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Previous: BTI TELECOM CORP, 10-Q, EX-27, 2000-08-14 |
Next: PROTECTIVE LIFE & ANNUITY INSURANCE CO, 10-Q, EX-27, 2000-08-14 |
| ALABAMA | 63-0761690 | ||
|---|---|---|---|
| (State or other jurisdiction | (IRS Employer | ||
| incorporation or organization) | Identificiation No. |
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 and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No[ ]
Number of shares of Common Stock, $10.00 par value, outstanding as of August 3, 2000: 250,000 shares.
The registrant meets the conditions set forth in General Instruction H(1)(a)and (b) of Form 10-Q and
Part I. Financial Information:
Item 1. Financial Statements:
Report of Independent Accountants......................................
Condensed Statements of Income for the Three and Six Months
ended June 30, 2000 and 1999 (unaudited).............................
Condensed Balance Sheets as of June 30, 2000
(unaudited) and December 31, 1999....................................
Condensed Statements of Cash Flows for the
Six Months ended June 30, 2000 and 1999 (unaudited)..................
Notes to Condensed Financial Statements (unaudited)....................
Item 2. Management's Narrative Analysis of the Results of Operations......
Item 3. Quantitative and Qualitative Disclosures about Market Risk.........
Part II. Other Information:
Item 6. Exhibits and Reports on Form 8-K....................................
Signature......................................................................
PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
CONDENSED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES
Premiums and policy fees $12,410,779 $15,567,150 $25,187,085 $32,182,258
Reinsurance ceded (3,605,928) (5,488,619) (8,284,706) (11,001,856)
---------- ---------- ---------- ----------
Premiums and policy fees, net of reinsurance ceded 8,804,851 10,078,531 16,902,379 21,180,402
Net investment income 8,097,829 5,954,040 15,464,192 12,889,667
Realized investment gains 37 11,081
Other income (loss) 4,691 2,344 8,399 (6,392)
---------- ---------- ---------- ----------
16,907,371 16,034,952 32,374,970 34,074,758
---------- ---------- ---------- ----------
BENEFITS AND EXPENSES
Benefits and settlement expenses (net of reinsurance ceded:
three months: 2000 - $3,392,895; 1999 - $5,278,386
six months: 2000 - $6,916,650; 1999 - $9,699,037) 9,048,737 6,059,584 17,066,128 16,526,171
Amortization of deferred policy acquisition costs 1,973,521 3,043,818 3,548,372 5,269,548
Other operating expenses (net of reinsurance ceded:
three months: 2000 - $67,938; 1999 - $68,922
six months: 2000 - $146,534; 1999 - $139,687) 2,600,168 3,544,292 5,955,295 5,857,733
---------- ---------- ---------- ----------
13,622,426 12,647,694 26,569,795 27,653,452
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAX 3,284,945 3,387,258 5,805,175 6,421,306
Income tax expense 1,133,306 948,433 2,002,785 1,797,966
---------- ---------- ---------- ----------
NET INCOME $ 2,151,639 $ 2,438,825 $ 3,802,390 $ 4,623,340
========== ========== ========== ==========
See notes to condensed financial statements
PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
CONDENSED BALANCE SHEETS
June 30 December 31
2000 1999
------------ -------------
(Unaudited)
ASSETS
Investments
Fixed maturities, at market
(amortized cost: 2000 - $412,421,838; 1999 - $384,291,937) $393,454,828 $366,838,300
Mortgage loans on real estate 3,453,222 3,683,311
Investment in real estate, net of accumulated depreciation 1,088,750 1,096,250
Policy loans 54,934,097 54,824,429
Short-term investments 6,496,917 7,493,877
----------- -----------
Total investments 459,427,814 433,936,167
Cash 2,938,518 4,021,839
Accrued investment income 8,472,685 7,718,388
Accounts and premiums receivable, net of allowance for uncollectible
amounts (2000 - $7,000; 1999 - $7,000) 2,002,688 4,256,931
Reinsurance receivables 23,578,216 26,779,589
Deferred policy acquisition costs 132,907,007 127,792,025
Other assets 26,864 41,731
Assets related to separate accounts
Variable annuity 8,396,281 4,951,159
----------- -----------
$637,750,073 $609,497,829
=========== ===========
LIABILITIES
Policy liabilities and accruals:
Future policy benefits and claims $449,352,463 $445,284,973
Unearned premiums 8,160,255 7,852,424
----------- -----------
457,512,718 453,137,397
Annuity deposits 20,392,753 12,253,056
Other policyholders' funds 5,732,387 5,410,510
Other liabilities 17,755,599 18,338,059
Deferred income taxes 4,473,937 109,523
Liabilities related to separate accounts
Variable annuity 8,396,281 4,951,159
----------- -----------
Total liabilities 514,263,675 494,199,704
