arrangement and long-term debt
|
(153,000
|
)
|
(42,725
|
)
|
|||
Issuance
of capital securities
|
200,000
|
0
|
|||||
Net
proceeds from securities sold under repurchase agreements
|
0
|
142,850
|
|||||
Payments
on liabilities related to variable interest entities
|
(12,337
|
)
|
(17,687
|
)
|
|||
Issuance
of non-recourse funding obligations
|
125,000
|
100,000
|
|||||
Dividends
to share owners
|
(43,679
|
)
|
(39,345
|
)
|
|||
Investment
product deposits and change in universal life deposits
|
1,808,908
|
2,318,325
|
|||||
Investment
product withdrawals
|
(2,574,251
|
)
|
(1,952,911
|
)
|
|||
Excess
tax benefits on stock based compensation
|
2,865
|
0
|
|||||
Other
financing activities, net
|
(77,044
|
)
|
88,539
|
||||
Net
cash provided by (used in) financing activities
|
(581,938
|
)
|
660,146
|
||||
Change
in cash
|
(44,385
|
)
|
(67,031
|
)
|
|||
Cash
at beginning of period
|
83,670
|
130,596
|
|||||
Cash
at end of period
|
$
|
39,285
|
$
|
63,565
|
Preliminary
Fair Value(Dollars
in thousands)
|
|||
ASSETS
|
|||
Investments
|
$
|
6,789,452
|
|
Policy
loans
|
380,608
|
|
|
Cash
|
364,531
|
||
Accrued
investment income
|
88,069
|
||
Accounts
and premiums receivable, net
|
9,570
|
||
Reinsurance
receivable
|
1,123,919
|
||
Value
of business acquired and other intangible assets
|
713,014
|
||
Other
assets
|
49,158
|
||
Assets
related to separate accounts
|
110,073
|
||
Total
assets
|
9,628,394
|
||
|
|||
LIABILITIES
|
|
||
Policy
liabilities and accruals
|
2,703,997
|
||
Annuity
account balances
|
5,528,849
|
|
|
Other
policyholders’ funds
|
257,912
|
||
Other
liabilities
|
144,248
|
||
Accrued
income taxes
|
22,925
|
||
Liabilities
related to separate accounts
|
110,073
|
||
Total
liabilities
|
8,768,004
|
||
NET
ASSETS ACQUIRED
|
$
|
860,390
|
· |
Expanded
distribution network
|
· |
Increased
geographic presence
|
· |
Broader
product portfolio in our core product
lines
|
· |
Additional
administration capabilities
|
· |
Greater
size and scale with improved earnings
diversification
|
Preliminary
Fair Value (Dollars in thousands)
|
|||
ASSETS
|
|||
Investments
|
$
18,571
|
||
Cash
|
1,873
|
|
|
Accrued
investment income
|
114
|
||
Accounts
and premiums receivable, net
|
16,924
|
||
Value
of business acquired and other intangible assets
|
12,650
|
||
Goodwill
|
18,813
|
||
Property
and equipment
|
450
|
||
Other
assets
|
9,990
|
||
Income
tax receivable
|
41
|
||
Deferred
income taxes
|
2,735
|
||
Total
assets
|
82,161
|
||
LIABILITIES
|
|||
Policy
liabilities and accruals
|
39,596
|
||
Other
liabilities
|
9,607
|
||
Total
liabilities
|
49,203
|
||
|
|||
NET
ASSETS ACQUIRED
|
$
32,958
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||
2006
|
2005
|
2006
|
2005
|
|
(Dollars
in thousands)
|
||||
Revenue
|
$762,213
|
$696,377
|
$2,160,565
|
$1,975,558
|
Net
Income
|
$57,301
|
$83,665
|
$215,560
|
$217,950
|
Net
income per common share:
|
||||
Basic
|
$0.81
|
$1.19
|
$3.05
|
$3.09
|
Diluted
|
$0.80
|
$1.17
|
$3.02
|
$3.06
|
Life
Marketing
|
Asset
Protection
|
Corporate
and
Other
|
Total
Consolidated
|
|
(Dollars
in thousands)
|
||||
Balance
as of December 31, 2005
|
$10,354
|
$38,986
|
$83
|
$49,423
|
Goodwill
acquired in current period acquisitions
|
0
|
18,813
|
0
|
18,813
|
Contingent
payment related to prior acquisition
|
0
|
236
|
0
|
236
|
Balance
as of September 30, 2006
|
$10,354
|
$58,035
|
$83
|
$68,472
|
· |
The
Life
Marketing segment markets
level premium term and term-like insurance (collectively “traditional
life”), universal life, variable universal life, and bank owned life
insurance (“BOLI”) products on a national basis primarily through
networks of independent insurance agents and brokers, stockbrokers,
and
independent marketing organizations.
|
· |
The
Acquisitions
segment focuses on acquiring, converting, and servicing policies
acquired
from other companies. The segment's primary focus is on life insurance
policies and annuity products sold to
individuals.
|
· |
The
Annuities
segment manufactures,
sells, and supports fixed and variable annuity products. These products
are primarily sold through stockbrokers, but are also sold through
financial institutions and independent agents and
brokers.
|
· |
The
Stable Value Products segment sells
guaranteed funding agreements (“GFAs”) to special purpose entities
that in turn issue notes or certificates in smaller, transferable
denominations. The segment also markets fixed and floating rate funding
agreements directly to the trustees of municipal bond proceeds,
institutional investors, bank trust departments, and money market
funds.
Additionally, the segment markets guaranteed investment
contracts (“GICs”) to 401(k) and other qualified retirement savings
plans.
|
· |
The
Asset Protection segment primarily markets extended service contracts
and
credit life and disability insurance to protect consumers’ investments in
automobiles and watercraft.
In
addition, the segment markets an inventory protection product and
a
guaranteed asset protection (“GAP”)
product.
