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Protective Reports Fourth Quarter And Full-Year 2012 Financial Results

Stable Value Products

Stable Value Products segment pre-tax operating income was $18.7 million in the fourth quarter of 2012 compared to $14.2 million in the fourth quarter of 2011. Included in the fourth quarter of 2012 results is $2.8 million of participating mortgage income compared to $0.1 million in the fourth quarter of 2011. In addition, the segment experienced a 60 basis point increase in the adjusted operating spread, which excludes participating income, due to a decline in credited interest. These favorable items were partially offset by lower average account balances.

Account balances as of December 31, 2012 totaled $2.5 billion. Sales were $272.2 million for the three months ended December 31, 2012, compared to $32.9 million in the fourth quarter of 2011.

Asset Protection

Asset Protection segment pre-tax operating income was $0.9 million in the fourth quarter of 2012 compared to $6.7 million in the fourth quarter of 2011. The decrease was primarily due to a $4.1 million write-off of previously capitalized software development costs recorded within the service contract product line. Excluding the software write-off, service contract earnings decreased $1.2 million compared to the prior year’s fourth quarter primarily due to higher operating expenses.

Sales were $104.9 million for the three months ended December 31, 2012, compared to $105.9 million in the fourth quarter of 2011. Service contract sales were $83.8 million compared to $80.5 million in the fourth quarter of 2011. Credit insurance sales were $6.9 million compared to $8.4 million in the fourth quarter of 2011. Sales of the GAP product were $14.1 million compared to $17.0 million in the prior year’s fourth quarter.

Corporate & Other

Corporate & Other segment pre-tax operating income was $0.9 million in the fourth quarter of 2012 compared to an operating loss of $4.4 million in the fourth quarter of 2011. The increase was primarily due to an $8.9 million increase in investment income related to a transfer from the Life Marketing segment and higher mortgage loan prepayment fee income compared to the fourth quarter of 2011. For the fourth quarter of 2012, $3.0 million of pre-tax gains were generated from the repurchase on non-recourse funding obligations compared to $3.1 million of pre-tax gains during the fourth quarter of 2011.

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