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES - NOTE B
SHARE-OWNERS EQUITY
Preferred Stock, $1.00 par value, shares authorized, issued, and
outstanding: 2,000 2,000 2,000
Common Stock, $10 par value
Shares authorized: 500,000
Shares issued and outstanding: 2000 and 1999: 250,000 2,500,000 2,500,000
Additional paid-in capital 101,386,324 101,386,324
Retained earnings 26,557,055 22,754,665
Accumulated other comprehensive income
Net unrealized losses on investments (net of income
tax: 2000 - $(3,747,144); 1999 - $(6,108,773)) (6,958,981) (11,344,864)
----------- -----------
Total share-owners' equity 123,486,398 115,298,125
----------- -----------
$637,750,073 $609,497,829
=========== ===========
See notes to condensed financial statements
PROTECTIVE LIFE AND ANNUITY INSURANCE COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
---------------------------
2000 1999
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,802,390 $ 4,623,340
Adjustments to reconcile net income to net cash used in operating activities:
Realized investment gains (11,081)
Amortization of deferred policy acquisition costs 3,548,372 5,269,548
Capitalization of deferred policy acquisition costs (402,469) (318,491)
Deferred income tax 2,002,785 1,797,966
Interest credited to universal life and investment products 8,911,521 3,101,263
Policy fees assessed on universal life and investment products (19,303,459) (488,856)
Change in accrued investment income and other receivables 4,701,319 72,411
Change in policy liabilities and other policyholder
funds of traditional life and health products 10,901,265 (8,326,802)
Change in other liabilities (582,460) 12,297,423
Other (net) 14,867 (174,455)
---------- ----------
Net cash provided by operating activities 13,594,131 17,842,266
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Maturities and principal reductions of investments
Investments available for sale 190,994,466 33,623,078
Other 240,079 2,107,560
Cost of investments acquired
Investments available for sale (218,123,072) (51,178,518)
Other (116,493)
---------- ----------
Net cash used in investing activities (27,005,020) (15,447,880)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Investment product deposits and change in universal life deposits 26,998,960 4,951,747
Investment product withdrawals (14,671,392) (2,722,859)
---------- ---------
Net cash provided by financing activities 12,327,568 2,228,888
---------- ---------
INCREASE (DECREASE) IN CASH (1,083,321) 4,623,274
CASH AT BEGINNING OF PERIOD 4,021,839 0
--------- ---------
CASH AT END OF PERIOD $ 2,938,518 $ 4,623,274
========= =========
See notes to condensed financial statements
The accompanying unaudited condensed financial statements of Protective Life and Annuity Insurance Company ("the Company") have been prepared on the basis of accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. For further information, refer to the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 1999.
All outstanding shares of the Company’s common stock are owned by Protective Life Insurance Company ("Protective"), which is a wholly-owned subsidiary of Protective Life Corporation ("PLC"). All outstanding shares of the Company’s preferred stock are owned by PLC.
Under insurance guaranty fund laws, in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. The Company does not believe such assessments will be materially different from amounts already provided for in the financial statements. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's own financial strength.
A number of civil jury verdicts have been returned against insurers in the jurisdictions in which the Company does business involving the insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Increasingly these lawsuits have resulted in the award of substantial judgments against the insurer that are disproportionate to the actual damages, including material amounts of punitive damages. In addition, in some class action and other lawsuits involving insurers’ sales practices, insurers have made material settlement payments. In some states (including Alabama), juries have substantial discretion in awarding punitive damages which creates the potential for unpredictable material adverse judgments in any given punitive damage suit. The Company, like other insurers, in the ordinary course of business, is involved in such litigation or alternatively in arbitration. Although the outcome of any litigation or arbitration cannot be predicted, the Company believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse effect on the financial position, results of operations, or liquidity of the Company.