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
||||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||||
(Dollars
in thousands)
|
|||||||||||||||
Revenues
|
|||||||||||||||
Life
Marketing
|
$
|
233,808
|
$
|
186,950
|
$
|
649,290
|
$
|
494,695
|
|||||||
Acquisitions
|
249,547
|
102,214
|
451,503
|
310,159
|
|||||||||||
Annuities
|
68,342
|
64,431
|
199,616
|
223,999
|
|||||||||||
Stable
Value Products
|
85,255
|
80,418
|
245,694
|
233,078
|
|||||||||||
Asset
Protection
|
81,035
|
67,723
|
216,487
|
204,748
|
|||||||||||
Corporate
and Other
|
44,226
|
67,541
|
155,377
|
129,177
|
|||||||||||
Total
revenues
|
$
|
762,213
|
$
|
569,277
|
$
|
1,917,967
|
$
|
1,595,856
|
|||||||
Segment
Operating Income (Loss)
|
|||||||||||||||
Life
Marketing
|
$
|
40,270
|
$
|
38,014
|
$
|
132,276
|
$
|
115,487
|
|||||||
Acquisitions
|
32,060
|
19,510
|
70,924
|
62,018
|
|||||||||||
Annuities
|
5,351
|
4,927
|
16,242
|
17,136
|
|||||||||||
Stable
Value Products
|
10,429
|
13,743
|
34,573
|
41,626
|
|||||||||||
Asset
Protection
|
(14,401
|
)
|
6,102
|
3,241
|
18,566
|
||||||||||
Corporate
and Other
|
(3,929
|
)
|
16,236
|
14,582
|
37,261
|
||||||||||
Total
segment operating income
|
69,780
|
98,532
|
271,838
|
292,094
|
|||||||||||
Realized
investment gains (losses) - investments (1)
|
72,266
|
3,450
|
77,039
|
14,233
|
|||||||||||
Realized
investment gains (losses) - derivatives (2)
|
(54,148
|
)
|
4,885
|
(47,636
|
)
|
(34,148
|
)
|
||||||||
Income
tax expense
|
(30,597
|
)
|
(36,976
|
)
|
(104,862
|
)
|
(94,174
|
)
|
|||||||
Net
income
|
$
|
57,301
|
$
|
69,891
|
$
|
196,379
|
$
|
178,005
|
|||||||
(1)
Realized
investment gains (losses) - investments
|
$
|
78,645
|
$
|
3,612
|
$
|
98,461
|
$
|
43,970
|
|||||||
Less
participating income from real estate ventures
|
0
|
0
|
13,494
|
5,883
|
|||||||||||
Less
related amortization of DAC
|
6,379
|
162
|
7,928
|
23,854
|
|||||||||||
$
|
72,266
|
$
|
3,450
|
$
|
77,039
|
$
|
14,233
|
||||||||
(2)
Realized
investment gains (losses) - derivatives
|
$
|
(55,302
|
)
|
$
|
7,662
|
$
|
(46,764
|
)
|
$
|
(24,727
|
)
|
||||
Less
settlements on certain interest rate swaps
|
654
|
2,777
|
2,659
|
9,421
|
|||||||||||
Less
derivative losses related to certain annuities
|
(1,808
|
)
|
0
|
(1,787
|
)
|
0
|
|||||||||
$
|
(54,148
|
)
|
$
|
4,885
|
$
|
(47,636
|
)
|
$
|
(34,148
|
)
|
Operating
Segment Assets
September
30, 2006
(Dollars
in thousands)
|
||||||||
Life
Marketing
|
Acquisitions
|
Annuities
|
Stable
Value
Products
|
|||||
|
||||||||
Investments
and other assets
|
$7,662,582
|
$12,075,879
|
$6,441,083
|
$5,389,729
|
||||
Deferred
policy acquisition costs and value of businesses acquired
|
1,804,742
|
|
1,011,969
|
111,210
|
16,786
|
|||
Goodwill
|
10,354
|
0
|
0
|
0
|
||||
Total
assets
|
$9,477,678
|
$13,087,848
|
$6,552,293
|
$5,406,515
|
||||
Asset
Protection
|
Corporate
and
Other
|
Adjustments
|
Total
Consolidated
|
|||||
Investments
and other assets
|
$
937,260
|
$3,092,557
|
$38,685
|
$35,637,775
|
||||
Deferred
policy acquisition costs and value of businesses acquired
|
98,162
|
56,857
|
0
|
3,099,726
|
||||
Goodwill
|
58,035
|
83
|
0
|
68,472
|
||||
Total
assets
|
$1,093,457
|
$3,149,497
|
$38,685
|
$38,805,973
|
||||
Operating
Segment Assets
December
31, 2005
(Dollars
in thousands)
|
||||||||
Life
Marketing
|
Acquisitions
|
Annuities
|
Stable
Value
Products
|
|||||
|
||||||||
Investments
and other assets
|
$7,219,157
|
$3,914,853
|
$6,065,367
|
$5,959,112
|
||||
Deferred
policy acquisition costs and value of businesses acquired
|
1,584,325
|
330,278
|
128,930
|
19,102
|
||||
Goodwill
|
10,354
|
0
|
0
|
0
|
||||
Total
assets
|
$8,813,836
|
$4,245,131
|
$6,194,297
|
$5,978,214
|
||||
Asset
Protection
|
Corporate
and
Other
|
Adjustments
|
Total
Consolidated
|
|||||
Investments
and other assets
|
$812,774
|
$2,732,774
|
$41,545
|
$26,745,582
|
||||
Deferred
policy acquisition costs and value of businesses acquired
|
101,972
|
7,381
|
0
|
2,171,988
|
||||
Goodwill
|
38,986
|
83
|
0
|
49,423
|
||||
Total
assets
|
$953,732
|
$2,740,238
|
$41,545
|
$28,966,993
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||
2006
|
2005
|
2006
|
2005
|
|||||
(Dollars
in thousands, except per share amounts)
|
||||||||
Calculation
of basic earnings per share:
|
||||||||
Net
income
|
$57,301
|
$69,891
|
|
$196,379
|
$178,005
|
|||
|
||||||||
Average
shares issued and outstanding
|
69,807,783
|
69,678,535
|
69,801,909
|
69,611,900
|
||||
Issuable
under various deferred compensation plans
|
1,003,509
|
903,481
|
988,073
|
913,104
|
||||
Weighted
shares outstanding - Basic
|
70,811,292
|
70,582,016
|
70,789,982
|
70,525,004
|
||||
|
||||||||
Basic
earnings per share
|
$0.81
|
$0.99
|
$2.77
|
$2.52
|
||||
|
||||||||
Calculation
of diluted earnings per share:
|
||||||||
Net
income
|
$57,301
|
$69,891
|
$196,379
|
$178,005
|
||||
|
||||||||
Weighted
shares outstanding - Basic
|
70,811,292
|
70,582,016
|
70,789,982
|
70,525,004
|
||||
Stock
appreciation rights (“SARs”)(a)
|
267,182
|
316,549
|
291,044
|
294,578
|
||||
Issuable
under various other stock-back compensation plans
|
276,747
|
451,479
|
350,278
|
481,753
|
||||
Weighted
shares outstanding - Diluted
|
71,355,221
|
71,350,044
|
71,431,304
|
71,301,335
|
||||
Diluted
earnings per share
|
$0.80
|
$0.98
|
$2.75
|
$2.50
|
||||
(a) Excludes
144,100 and 119,400 SARs as of September 30, 2006 and 2005,
respectively, that are antidilutive. In the event the average market
price
exceeds the issue price of the SARs, such rights would be dilutive
to the
Company’s earnings per share and will be included in the Company’s
calculation of the diluted average shares
outstanding.
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||
2006
|
2005
|
2006
|
2005
|
|||||
(Dollars
in thousands)
|
||||||||
Net
income
|
$
57,301
|
$
69,891
|
$196,379
|
$178,005
|
||||
Change
in net unrealized gains on investments, net of income tax:
(three
months: 2006 - $134,634; 2005 - $(61,309)
nine
months: 2006 - $(889); 2005 - $(45,788))
|
252,245
|
(113,859
|
) |
(1,666
|
) |
(85,034
|
) | |
Change
in accumulated gain-hedging, net of income tax:
(three
months: 2006 - $(7,844); 2005 - $3,593
nine
months: 2006 - $(6,272); $2005 - $977)
|
(14,696
|
) |
6,673
|
(11,745
|
) |
1,815
|
||
Minimum
pension liability adjustment, net of income tax:
(three
months: 2006 - $0; 2005 - $0
nine
months: 2006 - $(1,138); $2005 - $0)
|
0
|
0
|
(2,132
|
) |
0
|
|||
Reclassification
adjustment for amounts included in
net
income, net of income tax:
(three
months: 2006 - $(26,597); 2005 - $(1,264)
nine
months: 2006 - $(27,384); 2005 - $(15,390))
|
(49,830
|
) |
(2,348
|
) |
(51,282
|
) |
(28,581
|
) |
Comprehensive
income (loss)
|
$245,020
|
$
(39,643
|
) |
$129,554
|
$
66,205
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||
2006
|
2005
|
2006
|
2005
|
|||||
(Dollars
in thousands)
|
||||||||
Service
cost - Benefits earned during the period
|
$
2,407
|
$
1,557
|
$
6,709
|
$
5,352
|
||||
Interest
cost on projected benefit obligations
|
1,713
|
|
1,700
|
6,371
|
5,844
|
|||
Expected
return on plan assets
|
(1,847
|
) |
(1,986
|
) |
(7,619
|
) |
(6,828
|
) |
Amortization
of prior service cost
|
35
|
54
|
153
|
187
|
||||
Amortization
of actuarial losses
|
719
|
714
|
2,765
|
2,453
|
||||
Net
periodic benefit cost
|
$
3,027
|
$
2,039
|
$
8,379
|
$
7,008
|
Year
Awarded
|
Performance
Shares
|
Estimated
Fair
Value
|
(Dollars
in thousands)
|
||
2006
|
135,280
|
$6,500
|
Weighted
Average
Base
Price
|
No.
