<PAGE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
FORM 10-Q
---------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-9924
PROTECTIVE LIFE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2492236
(State of incorporation) (IRS Employer Identification Number)
2801 HIGHWAY 280 SOUTH
BIRMINGHAM, ALABAMA 35223
(Address of principal executive offices)
(205) 879-9230
(Registrant's telephone number)
---------------
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Number of shares of Common Stock, $.50 par value, outstanding as
of November 4, 1994: 13,713,259 shares.
<PAGE>
PROTECTIVE LIFE CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Report of Independent Accountants ............................... 2
Consolidated Condensed Statements of Income for the Three
and Nine Months ended September 30, 1994 and 1993 (unaudited) .. 3
Consolidated Condensed Balance Sheets as of September 30,
1994 (unaudited) and December 31, 1993 ......................... 4
Consolidated Condensed Statements of Cash Flows for the Nine
Months ended September 30, 1994 and 1993 (unaudited) ........... 5
Notes to Consolidated Condensed Financial Statements
(unaudited) .................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 11
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K .......................... 21
Signature ........................................................... 22
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders
Protective Life Corporation
Birmingham, Alabama
We have reviewed the accompanying consolidated condensed balance
sheet of Protective Life Corporation and subsidiaries as of
September 30, 1994, and the related consolidated condensed
statements of income and cash flows for the three-month and nine-
month periods ended September 30, 1994 and 1993. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the consolidated condensed
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December
31, 1993, and the related consolidated statements of income,
stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 14, 1994, we
expressed an unqualified opinion which contains an explanatory
paragraph regarding the changes in accounting for certain
investments in debt and equity securities in 1993 and
postretirement benefits other than pensions in 1992 on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated condensed
balance sheet as of December 31, 1993, is fairly stated in all
material respects in relation to the consolidated balance sheet
from which it has been derived.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
October 25, 1994 except for Note H,
as to which the date is November 7, 1994
2
<PAGE>
PROTECTIVE LIFE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------------ ------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Premiums and policy fees (net of reinsurance ceded:
three months: 1994 - $50,714; 1993 - $33,045 $ 101,876 $ 94,421 $ 289,362 $273,609
nine months: 1994 - $121,462; 1993 - $93,927)
Net investment income 105,762 95,697 304,647 262,073
Realized investment gains (losses) 3,122 (39) 4,855 763
Other income 2,185 6,607 13,394 16,929
----------- ---------- ------------ -----------
212,945 196,686 612,258 553,374
----------- ---------- ------------ -----------
BENEFITS AND EXPENSES
Benefits and settlement expenses (net of reinsurance ceded:
three months: 1994 - $31,118; 1993 - $18,321 134,208 126,679 376,536 351,306
nine months: 1994 - $80,541; 1993 - $57,558)
Amortization of deferred policy acquisition costs 20,493 19,030 60,218 52,318
Other operating expenses (net of reinsurance ceded:
three months: 1994 - $3,793; 1993 - $3,368 29,610 30,945 98,038 92,318
nine months: 1994 - $9,842; 1993 - $8,900) ----------- ----------- ------------ -----------
184,311 176,654 534,792 495,942
----------- ----------- ------------ -----------
INCOME BEFORE INCOME TAX AND MINORITY INTEREST 28,634 20,032 77,466 57,432
Income tax expense 9,163 7,671 24,789 19,639
----------- ----------- ------------ -----------
INCOME BEFORE MINORITY INTEREST 19,471 12,361 52,677 37,793
Minority interest in net income
of consolidated subsidiaries 804 0 992 19
----------- ----------- ------------ -----------
NET INCOME $ 18,667 $ 12,361 $ 51,685 $ 37,774
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
NET INCOME PER SHARE $ 1.36 $ 0.90 $ 3.77 $ 2.76
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
DIVIDENDS PAID PER SHARE $ 0.28 $ 0.26 $ 0.82 $ 0.75
----------- ----------- ------------ -----------
----------- ----------- ------------ -----------
Average shares outstanding 13,701,083 13,690,119 13,694,114 13,689,961
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
PROTECTIVE LIFE CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30 DECEMBER 31
1994 1993
------------ -----------
ASSETS (UNAUDITED)
<S> <C> <C>
Investments:
Fixed maturities $3,395,374 $3,051,292
Equity securities 45,197 40,596
Mortgage loans on real estate 1,393,667 1,407,744
Investment real estate, net 29,541 22,061
Policy loans 139,462 141,135
Other long-term investments 25,699 20,191
Short-term investments 135,345 83,692
---------- ----------
Total investments 5,164,285 4,766,711
Cash 2,519 27,119
Accrued investment income 53,938 51,337
Accounts and premiums receivable, net 21,344 26,315
Reinsurance receivables 91,273 102,559
Deferred policy acquisition costs 374,612 299,584
Property and equipment, net 35,123 35,664
Other assets 14,940 3,316
Assets held in separate accounts 88,533 3,400
---------- ----------
TOTAL ASSETS $5,846,567 $5,316,005
---------- ----------
---------- ----------
LIABILITIES
Policy liabilities and accruals $1,620,586 $1,469,630
Guaranteed investment contract deposits 2,251,587 2,015,075
Annuity deposits 1,175,551 1,005,742
Other policyholders' funds 179,107 141,975
Other liabilities 109,909 96,682
