Presidential Life Corporation Announces Full Year And Fourth Quarter 2011 Results

Presidential Life Corporation (“Presidential Life” or the “Company”) (NASDAQ: PLFE) today announced results for the fourth quarter and year ended December 31, 2011. Presidential Life, through its wholly owned subsidiary Presidential Life Insurance Company, is engaged in the sale of individual fixed deferred and immediate annuities, life insurance and accident and health insurance products.

Fourth quarter 2011 net income was $14.8 million or $0.50 per share, compared with net income of $14.6 million or $0.50 per share for the comparable quarter in 2010. Net income for the year ended December 31, 2011 was $38.9 million or $1.32 per share, compared with net income of $21.5 million or $0.73 per share for the year ended December 31, 2010. The increase in net income of $17.4 million for the full year 2011 compared to 2010 is principally due to an increase in realized gains, net of other-than-temporary impairments (“OTTI”), of $8.4 million; an increase in equity in earnings on limited partnerships accounted for under the equity method of $7.7 million; and the favorable effect of a decrease in the effective tax rate from 38.1% in 2010 to 30.3% in 2011.

Total revenues in the fourth quarter of 2011 were $73.6 million, a decrease of 17.1% or $15.2 million from $88.8 million in the fourth quarter 2010. Total revenues for the year ended December 31, 2011 were $267.4 million, a decrease of 10.0% or $29.6 million from $297.0 million for the year ended December 31, 2010. The decrease in revenues was largely attributable to a decline in individual fixed annuity sales given the low interest rate environment, partially offset by the increase in realized gains from our limited partnership portfolio for the full year of 2011 compared to the full year of 2010.

“In 2011, we made substantial improvements in our financial strength while also commencing the execution of key initiatives to grow the business. From a financial strength standpoint, we significantly improved our Risk-Based Capital ratio 1 to 556% by the end of 2011, which is up from 449% a year ago. In 2011, we began forming the foundation for our national distribution platform and annuity product line expansion. The initial product launch of our much anticipated fixed indexed annuity product is planned for the third quarter of 2012,” said Donald Barnes, Vice Chairman of the Board, CEO and President.

Key Items for the Fourth Quarter and Full Year Results
  • Our investment spread margin2 totaled 1.69% for the year ended December 31, 2011 compared to 1.16% for the year ended December 31, 2010.
  • Total annuity sales3 were $16.3 million in the fourth quarter 2011, a decrease of 39% compared to 2010 levels due to the continued low interest rate environment.
  • Deferred annuity surrenders were $31.5 million in the fourth quarter of 2011 compared to $32.5 million for the same period in 2010, a 3.1% decrease, representing average surrender rates for both periods of 1.6%.
  • Our capital base significantly strengthened during 2011 with our RBC ratio increasing to 556% at year end 2011 from 449% at year-end 2010.
  • As of December 31, 2011, book value per share, excluding other comprehensive income, increased to $20.12 at December 31, 2011, from $19.05 at December 31, 2010.

Discussion of Fourth Quarter 2011 and Full Year Financial and Operating Results

As previously discussed, total revenues were $73.6 million and $88.8 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $15.2 million or 17.1%, and were $267.4 million and $297.0 million for the years ended December 31, 2011 and 2010, respectively, a decrease of $29.6 million or 10.0%. The decreases from the prior periods were largely attributable to a decline in individual fixed annuity sales given the low interest rate environment partially reduced by an increase in realized gains from our limited partnership portfolio.

Total insurance revenues were $9.7 million and $17.2 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $7.5 million or 43.6%, and were $29.2 million and $70.5 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $41.3 million or 58.6%. Immediate annuity considerations with life contingencies were $3.7 million and $10.9 million in the fourth quarter of 2011 and 2010, respectively, a period-over-period decrease of $7.2 million or 66.6%, and were $9.6 million and $51.2 million for the year ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $41.6 million or 81.2%. Life insurance and accident and health premiums were $6.1 million and $6.3 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $0.2 million or 3.7%, and were $19.6 million and $19.3 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $0.3 million or 1.4%.

Sales of deferred annuities and immediate annuities without life contingencies were $12.6 million and $15.9 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $3.3 million or 20.8%, and were $53.5 million and $82.2 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $28.7 million or 34.9%. The decreases were primarily due to the low interest rate environment that continued throughout 2011.