of SARs
|
||||
Balance
at December 31, 2005
|
$26.89
|
1,467,210
|
|||
SARs
granted
|
47.36
|
81,970
|
|||
SARs
exercised
|
22.23
|
(326,459)
|
|||
Balance
at September 30, 2006
|
$29.51
|
1,222,721
|
Base
Price
|
SARs
Outstanding
|
Remaining
Life
in
Years
|
Currently
Exercisable
|
$22.31
|
505,776
|
3
|
505,776
|
31.29
|
2,500
|
4
|
2,500
|
32.00
|
435,000
|
5
|
0
|
26.49
|
80,000
|
6
|
0
|
41.05
|
117,475
|
8
|
9,175
|
48.60
|
46,900
|
9
|
0
|
45.70
|
35,070
|
9
|
0
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Segment
Operating Income (Loss)
|
||||||||||||||||||||||
Life
Marketing
|
$
|
40,270
|
$
|
38,014
|
5.9
|
%
|
$
|
132,276
|
$
|
115,487
|
14.5
|
%
|
||||||||||
Acquisitions
|
32,060
|
19,510
|
64.3
|
70,924
|
62,018
|
14.4
|
||||||||||||||||
Annuities
|
5,351
|
4,927
|
8.6
|
16,242
|
17,136
|
(5.2
|
)
|
|||||||||||||||
Stable
Value Products
|
10,429
|
13,743
|
(24.1
|
)
|
34,573
|
41,626
|
(16.9
|
)
|
||||||||||||||
Asset
Protection
|
(14,401
|
)
|
6,102
|
(336.0
|
)
|
3,241
|
18,566
|
(82.5
|
)
|
|||||||||||||
Corporate
and Other
|
(3,929
|
)
|
16,236
|
(124.2
|
)
|
14,582
|
37,261
|
(60.9
|
)
|
|||||||||||||
Total
segment operating income
|
69,780
|
98,532
|
(29.2
|
)
|
271,838
|
292,094
|
(6.9
|
)
|
||||||||||||||
Realized
investment gains (losses) - investments(1)
|
72,266
|
3,450
|
77,039
|
14,233
|
||||||||||||||||||
Realized
investment gains (losses) - derivatives(2)
|
(54,148
|
)
|
4,885
|
(47,636
|
)
|
(34,148
|
)
|
|||||||||||||||
Income
tax expense
|
(30,597
|
)
|
(36,976
|
)
|
(104,862
|
)
|
(94,174
|
)
|
||||||||||||||
Net
income
|
$
|
57,301
|
$
|
69,891
|
(18.0
|
)
|
$
|
196,379
|
$
|
178,005
|
10.3
|
|||||||||||
(1) Realized
investment gains (losses) - investments
|
$
|
78,645
|
$
|
3,612
|
$
|
98,461
|
$
|
43,970
|
||||||||||||||
Less
participating income from real estate ventures
|
0
|
0
|
13,494
|
5,883
|
||||||||||||||||||
Less
related amortization of DAC
|
6,379
|
162
|
7,928
|
23,854
|
||||||||||||||||||
$
|
72,266
|
$
|
3,450
|
$
|
77,039
|
$
|
14,233
|
|||||||||||||||
(2) Realized
investment gains (losses) - derivatives
|
$
|
(55,302
|
)
|
$
|
7,662
|
$
|
(46,764
|
)
|
$
|
(24,727
|
)
|
|||||||||||
Less
settlements on certain interest rate swaps
|
654
|
2,777
|
2,659
|
9,421
|
||||||||||||||||||
Less
derivative losses related to certain annuities
|
(1,808
|
)
|
0
|
(1,787
|
)
|
0
|
||||||||||||||||
$
|
(54,148
|
)
|
$
|
4,885
|
$
|
(47,636
|
)
|
$
|
(34,148
|
)
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
REVENUES
|
||||||||||||||||||||||
Gross
premiums and policy fees
|
$
|
327,355
|
$
|
297,098
|
10.2
|
%
|
$
|
978,215
|
$
|
861,200
|
13.6
|
%
|
||||||||||
Reinsurance
ceded
|
(206,269
|
)
|
(204,572
|
)
|
0.8
|
(652,048
|
)
|
(640,286
|
)
|
1.8
|
||||||||||||
Net
premiums and policy fees
|
121,086
|
92,526
|
30.9
|
326,167
|
220,914
|
47.6
|
||||||||||||||||
Net
investment income
|
80,444
|
66,847
|
20.3
|
228,771
|
190,541
|
20.1
|
||||||||||||||||
Other
income
|
32,278
|
27,577
|
17.0
|
94,352
|
83,240
|
13.3
|
||||||||||||||||
Total
operating revenues
|
233,808
|
186,950
|
25.1
|
649,290
|
494,695
|
31.3
|
||||||||||||||||
BENEFITS
AND EXPENSES
|
||||||||||||||||||||||
Benefits
and settlement expenses
|
147,213
|
112,119
|
31.3
|
405,544
|
274,896
|
47.5
|
||||||||||||||||
Amortization
of deferred policy acquisition costs
|
21,689
|
23,831
|
(9.0
|
)
|
42,791
|
63,071
|
(32.2
|
)
|
||||||||||||||
Other
operating expenses
|
24,636
|
12,986
|
89.7
|
68,679
|
41,241
|
66.5
|
||||||||||||||||
Total
benefits and expenses
|
193,538
|
148,936
|
29.9
|
517,014
|
379,208
|
36.3
|
||||||||||||||||
OPERATING
INCOME
|
40,270
|
38,014
|
5.9
|
132,276
|
115,487
|
14.5
|
||||||||||||||||
INCOME
BEFORE INCOME TAX
|
$
|
40,270
|
$
|
38,014
|
5.9
|
$
|
132,276
|
$
|
115,487
|
14.5
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Sales
By Product
|
||||||||||||||||||||||
Traditional
|
$
|
39,552
|
$
|
27,975
|
41.4
|
%
|
$
|
112,761
|
$
|
89,344
|
26.2
|
%
|
||||||||||
Universal
life
|
13,028
|
50,308
|
(74.1
|
)
|
60,625
|
124,695
|
(51.4
|
)
|
||||||||||||||
Variable
universal life
|
1,697
|
1,698
|
(0.1
|
)
|
4,610
|
4,033
|
14.3
|
|||||||||||||||
$
|
54,277
|
$
|
79,981
|
(32.1
|
)
|
$
|
177,996
|
$
|
218,072
|
(18.4
|
)
|
|||||||||||
Sales
By Distribution Channel
|
||||||||||||||||||||||
Brokerage
general agents
|
$
|
33,733
|
$
|
36,072
|
(6.5
|
)
|
$
|
104,556
|
$
|
101,740
|
2.8
|
|||||||||||
Independent
agents
|
7,814
|
21,798
|
(64.2
|
)
|
30,830
|
57,964
|
(46.8
|
)
|
||||||||||||||
Stockbrokers/banks
|
7,116
|
19,741
|
(64.0
|
)
|
28,765
|
50,303
|
(42.8
|
)
|
||||||||||||||
BOLI
/ other
|
5,614
|
2,370
|
136.9
|
13,845
|
8,065
|
71.7
|
||||||||||||||||
$
|
54,277
|
$
|
79,981
|
(32.1
|
)
|
$
|
177,996
|
$
|
218,072
|
(18.4
|
)
|
|||||||||||
Average
Life Insurance
In-Force(1)
|
||||||||||||||||||||||
Traditional
|
$
|
386,005,768
|
$
|
344,313,462
|
12.1
|
$
|
374,636,645
|
$
|
336,609,496
|
11.3
|
||||||||||||
Universal
life
|
50,801,493
|
46,057,903
|
10.3
|
50,032,713
|
44,581,586
|
12.2
|
||||||||||||||||
$
|
436,807,261
|
$
|
390,371,365
|
11.9
|
$
|
424,669,358
|
$
|
381,191,082
|
11.4
|
|||||||||||||
Average
Account Values
|
||||||||||||||||||||||
Universal
life
|
$
|
4,812,312
|
$
|
4,237,783
|
13.6
|
$
|
4,716,066
|
$
|
4,002,838
|
17.8
|
||||||||||||
Variable
universal life
|
280,608
|
233,236
|
20.3
|
270,519
|
225,183
|
20.1
|
||||||||||||||||
$
|
5,092,920
|
$
|
4,471,019
|
13.9
|
$
|
4,986,585
|
$
|
4,228,021
|
17.9
|
|||||||||||||
Mortality
Experience (2)
|
$
|
5,950
|
$
|
503
|
$
|
5,910
|
$
|
5,574
|
||||||||||||||
(1)
Amounts
are not adjusted for reinsurance ceded.