PLC, through its subsidiaries, operates seven divisions whose principal strategic focus can be grouped into three general categories: life insurance, specialty insurance products, and retirement savings and investment products. The Company is involved in the businesses of four of PLC’s seven divisions. The following table sets forth operating segment income and assets for the periods shown. Adjustments represent the inclusion of unallocated realized investment gains (losses) and the recognition of income tax expense. There are no asset adjustments.
OPERATING SEGMENT INCOME FOR THE
SIX MONTHS ENDED JUNE 30, 2000
---------------------------------------------
DENTAL AND
CONSUMER FINANCIAL
ACQUISITIONS BENEFITS INSTITUTIONS
------------ --------- ------------
Premiums and policy fees $23,128,582 $600,189 $1,410,202
Reinsurance ceded (7,984,613) (300,093)
---------- ------- ---------
Net of reinsurance ceded 15,143,969 300,096 1,410,202
Net investment income 14,639,975 3,291 292,471
Other income
---------- ------- ---------
Total revenues 29,783,944 303,387 1,702,673
---------- ------- ---------
Benefits and settlement expenses 15,266,654 145,900 1,176,459
Amortization of deferred policy
acquisition costs 3,195,766 352,606
Other operating expenses 5,271,398 2,675 24,894
---------- ------- ---------
Total benefits and expenses 23,733,818 148,575 1,553,959
---------- ------- ---------
Income (loss) before income tax 6,050,126 154,812 148,714
CORPORATE
INVESTMENT AND
PRODUCTS OTHER ADJUSTMENTS TOTAL
---------- --------- ----------- ----------
Premiums and policy fees $ 48,112 $25,187,085
Reinsurance ceded (8,284,706)
------- ----------
Net of reinsurance ceded 48,112 16,902,379
Net investment income 551,887 $(23,432) 15,464,192
Other income 8,399 8,399
------- ------- ----------
Total revenues 608,398 (23,432) 32,374,970
------- ------- ----------
Benefits and settlement expenses 477,115 17,066,128
Amortization of deferred policy
acquisition costs 3,548,372
Other operating expenses 522,033 134,295 5,955,295
------- ------- ----------
Total benefits and expenses 999,148 134,295 26,569,795
------- ------- ----------
Income (loss) before income tax (390,750) (157,727) 5,805,175
Income tax expense $2,002,785 2,002,785
----------
Net income $ 3,802,390
==========
OPERATING SEGMENT INCOME FOR THE
SIX MONTHS ENDED JUNE 30, 1999
-------------------------------------------------
DENTAL AND
CONSUMER FINANCIAL
ACQUISITIONS BENEFITS INSTITUTIONS
------------ --------- ------------
Premiums and policy fees $30,186,919 $1,241,619 $744,800
Reinsurance ceded (10,633,046) (368,810)
---------- --------- -------
Net of reinsurance ceded 19,553,873 872,809 744,800
Net investment income 12,350,158 218,497 108,455
Realized investment gains (losses)
Other Income (8,718)
---------- --------- -------
Total revenues 31,895,313 1,091,306 853,255
---------- --------- -------
Benefits and settlement expenses 15,203,723 842,643 408,742
Amortization of deferred policy
acquisition costs 5,085,560 183,988
Other operating expenses 5,529,534 23,096 (35,861)
---------- -------- -------
Total benefits and expenses 25,818,817 865,739 556,869
---------- -------- -------
Income (loss) before income tax 6,076,496 225,567 296,386
CORPORATE
INVESTMENT AND
PRODUCTS OTHER ADJUSTMENTS TOTAL
---------- --------- ----------- -----------
Premiums and policy fees $ 8,920 $32,182,258
Reinsurance ceded (11,001,856)
------ ----------
Net of reinsurance ceded 8,920 21,180,402
Net investment income $212,557 12,889,667
Realized investment gains (losses) $ 11,081 11,081
Other Income 2,326 (6,392)
------ ------- -------- ----------
Total revenues 11,246 212,557 11,081 34,074,758
------ ------- -------- ----------
Benefits and settlement expenses 71,063 16,526,171
Amortization of deferred policy
acquisition costs 5,269,548
Other operating expenses 315,834 25,130 5,857,733
------- ------- ----------
Total benefits and expenses 386,897 25,130 27,653,452
------- ------- ----------
Income (loss) before income tax (375,651) 187,427 6,421,306
Income tax expense 1,797,966 1,797,966
----------
Net income $ 4,623,340
==========
OPERATING SEGMENT ASSETS
JUNE 30, 2000
---------------------------------------------
DENTAL AND
CONSUMER FINANCIAL
