Protective Life Corporation ( PL)

Bank of America Merrill Lynch 2012 Insurance Conference

February 16, 2012 - 12:35 a.m. ET


John D. Johns – Chairman, President and Chief Executive Officer

Carolyn M. Johnson – Executive Vice President and Chief Operating Officer

D. Scott Adams – Senior Vice President and Chief Human Resources Officer

Carl S. Thigpen – Executive Vice President and Chief Investment Officer


Edward Spehar – Bank of America Merrill Lynch


Edward Spehar – Bank of America Merrill Lynch

We have Johnny Johns, CEO of Protective Life. And Johnny was nice enough to remind me that I downgraded the stock a week or so ago. I guess right before they had their second-highest operating earnings quarter I think in the history of the company, and the highest on an adjusted basis. So, thank you. I'm going to pass it over to Johnny.

John D. Johns

Ed, thank you for what enthusiastic introduction. I appreciate it. No, actually not only what Ed just said is true, but it was also my birthday that he downgraded the stock, just to add insult to injury in. Another analyst, who had a different writing on the stock, described it was the McMuffin of quarterly earnings reports in our industry. And I had to go Google that to see that ties back to a McDonald's commercial where anything that's a McMuffin is really good. So we got kind of chucked by that.

But it is good to be with you. I am Johnny Johns. I am the CEO at Protective Life Corporation. I'm joined today -- I'd like to acknowledge my colleagues, Carolyn Johnson, who is our Chief Operations Officer; Scott Adams, our Chief HR Officer; and Carl Thigpen, our Chief Investment Officer. But I guess it's a good time to be here, it's a good time to be with you and tell you a little bit about the Protective Life story. Now here's the agenda. Just want to talk about very fundamental aspects of our business.

We want to give you some insight into how we think about the life insurance business. I want to talk some about the earnings momentum we're currently enjoying, try to give you a little explanation as to why that is happening. Even though we are operating in what I think everyone would agree is a challenging macroeconomic environment. We'll show you our financial plan for this year. It is not earnings guidance.

It is really just our internal plan, the plan we're using to benchmark our own performance, but we want to be very transparent with investors about what we're trying to achieve. I'll talk a bit more about our focus going forward. And then, I'll stop and be pleased to answer your questions. Again, we had great performance in 2011, notwithstanding 155 basis point decline in 10-year treasury, lower interest rates throughout the year, a lot of uncertainty in the regulatory environment.

And of course, the overall -- overhang on financial stocks arising from the situation in the Eurozone. We finished the year as we started it, with a very strong balance sheet. Our statutory capital at the end of year, we estimate when we file our stat statements, will be at a record level, the highest level ever. We maintain very solid risk-based capital ratios. We enhanced our already robust enterprise risk management program. And we really set ourselves up for what we think is going to be a good year in 2012.

One thing, again, we point out to investors. And again, this is an attempt to make investment in life insurance something that's more comfortable for investors. We know that there are a lot of difficulties, whether you're an expert like Ed is or not. If you're a more casual follower of the industry, to really get tour arms around the real, true underlying economics of the business, the accounting can be confusing, a little opaque, and it changes a lot.

We're in sort of a dynamic era of changes in accounting principles. So what we try to do is every year we have an Investors conference in the fall of the year, usually late November, early December. And we fully disclose our forward-looking plan, our plan. And we -- in addition to that, we tag on two more years of a model, and we are very transparent about what the assumptions are, both around the plan and the model so that investors can kind of see through to understand what we're trying to accomplish.

And we're also very pleased by the fact that even though we set for ourselves what we consider to be fairly robust kind of longer-term goals, i.e., 10% plus earnings per share growth, along with consistent improvement in return on equity. And we set kind of a target around 50 basis points a year for the next several years. And at the same time, we pledged to do our best to reduce risk throughout the enterprise.

So we're not trying to game the system, if you will, by improving performance, but by adding leverage or taking more risk on our investment portfolio or anything like that. And so we've led it out. We've done this now for three years. In 2009, we announced a plan to earn $3.25. We earned $3.97. We knew that earnings after the crisis were going to sort of come back down, so we planned for $2.60. We earned $2.7. For 2011, we planned for $3.10 and we earned $3.65.

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