(2) Represents
a favorable (unfavorable) variance as compared to pricing assumptions.
Excludes results related to Chase Acquisition Group which was
acquired in
the third quarter of 2006.
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Insurance
Companies:
|
||||||||||||||||||||||
First
year commissions
|
$
|
79,856
|
$
|
87,001
|
(8.2)
|
%
|
$
|
250,552
|
$
|
247,930
|
1.1
|
%
|
||||||||||
Renewal
commissions
|
10,022
|
8,039
|
24.7
|
27,399
|
24,020
|
14.1
|
||||||||||||||||
First
year ceding allowances
|
(30,943
|
)
|
(21,238
|
)
|
45.7
|
(91,808
|
)
|
(94,821
|
)
|
(3.2
|
)
|
|||||||||||
Renewal
ceding allowances
|
(53,456
|
)
|
(43,759
|
)
|
22.2
|
(154,916
|
)
|
(129,549
|
)
|
19.6
|
||||||||||||
General
& administrative
|
41,483
|
41,365
|
0.3
|
125,247
|
133,188
|
(6.0
|
)
|
|||||||||||||||
Taxes,
licenses and fees
|
7,540
|
8,977
|
(16.0
|
)
|
22,977
|
23,344
|
(1.6
|
)
|
||||||||||||||
Other
operating expenses incurred
|
54,502
|
80,385
|
(32.2
|
)
|
179,451
|
204,112
|
(12.1
|
)
|
||||||||||||||
Less
commissions, allowances & expenses capitalized
|
(65,374
|
)
|
(94,023
|
)
|
(30.5
|
)
|
(209,964
|
)
|
(243,072
|
)
|
(14.4
|
)
|
||||||||||
Other
operating expenses
|
(10,872
|
)
|
(13,638
|
)
|
(20.3
|
)
|
(30,513
|
)
|
(38,960
|
)
|
(21.7
|
)
|
||||||||||
Marketing
Companies:
|
||||||||||||||||||||||
Commissions
|
19,443
|
17,395
|
11.8
|
57,465
|
53,092
|
8.2
|
||||||||||||||||
Other
|
16,065
|
9,229
|
74.1
|
41,727
|
27,109
|
53.9
|
||||||||||||||||
Other
operating expenses
|
35,508
|
26,624
|
33.4
|
99,192
|
80,201
|
23.7
|
||||||||||||||||
Other
operating expenses
|
$
|
24,636
|
$
|
12,986
|
89.7
|
%
|
$
|
68,679
|
$
|
41,241
|
66.5
|
%
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
REVENUES
|
||||||||||||||||||||||
Gross
premiums and policy fees
|
$
|
188,491
|
$
|
64,265
|
193.3
|
%
|
$
|
314,680
|
$
|
195,869
|
60.7
|
%
|
||||||||||
Reinsurance
ceded
|
(112,636
|
)
|
(17,668
|
)
|
537.5
|
(145,895
|
)
|
(54,954
|
)
|
165.5
|
||||||||||||
Net
premiums and policy fees
|
75,855
|
46,597
|
62.8
|
168,785
|
140,915
|
19.8
|
||||||||||||||||
Net
investment income
|
152,834
|
55,366
|
176.0
|
260,950
|
168,179
|
55.2
|
||||||||||||||||
Other
income
|
4,774
|
251
|
1,802.0
|
5,684
|
1,065
|
433.7
|
||||||||||||||||
Total
operating revenues
|
233,463
|
102,214
|
128.4
|
435,419
|
310,159
|
40.4
|
||||||||||||||||
Realized
gains (losses) - investments
|
74,628
|
0
|
74,628
|
0
|
||||||||||||||||||
Realized
gains (losses) - derivatives
|
(58,544
|
)
|
0
|
(58,544
|
)
|
0
|
||||||||||||||||
Total
revenues
|
249,547
|
102,214
|
451,503
|
310,159
|
||||||||||||||||||
BENEFITS
AND EXPENSES
|
||||||||||||||||||||||
Benefits
and settlement expenses
|
178,946
|
69,312
|
158.2
|
313,384
|
204,495
|
53.2
|
||||||||||||||||
Amortization
of deferred policy acquisition costs and value of businesses
acquired
|
9,956
|
6,197
|
60.7
|
23,100
|
20,453
|
12.9
|
||||||||||||||||
Other
operating expenses
|
12,501
|
7,195
|
73.7
|
28,011
|
23,193
|
20.8
|
||||||||||||||||
Operating
benefits and expenses
|
201,403
|
82,704
|
143.5
|
364,495
|
248,141
|
46.9
|
||||||||||||||||
Amortization
of DAC/VOBA related to realized gains
(losses)
- investment
|
5,186
|
0
|
5,186
|
0
|
||||||||||||||||||
Total
benefits and expenses
|
206,589
|
82,704
|
369,681
|
248,141
|
||||||||||||||||||
INCOME
BEFORE INCOME TAX
|
42,958
|
19,510
|
120.2
|
81,822
|
62,018
|
31.9
|
||||||||||||||||
Less
realized gains (losses) - investments
|
16,084
|
0
|
16,084
|
0
|
||||||||||||||||||
Less
related amortization of DAC
|
(5,186
|
)
|
0
|
(5,186
|
)
|
0
|
||||||||||||||||
OPERATING
INCOME
|
$
|
32,060
|
$
|
19,510
|
64.3
|
$
|
70,924
|
$
|
62,018
|
14.4
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Average
Life Insurance
In-Force(1)
|
||||||||||||||||||||||
Traditional
|
$
|
236,087,652
|
$
|
10,641,093
|
2,118.6
|
%
|
$
|
236,302,640
|
$
|
10,915,764
|
2,064.8
|
%
|
||||||||||
Universal
life
|
33,520,117
|
17,017,720
|
97.0
|
33,781,836
|
17,325,813
|
95.0
|
||||||||||||||||
$
|
269,607,769
|
$
|
27,658,813
|
874.8
|
$
|
270,084,476
|
$
|
28,241,577
|
856.3
|
|||||||||||||
Average
Account Values
|
||||||||||||||||||||||
Universal
life
|
$
|
3,238,068
|
$
|
1,703,219
|
90.1
|
$
|
3,246,655
|
$
|
1,709,402
|
89.9
|
||||||||||||
Fixed
annuity(2)
|
3,945,835
|
212,967
|
1,752.8
|
3,948,477
|
214,337
|
1,742.2
|
||||||||||||||||
Variable
annuity
|
1,385,840
|
72,826
|
1,802.9
|
1,389,720
|
78,376
|
1,673.1
|
||||||||||||||||
$
|
8,569,743
|
$
|
1,989,012
|
330.9
|
$
|
8,584,852
|
$
|
2,002,115
|
328.8
|
|||||||||||||
Interest
Spread - UL & Fixed Annuities
|
||||||||||||||||||||||
Net
investment income yield
|
6.33
|
%
|
6.96
|
%
|
6.33
|
%
|
7.03
|
%
|
||||||||||||||
Interest
credited to policyholders
|
4.10
|
5.15
|
4.10
|
5.15
|
||||||||||||||||||
Interest
spread
|
2.23
|
%
|
1.81
|
%
|
2.23
|
%
|
1.88
|
%
|
||||||||||||||
Mortality
Experience(3)
|
$
|
2,636
|
$
|
722
|
$
|
5,298
|
$
|
3,937
|
||||||||||||||
(1) Amounts
are not adjusted for reinsurance ceded.
(2) Includes
general account balances held within variable annuity
products.
(3) Represents
a favorable variance as compared to pricing assumptions. Excludes
results
related to Chase Acquisition Group which was acquired in the third
quarter
of 2006.