Net investment income was $47.7 million and $50.9 in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $3.2 million or 6.2%, and was $194.3 million and $198.6 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $4.3 million or 2.2%. Excluding the return on the Company’s limited partnership investments and other realized gains, the investment yields for 2011 and 2010 were 5.89% and 6.01%, respectively.

Net realized investment gains, including OTTI, were $14.5 million and $19.0 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period reduction of $4.5 million, and were $35.3 million and $26.9 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $8.4 million. The full year increase in net realized gains was due to $22.4 million of increases in realized gains, including a $17.0 million increase in gains from hedge fund redemptions within our limited partnership portfolio and other increases in realized gains from limited partnerships, bonds and stocks of $5.4 million, partially offset by $14.0 million of increases in realized losses related to an increase in other-than-temporary impairments of $8.9 million and a change in the decrease in the fair value of payor swaptions of $5.1 million. Consistent with the Company’s strategic plan, during 2011 and 2010, the Company has sold its hedge fund investments that had redemption rights.

Interest credited and benefits paid and accrued to policyholders were $46.7 million and $56.0 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $9.3 million or 16.6%, and were $178.5 million and $229.6 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $51.1 million or 22.3%. The decreases are principally due to the effect of the decline in sales of immediate annuities with life contingencies in 2011 compared to 2010 on the change in liabilities for future policy benefits.

Commissions to agents, net were $1.3 million and $1.6 in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $0.3 million or 19.1%, and were $4.3 million and $7.2 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $2.9 million or 39.4%. Commission expense declined in 2011 and 2010 due to lower annuity sales compared to the previous year.

General expenses were $4.9 million and $4.7 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period increase of $0.2 million or 4.5%, and were $22.5 million and $20.1 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $2.4 million or 11.7%. The full year increase was primarily due to an increase in general expenses including severance costs, costs associated with the New York State triennial examination and legal and accounting expenses associated with Company’s financial restatements.

The Company recorded income tax expenses of $4.2 million and $9.6 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $5.4 million principally due to a reduction in the effective tax rate related to changes in year-end true-ups between 2011 and 2010. Income tax expense was $16.9 million and $13.3 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $3.6 million. The increase in income tax expense for 2011 relative to 2010 was due to higher pre-tax income, notwithstanding the lower effect tax rate in 2011.

Cautionary statement regarding forward-looking statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, quotations from management, statements about our future plans and business strategy, and expected or anticipated future events or performance.

These forward-looking statements involve risks and uncertainties that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors. Accordingly, there is no assurance that our plans, strategy and expectations will be realized. Actual future events and results may differ materially from those expressed or implied in forward-looking statements.

About Presidential Life

Presidential Life Corporation, through its wholly owned subsidiary Presidential Life Insurance Company, is a provider of fixed deferred and immediate annuities, life insurance and accident & health insurance products to financial service professionals and their clients. Headquartered in Nyack, New York, the Company was founded in 1969 and markets its products in 50 states and the District of Columbia. For more information, visit our website www.presidentiallife.com.

1 Risk-Based Capital (“RBC”) refers to the ratio of adjusted statutory surplus divided by Company Action Level capital that triggers regulatory involvement, as those terms are defined by the National Association of Insurance Commissioners (“NAIC”).

2 Defined as the yield on invested assets over the cost of money on annuity liabilities. Yield is inclusive of realized capital gains/ (losses), other-than-temporary-impairments and equity in earnings/(losses) on limited partnerships.

3 In accordance with Generally Accepted Accounting Principles (“GAAP”), sales of deferred annuities and immediate annuities without life contingencies ($12.6 million) are not reported as insurance revenues, but rather as additions to policyholder account balances. In addition, sales of immediate annuities with life contingencies, which are reported as insurance revenues under GAAP, totaled $3.7 million.
 