ACQUISITIONS BENEFITS INSTITUTIONS
------------ ---------- ------------
Investments and other assets $433,879,325 $3,687,498 $11,888,826
Deferred policy acquisition costs 131,312,984 1,594,023
------------ ---------- ------------
Total assets $565,192,309 $3,687,498 $13,482,849
============ ========== ============
CORPORATE
INVESTMENT AND
PRODUCTS OTHER TOTAL
----------- ---------- ------------
Investments and other assets $17,980,334 $37,407,083 $504,843,066
Deferred policy acquisition costs 132,907,007
----------- ----------- ------------
Total assets $17,980,334 $37,407,083 $637,750,073
=========== =========== ============
OPERATING SEGMENT ASSETS
DECEMBER 31, 1999
-------------------------------------------
DENTAL AND
CONSUMER FINANCIAL
ACQUISITIONS BENEFITS INSTITUTIONS
------------ ---------- ------------
Investments and other assets $424,265,907 $3,871,844 $11,815,617
Deferred policy acquisition costs 126,247,865 1,544,160
------------ ----------- ------------
Total assets $550,513,772 $3,871,844 $13,359,777
============ =========== ============
CORPORATE
INVESTMENT AND
PRODUCTS OTHER TOTAL
---------- ----------- -----------
Investments and other assets $9,812,824 $31,939,612 $481,705,804
Deferred policy acquisition costs 127,792,025
---------- ----------- ------------
Total assets $9,812,824 $31,939,612 $609,497,829
========== =========== ============
Financial statements prepared in conformity with generally accepted accounting principles (i.e., GAAP) differ in some respects from the statutory accounting practices prescribed or permitted by insurance regulatory authorities. At June 30, 2000, and for the six months then ended, the Company had share-owners’ equity and net income prepared in conformity with statutory reporting practices of $40.2 million and $8.4 million, respectively.
As prescribed by Statement of Financial Accounting Standards ("SFAS") No. 115, certain investments are recorded at their market values with the resulting net unrealized gains and losses reduced by a related adjustment to deferred policy acquisition costs, net of income tax, recorded as a component of share-owners’ equity. The market values of fixed maturities increase or decrease as interest rates fall or rise. Therefore, although the application of SFAS No. 115 does not affect the Company’s operations, its reported share-owners’ equity will fluctuate significantly as interest rates change.
The Company’s balance sheets at June 30, 2000 and December 31, 1999, prepared on the basis of reporting investments at amortized cost rather than at market values, are as follows:
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
Total investments $478,394,824 $451,389,804
Deferred policy acquisition costs 124,646,122 127,792,025
All other assets 45,415,252 47,769,637
------------ ------------
$648,456,198 $626,951,466
============ ============
Deferred income taxes $ 8,221,081 $ 6,218,296
All other liabilities 509,789,738 494,090,181
------------ ------------
518,010,819 500,308,477
Share-owners’ equity 130,445,379 126,642,989
------------ ------------
$648,456,198 $626,951,466
============ ============
The following table sets forth the Company’s comprehensive income (loss) for the three- month and six- month periods ended June 30, 2000 and 1999:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------------- --------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income $2,151,639 $ 2,438,825 $3,802,390 $ 4,623,340
Increase (decrease) in net unrealized gains
on investments (net of income tax:
three months: 2000 - $(179,823);
1999 - ($4,824,923))
six months: 2000 - $2,361,629;
1999 - $(7,161,647)) (333,957) (8,960,572) 4,385,883 (13,300,202)
Reclassification adjustment for amounts
included in net income (net of income tax:
three months: 1999 - $(13)
six months: 1999 - $(3,878)) (24) (7,203)
---------- ------------ ---------- ------------
Comprehensive income (loss) $1,817,682 $(6,521,771) $8,188,273 $(8,684,065)
========== ============ ========== ============
Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior year amounts comparable to those of the current year. Such reclassifications had no effect on previously reported net income, total assets, or share-owners’ equity.