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
REVENUES
|
||||||||||||||||||||||
Gross
premiums and policy fees
|
$
|
7,794
|
$
|
8,057
|
(3.3)
|
%
|
$
|
23,938
|
$
|
23,763
|
0.7
|
%
|
||||||||||
Reinsurance
ceded
|
0
|
0
|
0.0
|
0
|
0
|
0.0
|
||||||||||||||||
Net
premiums and policy fees
|
7,794
|
8,057
|
(3.3
|
)
|
23,938
|
23,763
|
0.7
|
|||||||||||||||
Net
investment income
|
56,475
|
54,008
|
4.6
|
164,834
|
164,944
|
(0.1
|
)
|
|||||||||||||||
Realized
gains (losses) - derivatives
|
(1,808
|
)
|
0
|
(1,787
|
)
|
0
|
||||||||||||||||
Other
income
|
2,469
|
2,133
|
15.8
|
7,711
|
6,123
|
25.9
|
||||||||||||||||
Operating
revenues
|
64,930
|
64,198
|
1.1
|
194,696
|
194,830
|
(0.1
|
)
|
|||||||||||||||
Realized
gains (losses) - Investments
|
3,412
|
233
|
4,920
|
29,169
|
||||||||||||||||||
Total
revenues
|
68,342
|
64,431
|
199,616
|
223,999
|
||||||||||||||||||
BENEFITS
AND EXPENSES
|
||||||||||||||||||||||
Benefits
and settlement expenses
|
48,233
|
44,596
|
8.2
|
142,429
|
141,363
|
0.8
|
||||||||||||||||
Amortization
of deferred policy acquisition costs
|
6,585
|
7,501
|
(12.2
|
)
|
17,545
|
16,900
|
3.8
|
|||||||||||||||
Other
operating expenses
|
4,761
|
7,174
|
(33.6
|
)
|
18,480
|
19,431
|
(4.9
|
)
|
||||||||||||||
Operation
benefits and expenses
|
59,579
|
59,271
|
0.5
|
178,454
|
177,694
|
0.4
|
||||||||||||||||
Amortization
of DAC related to realized gains
(losses)
- investment
|
1,193
|
162
|
2,742
|
23,854
|
||||||||||||||||||
Total
benefits and expenses
|
60,772
|
59,433
|
181,196
|
201,548
|
||||||||||||||||||
INCOME
BEFORE INCOME TAX
|
7,570
|
4,998
|
51.5
|
18,420
|
22,451
|
(18.0
|
)
|
|||||||||||||||
Less
realized gains (losses) - investments
|
3,412
|
233
|
4,920
|
29,169
|
||||||||||||||||||
Less
related amortization of DAC
|
(1,193
|
)
|
(162
|
)
|
(2,742
|
)
|
(23,854
|
)
|
||||||||||||||
OPERATING
INCOME
|
$
|
5,351
|
$
|
4,927
|
8.6
|
$
|
16,242
|
$
|
17,136
|
(5.2
|
)
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Sales
|
||||||||||||||||||||||
Fixed
annuity
|
$
|
339,950
|
$
|
69,826
|
386.9
|
%
|
$
|
568,619
|
$
|
190,235
|
198.9
|
%
|
||||||||||
Variable
annuity
|
76,299
|
74,659
|
2.2
|
231,236
|
241,991
|
(4.4
|
)
|
|||||||||||||||
$
|
416,249
|
$
|
144,485
|
188.1
|
$
|
799,855
|
$
|
432,226
|
85.1
|
|||||||||||||
Average
Account Values
|
||||||||||||||||||||||
Fixed
annuity(1)
|
$
|
3,649,162
|
$
|
3,452,363
|
5.7
|
$
|
3,493,415
|
$
|
3,451,683
|
1.2
|
||||||||||||
Variable
annuity
|
2,365,238
|
2,261,110
|
4.6
|
2,365,541
|
2,210,062
|
7.0
|
||||||||||||||||
$
|
6,014,400
|
$
|
5,713,473
|
5.3
|
$
|
5,858,956
|
$
|
5,661,745
|
3.5
|
|||||||||||||
Interest
Spread - Fixed
Annuities(2)
|
||||||||||||||||||||||
Net
investment income yield
|
6.17
|
%
|
6.32
|
%
|
6.19
|
%
|
6.33
|
%
|
||||||||||||||
Interest
credited to policyholders
|
5.28
|
5.55
|
5.34
|
5.50
|
||||||||||||||||||
Interest
spread
|
0.89
|
%
|
0.77
|
%
|
0.85
|
%
|
0.83
|
%
|
||||||||||||||
As
of
September
30
|
||||||||||||||||||||||
2006
|
2005
|
|||||||||||||||||||||
GMDB
- Net amount at risk(3)
|
$
|
111,187
|
$
|
155,640
|
(28.6
|
)
|
||||||||||||||||
GMDB
- Reserves
|
2,920
|
$
|
2,070
|
41.1
|
||||||||||||||||||
S&P
500®
Index
|
1,336
|
1,229
|
8.7
|
|||||||||||||||||||
(1) Includes
general account balances held within variable annuity
products.
(2) Interest
spread on average general account values.
(3) Guaranteed
death benefit in excess of contract holder account
balance.
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
REVENUES
|
||||||||||||||||||||||
Net
investment income
|
$
|
80,734
|
$
|
79,118
|
2.0
|
%
|
$
|
245,317
|
$
|
229,074
|
7.1
|
%
|
||||||||||
Realized
gains (losses)
|
4,521
|
1,300
|
377
|
4,004
|
||||||||||||||||||
Total
revenues
|
85,255
|
80,418
|
245,694
|
233,078
|
||||||||||||||||||
BENEFITS
AND EXPENSES
|
||||||||||||||||||||||
Benefits
and settlement expenses
|
68,154
|
62,747
|
8.6
|
204,032
|
180,000
|
13.4
|
||||||||||||||||
Amortization
of deferred policy acquisition costs
|
1,064
|
1,240
|
(14.2
|
)
|
3,429
|
3,445
|
(0.5
|
)
|
||||||||||||||
Other
operating expenses
|
1,087
|
1,388
|
(21.7
|
)
|
3,283
|
4,003
|
(18.0
|
)
|
||||||||||||||
Total
benefits and expenses
|
70,305
|
65,375
|
7.5
|
210,744
|
187,448
|
12.4
|
||||||||||||||||
INCOME
BEFORE INCOME TAX
|
14,950
|
15,043
|
(0.6
|
)
|
34,950
|
45,630
|
(23.4
|
)
|
||||||||||||||
Less
realized gains (losses)
|
4,521
|
1,300
|
377
|
4,004
|
||||||||||||||||||
OPERATING
INCOME
|
$
|
10,429
|
$
|
13,743
|
(24.1
|
)
|
$
|
34,573
|
$
|
41,626
|
(16.9
|
)
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Sales
|
||||||||||||||||||||||
GIC
|
$
|
107,500
|
$
|
20,500
|
424.4
|
%
|
$
|
265,100
|
$
|
49,550
|
435.0
|
%
|
||||||||||
GFA
- Registered Notes - Institutional
|
0
|
300,000
|
(100.0
|
)
|
0
|
1,000,000
|
(100.0
|
)
|
||||||||||||||
GFA
- Registered Notes - Retail
|
54,743
|
20,790
|
163.3
|
108,662
|
149,430
|
(27.3
|
)
|
|||||||||||||||
$
|
162,243
|
$
|
341,290
|
(52.5
|
)
|
$
|
373,762
|
$
|
1,198,980
|
(68.8
|
)
|
|||||||||||
Average
Account Values
|
$
|
5,662,236
|
$
|
5,973,325
|
(5.2
|
)
|
$
|
5,829,589
|
$
|
5,834,429
|
(0.1
|
)
|
||||||||||
Operating
Spread
|
||||||||||||||||||||||
Net
investment income yield
|
5.83
|
%
|
5.41
|
%
|
5.73
|
%
|
5.37
|
%
|
||||||||||||||
Interest
credited
|
