Protective Life Corporation's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Protective Life Corporation (PL)

Q2 2012 Earnings Call

August 8, 2012, 10:00 am ET

Executives

Eva Robertson - VP, Investor Relations

John Johns - Chairman, President & CEO

Rich Bielen - Vice Chairman & CFO

Carl Thigpen - EVP & CIO

Analysts

Christopher Giovanni - Goldman Sachs

Sean Dargan - Macquarie

Mark Finkelstein - Evercore Partners

Jamminder Bhullar - JPMorgan

Ed Spehar - Bank of America-Merrill Lynch

Steve Schwartz - Raymond James & Associates

Dan Berman - UBS

Presentation

Operator

Good day, ladies and gentlemen and welcome to the second quarter Protective Life Corporation earnings conference call. My name is Dominic and I will be your operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to, Ms. Eva Robertson. Please proceed.

Eva Robertson

Good morning and thank you operator. Good morning everyone and welcome to Protective Life Corporation's 2012 second quarter earnings call. The call today is hosted by John Johns, Protective’s Chairman, President and CEO as well as Rich Bielen, our Vice Chairman and CFO. Here with us we also have Carl Thigpen, our Executive Vice President and Chief Investment Officer and Steve Walker, our Senior Vice President and Chief Accounting Officer.

Yesterday we released our earnings press release and the supplemental financial information and both are posted on our website at protective.com. In addition to the information released yesterday, today we are using a slide presentation with our discussion. The slide deck is being webcast from a link at the Investor Relations page of our website and the file is available for download from that location.

And finally, today's discussion includes forward-looking statements which express expectations of future events and results. Actual events and results may differ materially from these expectations. You can refer to our press release and the risks and uncertainties, as well as Risk Factors section of the company's most recent report on Form 10-K and subsequent 10-Q for more information about factors that may affect future results.

Our discussion also includes non-GAAP financial information and reconciliation to the GAAP measures and can be found in the supplemental financial information report on our website.

At this time, I will turn the call over to John Johns.

John Johns

Yes Eva, thank you very much and good morning everyone and welcome to our quarterly conference call. I am very pleased to result a very solid, a good strong quarter, this quarter. Our operating results were within our expectations across each of our operating segments and we continue to perform ahead of our plan not only for the quarter, but for year-to-date.

There were a number of encouraging developments in the quarter that included favorable mortality results, sequentially higher life insurance and asset protection sales, positive fund flows in our annuity segment and continued strong stable value spreads. We’re definitely pleased by the good results not withstanding that the interest rate environment continues to be challenging for us and all insurance companies and in fact lower than we expected when we developed our plans for the year, but we are addressing those issues head on and as you can see, still producing very good results.

As we look to the rest of the year, we continue to be focus on very disciplined execution of our plans. We’re not chasing market share, we’re not chasing anything. We’re very careful in being sure that we get our capital allocated in the right place and acceptable returns and also very prudent financial risk management. We remain very confident in our ability to execute successfully on our plans for the remainder of the year.

I'll now turn it over to our Chief Financial Officer, Rich Bielen. Rich well delve through the numbers in the quarter in more detail.

Rich Bielen

Thank you John and good morning everyone. On slide four, we list out some of the second quarter financial highlights. Operating earnings for the quarter were $0.85 per share. Net earnings for the quarter were $0.91 per share. We saw a favorable mortality results in our life marketing acquisition and annuity lines.

During the quarter, we did call some of our trust preferred securities and we have a deferred issuance cost write-off of $7.2 million. We also had some unfavorable unlocking related to certain securities that have been called that we did not originally expect and I’ll talk about that a little bit more later. We did have a favorable tax rate during the quarter of approximately 29% as a result of the leasing some reserves and on a year-to-date basis we returned back to shareholders 46% of our earnings through either share repurchase or dividends.

Turning to slide five, operating income of $0.85 in the second quarter versus $0.86 a year ago. In the second quarter of last year we did have some note repurchasing which did not occur this quarter. We had net realized investment gains of $0.06 resulting in net income of $0.91 versus $1 a year ago.

Turning to slide six, our net realized investment gains and losses. During the quarter, in our normal portfolio rebalancing activities we realized $0.13 of gains. As you recall, we have a Modco account related to our Chase Insurance Group (inaudible) few years ago that added $0.06 to our net realized gains. We did have impairments of $0.11 during the quarter approximately half of that was related to non-agency residential mortgage back and the balance was related to some small corporate bond decisions.

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