Protective Life and Annuity Insurance Company ("the Company"), a stock life insurance company, was founded in 1978. Since 1983, all outstanding shares of the Company’s common stock have been owned by Protective Life Insurance Company ("Protective"), which is a wholly- owned subsidiary of Protective Life Corporation ("PLC"), an insurance holding company whose common stock is traded on the New York Stock Exchange under the symbol "PL". All outstanding shares of the Company’s preferred stock are owned by PLC. The Company is authorized to transact insurance business as an insurance company or a reinsurance company in 49 states, including New York, as well as the District of Columbia.
In accordance with General Instruction H(2)(a), the Company includes the following analysis with the reduced disclosure format.
PLC through its subsidiaries provides financial services through the production, distribution, and administration of insurance and investment products. PLC through its subsidiaries operates seven divisions whose principal strategic focuses can be grouped into three general categories: life insurance, specialty insurance products, and retirement savings and investment products. The life insurance category includes the Individual Life, West Coast, and Acquisitions Divisions. The specialty insurance products category includes the Dental and Consumer Benefits (“Dental”) and Financial Institutions Divisions. The retirement savings and investment products category includes the Stable Value Products and Investment Products Divisions.
The Company, since it is licensed in the State of New York, is the entity through which PLC markets, distributes, and services insurance and annuity products in New York. As of June 30, 2000, the Company was involved in the businesses of four of PLC’s seven divisions: the Acquisition Division, the Dental Division, the Financial Institutions Division and the Investment Products Division. The Company has an additional business segment which is described herein as Corporate and Other.
Protective has entered into an intercompany guaranty agreement, enforceable by the Company or its successors, whereby Protective has guaranteed the Company’s payment of claims made by the holders of Company policies according to the terms of such policies. The guarantee will remain in force until the earlier of (a) when the Company achieves a claims-paying rating equal to or better than Protective without the benefit of any intercompany guaranty agreement or (b) 90 days after the guaranty agreement is revoked by written instrument; provided, however, even after any revocation or termination by such notice, the guarantee shall remain effective as to policies issued during the existence of the guaranty agreement.
This report includes "forward-looking statements" which express expectations of future events and/or results. The words "believe", "expect", "anticipate" and similar expressions identify forward-looking statements which are based on future expectations rather than on historical facts and are subject to a number of risks and uncertainties, and the Company cannot give assurance that such statements will prove to be correct. Please refer to Exhibit 99 herein for more information about factors which could affect future results.
Revenues
The following table sets forth revenues by source for the period shown, and the percentage change from the prior period:
SIX MONTHS PERCENTAGE
ENDED INCREASE
JUNE 30 (DECREASE)
------------------------------- ----------
2000 1999
---- ----
Premiums and policy fees $16,902,379 $21,180,402 (20.2)%
Net investment income 15,464,192 12,889,667 20.0
Realized investment gains 11,081 –
Other 8,399 (6,392) –
---------- ----------
$32,374,970 $34,074,758
========== ==========
Premiums and policy fees, net of reinsurance ("premiums and policy fees") decreased $4.3 million or 20.2% in the first six months of 2000 over the first six months of 1999. Premiums and policy fees from the Acquisitions Division decreased $4.4 million primarily due to the expected lapsing of policies associated with the nature of the division. Premiums and policy fees related to the Dental Division decreased $0.6 million in the first six months of 2000 as compared to the same period in 1999, primarily due to the termination of a group life customer effective December 31, 1999. The Financial Institutions Division’s premiums and policy fees increased $0.7 million in the first six months of 2000 over the first six months of 1999 due to increased marketing efforts and sales momentum.
Net investment income in the first six months of 2000 increased $2.6 million or 20.0% as compared to the corresponding period of the preceding year primarily due to increases in the average amount of invested assets. The Company could experience significant realized investment losses were it to make adjustments to its existing fixed maturity portfolio.