4.93
|
4.29
|
4.76
|
4.22
|
||||||||||||||||||
Operating
expenses
|
0.15
|
0.18
|
0.16
|
0.17
|
||||||||||||||||||
Operating
spread
|
0.75
|
%
|
0.94
|
%
|
0.81
|
%
|
0.98
|
%
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
REVENUES
|
||||||||||||||||||||||
Gross
premiums and policy fees
|
$
|
104,564
|
$
|
106,685
|
(2.0)
|
%
|
$
|
305,457
|
$
|
326,906
|
(6.6)
|
%
|
||||||||||
Reinsurance
ceded
|
(52,775
|
)
|
(60,661
|
)
|
(13.0
|
)
|
(162,165
|
)
|
(182,196
|
)
|
(11.0
|
)
|
||||||||||
Net
premiums and policy fees
|
51,789
|
46,024
|
12.5
|
143,292
|
144,710
|
(1.0
|
)
|
|||||||||||||||
Net
investment income
|
8,649
|
8,075
|
7.1
|
24,533
|
24,277
|
1.1
|
||||||||||||||||
Other
income
|
20,597
|
13,624
|
51.2
|
48,662
|
35,761
|
36.1
|
||||||||||||||||
Total
operating revenues
|
81,035
|
67,723
|
19.7
|
216,487
|
204,748
|
5.7
|
||||||||||||||||
BENEFITS
AND EXPENSES
|
||||||||||||||||||||||
Benefits
and settlement expenses
|
26,137
|
27,560
|
(5.2
|
)
|
71,216
|
83,940
|
(15.2
|
)
|
||||||||||||||
Amortization
of deferred policy acquisition costs
|
20,713
|
18,052
|
14.7
|
53,954
|
53,267
|
1.3
|
||||||||||||||||
Other
operating expenses
|
48,586
|
16,009
|
203.5
|
88,076
|
48,975
|
79.8
|
||||||||||||||||
Total
benefits and expenses
|
95,436
|
61,621
|
54.9
|
213,246
|
186,182
|
14.5
|
||||||||||||||||
OPERATING
INCOME (LOSS)
|
(14,401
|
)
|
6,102
|
(336.0
|
)
|
3,241
|
18,566
|
(82.5
|
)
|
|||||||||||||
INCOME
(LOSS) BEFORE INCOME TAX
|
$
|
(14,401
|
)
|
$
|
6,102
|
(336.0
|
)
|
$
|
3,241
|
$
|
18,566
|
(82.5
|
)
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Sales
|
||||||||||||||||||||||
Credit
insurance
|
$
|
41,488
|
$
|
56,749
|
(26.9)
|
%
|
$
|
113,287
|
$
|
158,276
|
(28.4)
|
%
|
||||||||||
Service
contracts
|
79,183
|
67,880
|
16.7
|
206,247
|
173,833
|
18.6
|
||||||||||||||||
Other
products
|
35,792
|
14,812
|
141.6
|
75,613
|
37,454
|
101.9
|
||||||||||||||||
$
|
156,463
|
$
|
139,441
|
12.2
|
$
|
395,147
|
$
|
369,563
|
6.9
|
|||||||||||||
Loss
Ratios (1)
|
||||||||||||||||||||||
Credit
insurance
|
34.7
|
%
|
37.2
|
%
|
34.0
|
%
|
35.3
|
%
|
||||||||||||||
Service
contracts
|
67.7
|
77.6
|
66.5
|
74.3
|
||||||||||||||||||
Other
products
|
24.2
|
67.5
|
29.7
|
68.1
|
||||||||||||||||||
(1) Incurred
claims as a percentage of earned
premiums.
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
REVENUES
|
||||||||||||||||||||||
Gross
premiums and policy fees
|
$
|
9,253
|
$
|
10,555
|
(12.3)
|
%
|
$
|
29,072
|
$
|
32,079
|
(9.4)
|
%
|
||||||||||
Reinsurance
ceded
|
(8
|
)
|
(18
|
)
|
(55.6
|
)
|
(19
|
)
|
(146
|
)
|
(87.0
|
)
|
||||||||||
Net
premiums and policy fees
|
9,245
|
10,537
|
(12.3
|
)
|
29,053
|
31,933
|
(9.0
|
)
|
||||||||||||||
Net
investment income
|
31,610
|
43,471
|
(27.3
|
)
|
86,140
|
100,197
|
(14.0
|
)
|
||||||||||||||
Realized
gains (losses) - investments
|
0
|
0
|
13,494
|
5,883
|
||||||||||||||||||
Realized
gains (losses) - derivatives
|
654
|
2,777
|
2,659
|
9,421
|
||||||||||||||||||
Other
income
|
2,237
|
3,792
|
(41.0
|
)
|
8,081
|
10,977
|
(26.4
|
)
|
||||||||||||||
Total
operating revenues
|
43,746
|
60,577
|
(27.8
|
)
|
139,427
|
158,411
|
(12.0
|
)
|
||||||||||||||
Realized
gains (losses) - investments
|
(3,929
|
)
|
2,658
|
5,439
|
5,313
|
|||||||||||||||||
Realized
gains (losses) - derivatives
|
4,409
|
4,306
|
10,511
|
(34,547
|
)
|
|||||||||||||||||
Total
revenues
|
44,226
|
67,541
|
(34.5
|
)
|
155,377
|
129,177
|
20.3
|
|||||||||||||||
BENEFITS
AND EXPENSES
|
||||||||||||||||||||||
Benefits
and settlement expenses
|
20,265
|
17,031
|
19.0
|
37,888
|
40,741
|
(7.0
|
)
|
|||||||||||||||
Amortization
of deferred policy acquisition costs
|
813
|
967
|
(15.9
|
)
|
2,636
|
3,078
|
(14.4
|
)
|
||||||||||||||
Other
operating expenses
|
26,597
|
26,343
|
1.0
|
84,321
|
77,331
|
9.0
|
||||||||||||||||
Total
benefits and expenses
|
47,675
|
44,341
|
7.5
|
124,845
|
121,150
|
3.0
|
||||||||||||||||
INCOME
(LOSS) BEFORE INCOME TAX
|
(3,449
|
)
|
23,200
|
(114.9
|
)
|
30,532
|
8,027
|
280.4
|
||||||||||||||
Less
realized gains (losses) - investments
|
(3,929
|
)
|
2,658
|
5,439
|
5,313
|
|||||||||||||||||
Less
realized gains (losses) - derivatives
|
4,409
|
4,306
|
10,511
|
(34,547
|
)
|
|||||||||||||||||
OPERATING
INCOME (LOSS)
|
$
|
(3,929
|
)
|
$
|
16,236
|
(124.2
|
)
|
$
|
14,582
|
$
|
37,261
|
(60.9
|
)
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||||||||||||
2006
|
2005
|
Change
|
2006
|
2005
|
Change
|
|||||||||||||||||
(Dollars
in thousands)
|
(Dollars
in thousands)
|
|||||||||||||||||||||
Fixed
maturity gains - sales
|
$
|
31,502
|
$
|
10,024
|
$
|
21,478
|
$
|
54,765
|
$
|
53,338
|
$
|
1,427
|
||||||||||
Fixed
maturity losses - sales
|
(5,382
|
)
|
(25
|
)
|
(5,357
|
)
|
(26,634
|
)
|
(6,880
|
)
|
(19,754
|
)
|
||||||||||
Equity
gains - sales
|
14
|
26
|
(12
|
)
|
249
|
1,602
|
(1,353
|
)
|
||||||||||||||
Equity
losses - sales
|
0
|
(199
|
)
|
199
|
(7
|
)
|
(1,034
|
)
|
1,027
|
|||||||||||||
Impairments
on fixed maturity securities
|
(5,689
|
)
|
(4,194
|
)
|
(1,495
|
)
|
(5,689
|
)
|
(4,490
|
)
|
(1,199
|
)
|
||||||||||
Impairments
on equity securities
|
0
|
(29
|
)
|
29
|
0
|
(53
|
)
|
53
|
||||||||||||||
Mark
to market - Modco trading portfolios
|
55,981
|
0
|
55,981
|
55,981
|
0
|
55,981
|
||||||||||||||||
Other
|
2,219
|
(1,991
|
)
|