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
           
December 31,
2011 2010
ASSETS:
Investments:
Fixed maturities:
Available for sale at market (Amortized cost
of $3,206,884 and $3,209,803 respectively) $ 3,520,755 $ 3,391,998
Common stocks (Cost of $748 and
$472, respectively) 1,302 1,279
Derivative instruments, at fair value 3,358 9,402
Real estate 415 415
Policy loans 18,442 19,607
Short-term investments 61,233 107,958
Limited Partnerships   166,923   195,501
Total Investments 3,772,428 3,726,160
 
Cash and cash equivalents 47,110 5,924
Accrued investment income 47,289 42,757
Deferred policy acquisition costs 41,746 57,298
Furniture and equipment, net 1,065 376
Amounts due from reinsurers 19,116 16,644
Amounts due from investments transactions 23,880 49,005
Federal income taxes recoverable - 2,627
Other assets   1,649   1,495
TOTAL ASSETS $ 3,954,283 $ 3,902,286
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Policy Liabilities:
Policyholders' account balances $ 2,323,364 $ 2,401,482
Annuity 634,397 663,456
Life and accident and health 83,855 81,081
Other policy liabilities   20,633   11,718
Total Policy Liabilities 3,062,249 3,157,737
Deposits on policies to be issued 490 1,166
General expenses and taxes accrued 2,521 1,573
Federal income taxes payable 1,411 -
Deferred federal income taxes, net 82,355 45,157
Amounts due for security transactions 268 -
Other liabilities   17,045   14,745
Total Liabilities $ 3,166,339 $ 3,220,378
 
Commitments and Contingencies
 
Shareholders’ Equity:
Capital stock ($.01 par value; authorized
100,000,000 shares outstanding,
29,574,697 and 29,574,697 shares, respectively) 296 296
Additional paid in capital 7,408 7,123
Accumulated other comprehensive gain 192,815 118,609
Retained earnings   587,425   555,880
Total Shareholders’ Equity   787,944   681,908
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 3,954,283 $ 3,902,286
 
 
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
                       
Three Months Ended December 31 Years Ended December 31

2011

2010

2011

2010
REVENUES:
Insurance revenues:
Premiums $ 6,051 $ 6,284 $ 19,584 $ 19,316
Annuity considerations 3,653 10,931 9,636 51,198
Universal life and investment type policy fee income 873 503 3,519 2,090
Equity in earnings (loss) on limited partnerships 88 586 2,156 (5,450)
Net investment income 47,733 50,887 194,289 198,568
Net realized investment gains (losses):
Total other-than-temporary impairment ("OTTI") losses (3,495) (1,392) (11,769) (1,392)
OTTI losses recognized in other comprehensive income - - 1,511 -
Net OTTI losses recognized in earnings (3,495) (1,392) (10,258) (1,392)
Net realized capital gains, excluding OTTI losses 17,959 20,381 45,585 28,302
Net realized investment gains 14,464 18,989 35,327 26,910
Other income 730 653 2,932 4,391
TOTAL REVENUES 73,592 88,833 267,443 297,023
 
BENEFITS AND EXPENSES:
Death and other life insurance benefits 6,512 5,913 19,947 19,463
Annuity benefits 21,214 21,074 83,498 81,743
Interest credited to policyholders’ account balances 25,114 26,345 101,568 106,341
Other interest and other charges 654 403 1,603 1,280
Increase (decrease) in liability for future policy benefits (6,820) 2,271 (28,113) 20,811
Commissions to agents, net 1,276 1,578 4,340 7,156
Costs related to consent revocation solicitation - 55 (0) 1,525
General expenses and taxes 4,884 4,618 22,468 18,584
Change in deferred policy acquisition costs 1,803 2,316 6,260 5,305
TOTAL BENEFITS AND EXPENSES 54,637 64,573 211,571 262,208
 
Income before income taxes 18,955 24,260 55,872 34,815
 
Provision (benefit) for income taxes:
Current 1,450 7,555 19,792 14,120
Deferred 2,747 2,061 (2,858) (845)
4,197 9,616 16,934 13,275
NET INCOME $ 14,758 $ 14,644 $ 38,938 $ 21,540
 
Earnings per common share, basic $ 0.50 $ 0.50 $ 1.32 $ 0.73
Earnings per common share, diluted $ 0.50 $ 0.50 $ 1.32 $ 0.73
 
Weighted average number of shares outstanding during the year, basic 29,574,697 29,574,697 29,574,697 29,574,697
 

Weighted average number of shares outstanding during the year, diluted
29,574,697 29,574,697 29,574,697 29,574,697

Copyright Business Wire 2010

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