The Company generally purchases its investments with the intent to hold to maturity by purchasing investments that match future cash-flow needs. However, the Company may sell any of its investments to maintain approximate matching of assets and liabilities. Accordingly, the Company has classified its fixed maturities and certain other securities as "available for sale." The sales of investments that have occurred generally result from portfolio management decisions to maintain proper matching of assets and liabilities.
The Company reported an insignificant amount of realized investment gains and other income (loss) in the first six months of 2000 and 1999.
Income Before Income Tax
The following table sets forth operating income or loss and income or loss before income tax by business segment for the periods shown:
OPERATING INCOME (LOSS) AND INCOME (LOSS) BEFORE INCOME TAX
SIX MONTHS ENDED JUNE 30
2000 1999
---- ----
Operating Income (Loss)1
Acquisitions $6,050,126 $6,076,496
Dental and Consumer Benefits 154,812 225,567
Financial Institutions 148,714 296,386
Investment Products (390,750) (375,651)
Corporate and Other (157,727) 187,427
--------- ---------
Total operating income 5,805,175 6,410,225
--------- ---------
Realized Investment Gains
Unallocated Investment Gains 11,081
---------
Total net 11,081
---------
Income (Loss) Before Income Tax
Acquisitions 6,050,126 6,076,496
Dental and Consumer Benefits 154,812 225,567
Financial Institutions 148,714 296,386
Investment Products (390,750) (375,651)
Corporate and Other (157,727) 187,427
Unallocated Realized Investment Gains 11,081
--------- ---------
Total income before tax $5,805,175 $6,421,306
========= =========
1 Income (loss) before tax excluding realized investment gains and losses.
Pretax operating income from the Acquisitions Division was $6.1 million in the first six months of 2000 and 1999. Earnings from the Acquisitions Division are expected to decline over time (due to the lapsing of policies resulting from deaths of insureds or terminations of coverage) unless new acquisitions are made. The increase in investment income on invested assets allocated to the division primarily offsets the decrease in premiums and policy fees.
Dental Division pretax earnings were $0.2 million in the first six months of 2000 and $0.2 million in the first six months of 1999.
The Financial Institutions Division’s pretax operating income was $0.1 million for the first six months of 2000 as compared to $0.3 million in the first six months of 1999. The decrease was primarily due to higher than expected mortality in the division.
The Investment Products Division began marketing certain annuity products in the state of New York in the latter part of 1998. The Division had a pretax operating loss of $0.4 million in the first six months of 2000 and in 1999, primarily related to start-up expenses.
The Corporate and Other segment consists of net investment income and realized investment gains not identified with the preceding operating divisions. The pretax operating loss from this segment was $0.2 million in the first six months of 2000 compared to pretax operating income of $0.2 million in the first six months of 1999.
Income Taxes
The following table sets forth the effective tax rates for the periods shown:
SIX MONTHS
ENDED ESTIMATED EFFECTIVE
JUNE 30 INCOME TAX RATES
---------- -------------------
1999 28.0 %
2000 34.5
The effective income tax rate for the full year of 1999 was 28%. Management’s estimate of the effective income tax rate for 2000 is 34.5%.
Net Income
The following table sets forth net income for the periods shown, and the percentage change from the prior period:
NET INCOME
-------------------------------------
SIX MONTHS PERCENTAGE
ENDED INCREASE
JUNE 30 TOTAL (DECREASE)
---------- --------- ----------
1999 $4,623,340 513.3 %
2000 3,802,390 (17.8)
Compared to the same period in 1999, net income in the first six months of 2000 decreased $0.8 million, reflecting decreases in all divisions and the Corporate and Other segment, and by an increase in the Company’s effective tax rate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKThere have been no material changes from the disclosure in the Company’s 1999 Annual Report on Form 10-K for the year ended December 31, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial data schedule
Exhibit 99 - Safe Harbor for Forward-Looking Statements
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Protective Life and Annuity Insurance Company | ||
|---|---|---|
| Date: | August 14, 2000 | /s/ Jerry W. Defoor |
| Jerry W. DeFoor | ||
| Vice President and Controller | ||
| and Chief Accounting Officer | ||
| (Duly authrorized officer) |
|
|