4,210
|
19,796
|
1,487
|
18,309
|
|||||||||||||||
Total
realized gains (losses) - investments
|
$
|
78,645
|
$
|
3,612
|
$
|
75,033
|
$
|
98,461
|
$
|
43,970
|
$
|
54,491
|
||||||||||
Foreign
currency swaps
|
$
|
(175
|
)
|
$
|
(14,522
|
)
|
$
|
14,347
|
$
|
2,386
|
$
|
(27,982
|
)
|
$
|
30,368
|
|||||||
Foreign
currency adjustments on stable value contracts
|
230
|
14,761
|
(14,531
|
)
|
(2,113
|
)
|
28,292
|
(30,405
|
)
|
|||||||||||||
Derivatives
related to corporate debt
|
9,784
|
(4,787
|
)
|
14,571
|
(1,251
|
)
|
3,710
|
(4,961
|
)
|
|||||||||||||
Derivatives
related to mortgage loan commitments
|
(2,128
|
)
|
17,200
|
(19,328
|
)
|
17,570
|
(10,732
|
)
|
28,302
|
|||||||||||||
Embedded
derivatives related to reinsurance
|
(58,240
|
)
|
(571
|
)
|
(57,669
|
)
|
(57,631
|
)
|
(1,621
|
)
|
(56,010
|
)
|
||||||||||
Other
derivatives
|
(4,775
|
)
|
(4,419
|
)
|
(356
|
)
|
(5,724
|
)
|
(16,394
|
)
|
10,670
|
|||||||||||
Total
realized gains (losses) - derivatives
|
$
|
(55,304
|
)
|
$
|
7,662
|
$
|
(62,966
|
)
|
$
|
(46,763
|
)
|
$
|
(24,727
|
)
|
$
|
(22,036
|
)
|
September
30, 2006
|
December
31, 2005
|
||||||
(Dollars
in thousands)
|
|||||||
Publicly-issued
bonds
|
$19,056,723
|
69.4
|
% |
$13,665,615
|
66.8
|
% | |
Privately
issued bonds
|
2,089,499
|
7.6
|
1,804,263
|
8.8
|
|||
Redeemable
preferred stock
|
85
|
0.0
|
2,508
|
0.0
|
|
||
Fixed
maturities
|
21,146,307
|
77.0
|
15,472,386
|
75.6
|
|||
Equity
securities
|
124,495
|
0.5
|
121,012
|
0.6
|
|||
Mortgage
loans
|
3,650,356
|
13.2
|
3,287,745
|
16.0
|
|||
Investment
real estate
|
52,263
|
0.2
|
72,932
|
0.4
|
|||
Policy
loans
|
835,817
|
3.0
|
458,825
|
2.2
|
|||
Other
long-term investments
|
290,304
|
1.1
|
279,676
|
1.4
|
|||
Short-term
investments
|
1,377,210
|
5.0
|
776,139
|
3.8
|
|||
Total
investments
|
$27,476,752
|
100.0
|
% |
$20,468,715
|
100.0
|
% |
S&P
or Equivalent Designation
|
Market
Value
|
Percent
of
Market
Value
|
||
(Dollars
in thousands)
|
||||
AAA
|
$
7,563,589
|
43.4
|
%
|
|
AA
|
1,040,489
|
6.0
|
||
A
|
3,190,972
|
18.4
|
||
BBB
|
5,173,894
|
29.8
|
||
Investment
grade
|
16,968,944
|
97.6
|
||
BB
|
257,925
|
1.5
|
||
B
|
139,435
|
0.8
|
||
CCC
or lower
|
9,009
|
0.1
|
||
In
or near default
|
4,314
|
0.0
|
||
Below
investment grade
|
410,683
|
2.4
|
||
Redeemable
preferred stock
|
85
|
0.0
|
||
Total
|
$17,379,712
|
100.0
|
%
|
Creditor
|
Market
Value
|
|
(Dollars
in millions)
|
||
Bank
of America
|
$132.9
|
|
Verizon
|
119.3
|
|
Wachovia
|
119.1
|
|
Duke
Energy
|
116.7
|
|
General
Electric
|
114.7
|
|
Comcast
|
113.8
|
|
Citigroup
|
112.5
|
|
Goldman
Sachs
|
111.7
|
|
Toyota
Motor Credit
|
108.3
|
|
US
Bancorp
|
104.4
|
Estimated
Market
Value
|
%
Market
Value
|
Amortized
Cost
|
%
Amortized
Cost
|
Unrealized
Loss
|
%
Unrealized
Loss
|
|||||||
(Dollars
in thousands)
|
||||||||||||
<=
90 days
|
$
328,086
|
3.8
|
%
|
$
330,556
|
3.8
|
%
|
$
(2,470)
|
1.4
|
%
|
|||
>90
days but <= 180 days
|
164,641
|
1.9
|
166,628
|
|
1.9
|
|
(1,987)
|
1.0
|
||||
>180
days but <= 270 days
|
2,315,611
|
27.1
|
2,349,979
|
26.8
|
(34,368)
|
17.0
|
||||||
>270
days but <= 1 year
|
1,949,901
|
22.8
|
1,981,809
|
22.6
|
(31,908)
|
15.8
|
||||||
>1
year but <= 2 years
|
3,530,323
|
41.3
|
3,637,345
|
41.6
|
(107,022)
|
53.2
|
||||||
>2
years but <= 3 years
|
144,625
|
1.7
|
156,095
|
1.8
|
(11,470)
|
5.7
|
||||||
>3
years but <= 4 years
|
100,793
|
1.2
|
108,103
|
1.2
|
(7,310)
|
3.6
|
||||||
>4
years but <= 5 years
|
527
|
0.0
|
609
|
0.0
|
(82)
|
0.0
|
||||||
>5
years
|
20,153
|
0.2
|
24,834
|
0.3
|
(4,681)
|
2.3
|
||||||
Total
|
$8,554,660
|
100.0
|
%
|
$8,755,958
|
100.0
|
%
|
$(201,298)
|
100.0
|
%
|
Estimated
Market
Value
|
%
Market
Value
|
Amortized
Cost
|
%
Amortized
Cost
|
Unrealized
Loss
|
%
Unrealized
Loss
|
|||||||
(Dollars
in thousands)
|
||||||||||||
Agency
Mortgages
|
$2,196,432
|
25.7
|
%
|
$2,247,337
|
25.8
|
%
|
$
(50,905)
|
25.5
|
%
|
|||
Banking
|
498,403
|
5.8
|
509,888
|
|
5.8
|
(11,485)
|
|
5.7
|
||||
Basic
Industrial
|
175,790
|
2.1
|
186,041
|
2.1
|
(10,251)
|
5.1
|
||||||
Brokerage
|
145,942
|
1.7
|
148,765
|
1.7
|
(2,823)
|
1.4
|
||||||
Canadian
Govt Agencies
|
10,879
|
0.1
|
11,044
|
0.1
|
(165)
|
0.1
|
||||||
Capital
Goods
|
78,786
|
0.9
|
80,283
|
0.9
|
(1,497)
|
0.7
|
||||||
Communications
|
204,492
|
2.4
|
215,932
|
2.5
|
(11,440)
|
5.7
|
||||||
Consumer
Cyclical
|
193,072
|
2.3
|
204,864
|
2.3
|
(11,792)
|
5.8
|
||||||
Consumer
Noncyclical
|
181,422
|
2.1
|
186,633
|
2.1
|
(5,211)
|
2.6
|
||||||
Electric
|
770,054
|
9.0
|
793,957
|
9.1
|
(23,903)
|
11.8
|
||||||
Energy
|
156,816
|
1.8
|
162,768
|
1.9
|
(5,952)
|
3.0
|
||||||
Finance
Companies
|
132,783
|
1.6
|
135,032
|
1.5
|
(2,249)
|
1.1
|
||||||
Insurance
|
182,775
|
2.1
|
187,779
|
2.1
|
(5,004)
|
2.5
|
||||||
Municipal
Agencies
|
2,178
|
0.0
|
2,190
|
0.0
|
(12)
|
0.0
|
||||||
Natural
Gas
|
379,168
|
4.4
|
397,880
|
4.5
|
(18,712)
|
9.3
|
||||||
Non-Agency
Mortgages
|
2,705,772
|
31.7
|
2,728,002
|
31.2
|
(22,230)
|
11.0
|
||||||
Other
Finance
|
191,283
|
2.2
|
199,745
|
2.3
|
(8,462)
|
4.2
|
||||||
Other
Industrial
|
47,325
|
0.6
|
49,360
|
0.6
|
(2,035)
|
1.0
|
||||||
Other
Utility
|
21
|
0.0
|
43
|
0.0
|
(22)
|
0.0
|
||||||
Technology
|
78,588
|
0.9
|
80,796
|
0.9
|
(2,208)
|
1.1
|
||||||
Transportation
|
173,273
|
2.0
|
177,098
|
2.0
|
(3,825)
|
1.9
|
||||||
U.S.
Government
|
42,508
|
0.5
|
43,536
|
0.5
|
(1,028)
|
0.5
|
||||||
U.S.
Govt Agencies
|
6,898
|
0.1
|
6,985
|
0.1
|
(87)
|
0.0
|
||||||
Total
|
$8,554,660
|
100.0
|
%
|
$8,755,958
|
100.0
|
%
|
$(201,298)
|
100.0
|
%
|
S&P
or Equivalent
Designation
|
Estimated
Market
Value
|
%
Market
Value
|
Amortized
Cost
|
%
Amortized
Cost
|
Unrealized
Loss
|
%
Unrealized
Loss
|
||||||
(Dollars
in thousands)
|
||||||||||||
AAA/AA/A
|
$6,243,186
|
73.0
|
%
|
$6,346,834
|
72.5
|
%
|
$(103,648)
|
51.6
|
%
|
|||
BBB
|
2,087,765
|
24.4
|
2,166,064
|
24.7
|
(78,299)
|
38.8
|
||||||
Investment
grade
|
8,330,951
|
97.4
|
8,512,898
|
97.2
|
(181,947)
|
90.4
|
||||||
BB
|
104,669
|
1.2
|
110,936
|
1.3
|
(6,267)
|
3.1
|
||||||
B
|
106,007
|
1.2
|
116,364
|
1.3
|
(10,357)
|
5.1
|
||||||
CCC
or lower
|
13,033
|
0.2
|
15,760
|
0.2
|
(2,727)
|
1.4
|
||||||
Below
investment grade
|
223,709
|
2.6
|
243,060
|
2.8
|
(19,351)
|
9.6
|
||||||
Total
|
$8,554,660
|
100.0
|
%
|
$8,755,958
|
100.0
|
%
|
$(201,298)
|
100.0
|
%
|
Estimated
Market
Value
|
%
Market
Value
|
Amortized
Cost
|
%
Amortized
Cost
|
Unrealized
Loss
|
%
Unrealized
Loss
|
|||||||
(Dollars
in thousands)
|
||||||||||||
<=
90 days
|
$
1,279
|
0.6
|
%
|
$
1,284
|
0.5
|
%
|
$
(5)
|
0.0
|
%
|
|||
>90
days but <= 180 days
|
6,142
|
2.7
|
6,601
|
2.7
|
(459)
|
|
2.4
|
|||||
>180
days but <= 270 days
|
16,923
|
7.6
|
18,458
|
7.6
|
(1,535)
|
7.9
|
||||||
>270
days but <= 1 year
|
29,402
|
13.1
|
31,604
|
13.0
|
(2,202)
|
11.4
|
||||||
>1
year but <= 2 years
|
115,052
|
51.4
|
120,156
|
49.4
|
(5,104)
|
26.4
|
||||||
>2
years but <= 3 years
|
36,770
|
16.4
|
42,807
|
17.6
|
(6,037)
|
31.1
|
||||||
>3
years but <= 4 years
|
130
|
0.1
|
167
|
0.1
|
(37)
|
0.2
|
||||||
>4
years but <= 5 years
|
131
|
0.1
|
162
|
0.1
|
(31)
|
0.2
|
||||||
>5
years
|
17,880
|
8.0
|
21,821
|
9.0
|
(3,941)
|
20.4
|
||||||
Total
|
$223,709
|
100.0
|
%
|
$243,060
|
100.0
|
%
|
$(19,351)
|
100.0
|
%
|
Proceeds
|
%
Proceeds
|
Realized
Loss
|
%
Realized Loss
|
|||||
(Dollars
in thousands)
|
||||||||
<=
90 days
|
$3,624,930
|
82.0
|
%
|
$
(4,883)
|
18.3
|
%
|
||
>90
days but <= 180 days
|
323,803
|
7.3
|
(7,045)
|
26.4
|
||||
>180
days but <= 270 days
|
428,571
|
9.7
|
(11,118)
|
41.7
|
||||
>270
days but <= 1 year
|
13,558
|
0.3
|
(1,430)
|
5.4
|
||||
>
1 year
|
29,685
|
0.7
|
(2,165)
|
8.1
|
||||
Total
|
$4,420,547
|
100.0
|
%
|
$(26,641)
|
100.0
|
%
|
Payments
due by period
|
||||||||||
Total
|
Less
than
1
year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
||||||
(Dollars
in thousands)
|
||||||||||
Long-term
debt(a)
|
$
623,045
|
$
22,191
|
$
99,986
|
$
48,205
|
$
452,663
|
|||||
Non-recourse
funding obligations(b)
|
816,406
|
18,125
|
36,250
|
36,250
|
725,781
|
|||||
Subordinated
debt securities(c)
|
1,997,758
|
37,147
|
74,294
|
74,294
|
1,812,023
|
|||||
Stable
value products(d)
|
6,487,775
|
1,455,228
|
2,259,637
|
1,494,019
|
1,278,891
|
|||||
Operating
leases(e)
|
32,086
|
7,430
|
10,908
|
8,161
|
5,587
|
|||||
Home
office lease(f)
|
76,743
|
76,743
|
|
|||||||
Mortgage
loan commitments
|
1,117,688
|
1,117,688
|
||||||||
Liabilities
related to variable interest entities(g)
|
532,982
|
31,050
|
80,197
|
421,735
|
|
|||||
Policyholder
obligations(h)
|
18,450,301
|
1,111,442
|
2,150,126
|
2,088,527
|
|
13,100,206
|
||||
Defined
benefit pension obligations(i)
|
6,800
|
6,800
|
||||||||
(a) Long-term
debt includes all principal amounts owed on note agreements, and
includes
expected interest payments due over the term of the notes.
(b) Non-recourse
funding obligations include all principal amounts owed on note
agreements,
and include expected interest payments due over the term of the
notes.
(c) Subordinated
debt securities includes all principal amounts owed to non-consolidated
special purpose finance subsidiaries of the Company, and includes
interest
payments due over the term of the obligations.
(d) Anticipated
stable value products cash flows, including interest.
(e) Includes
all lease payments required under operating lease agreements.
(f) The
lease payments shown assume the Company exercises its option to
purchase
the building at the end of the lease term.
(g) Liabilities
related to variable interest entities are not the legal obligations
of the
Company, but will be repaid with cash flows generated by the variable
interest entities. The amounts represent scheduled principal and
expected
interest payments.
(h) Estimated
contractual policyholder obligations are based on mortality, morbidity,
and lapse assumptions comparable to the Company’s historical experience,
modified for recent observed trends. These obligations are based
on
current balance sheet values and include expected interest crediting,
but
do not incorporate an expectation of future market growth, or future
deposits. Due to the significance of the assumptions used, the
amounts
presented could materially differ from actual results. As separate
account
obligations are legally insulated from general account obligations,
the
separate account obligations will be fully funded by cash flows
from
separate account assets. The Company expects to fully fund the
general
account obligations from cash flows from general account
investments.
(i) Estimated
2006 contributions to the Company’s defined benefit pension plan
approximate the projected expense to be recognized in 2006. Due
to the
significance of the assumptions used, this amount could differ
from actual
results. No estimate has been made of amounts to be contributed
to this
plan in years subsequent to
2006.
|
(a)
|
Disclosure
controls and procedures
|
(b)
|
Changes
in internal control over financial
reporting
|
|
|||
PROTECTIVE LIFE CORPORATION | ||
Date: November 9, 2006 | /s/ Steven G. Walker | |
Senior Vice President, Controller | ||
and Chief Accounting Officer | ||
(Duly authorized officer) |