Accrued income taxes 2,609 6,381
Deferred income taxes (10,487) 69,269
Debt 102,046 147,118
Liabilities related to separate accounts 88,533 3,400
Minority interest in consolidated subsidiaries 55,000 0
---------- ----------
TOTAL LIABILITIES 5,574,441 4,955,272
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES - NOTE C
STOCKHOLDERS' EQUITY
Preferred Stock, $1 par value
Shares authorized: 3,850,000; Issued: none
Junior Participating Cumulative Preferred Stock, $1 par value
Shares authorized: 150,000; Issued: none
Common Stock, $0.50 par value
Shares authorized: 80,000,000
Issued: 1994 and 1993 - 15,668,231 7,834 7,834
Additional paid-in capital 70,925 70,469
Net unrealized gains (losses) on investments
(net of income tax: 1994 - $(48,694); 1993 - $19,774) (90,431) 39,284
Retained earnings 307,814 267,361
Treasury stock (1994 - 1,974,117 shares; 1993 - 1,974,987 shares) (18,424) (18,359)
Unallocated stock in Employee Stock Ownership Plan
(1994 - 422,073 shares; 1993 - 442,000 shares) (5,592) (5,856)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 272,126 360,733
---------- ----------
$5,846,567 $5,316,005
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
<PAGE>
PROTECTIVE LIFE CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-------------------------
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 51,685 $ 37,774
Adjustments to reconcile net income to net cash provided by
operating activities:
Net change in deferred policy acquisition costs (67,797) (19,456)
Depreciation expense 4,388 3,122
Deferred income taxes (79,756) (1,816)
Accrued income taxes (3,772) 2,266
Interest credited to universal life and investment products 183,642 164,095
Policy fees assessed on universal life and investment products (58,887) (44,328)
Change in accrued investment income and other receivables 13,656 (99,142)
Change in policy liabilities and other policyholders' funds
of traditional life and health products 84,215 134,751
Change in other liabilities 12,777 12,767
Other (net) (9,588) 8,000
---------- ----------
Net cash provided by operating activities 130,563 198,033
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cost of investments acquired
Investments available for sale (1,227,707)
Other (112,964) (1,568,906)
Maturities and principal reductions of investments
Investments available for sale 317,959
Other 129,296 837,201
Sale of investments
Investments available for sale 349,944
Other 16,183 167,583
Acquisitions and bulk reinsurance assumptions 39,328 17,968
Purchase of property and equipment (4,380) (3,711)
Sale of property and equipment 1,832 1,471
---------- ----------
Net cash used in investing activities (490,509) (548,394)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under line of credit
arrangements and long-term debt 460,186 548,351
Principal payments on line of credit arrangements
and long-term debt (505,258) (482,123)
Proceeds from issuance of Monthly Income Preferred Securities 55,000
Dividends to stockholders (11,232) (10,267)
Purchase of treasury stock (190)
Change in universal life, annuity, and guaranteed
investment contract product deposits 336,840 326,021
---------- ----------
Net cash provided by financing activities 335,346 381,982
---------- ----------
INCREASE (DECREASE) IN CASH (24,600) 31,621
CASH AT BEGINNING OF PERIOD 27,119 14,959
---------- ----------
CASH AT END OF PERIOD $ 2,519 $ 46,580
---------- -----------
---------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:
Interest on debt $ (4,176) $ (4,217)
Income taxes $ (37,937) $ (19,841)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Change in minority interest in consolidated subsidiary $ (1,311)
Reissuance of treasury stock to ESOP $ 3 $ 3
Unallocated stock in ESOP $ 264 $ 344
Reissuance of treasury stock $ 578 $ 135
Acquisitions and bulk reinsurance assumptions
Assets acquired $ 41,818 $ 426,992
Liabilities assumed (49,049) (429,580)
---------- ----------
Net $ (7,231) $ (2,588)
---------- ----------
---------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
PROTECTIVE LIFE CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial
statements of Protective Life Corporation (the "Company") have
been prepared in accordance with generally accepted accounting
principles 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 generally accepted accounting principles 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 nine month period ended September 30, 1994 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 1994. For further information,
refer to the consolidated financial statements and notes thereto
included in the Company's annual report on Form 10-K for the year
ended December 31, 1993.
NOTE B - MONTHLY INCOME PREFERRED SECURITIES
On June 10, 1994, a special purpose finance subsidiary of
the Company, PLC Capital L.L.C. ("PLC Capital"), issued $55
million of 9% Cumulative Monthly Income Preferred Securities,
Series A ("MIPS"), guaranteed by the Company. PLC Capital was
formed solely to issue MIPS and other securities and lend the
proceeds thereof to the Company in exchange for subordinated
debentures of the Company. The Company has the right under the
subordinated debentures to extend interest payment periods up to
60 months, and, as a consequence, monthly dividends on the MIPS
may be deferred (but will continue to accumulate, together with
additional dividends on any accumulated but unpaid dividends at
the dividend rate) by PLC Capital during any such extended
interest payment period. The MIPS are redeemable by PLC Capital
at any time on or after June 30, 1999. The MIPS and dividends
thereon are reported in the accompanying financial statements as
"minority interest in consolidated subsidiaries."
NOTE C - COMMITMENTS AND CONTINGENT LIABILITIES
At September 30, 1994, the Company's life insurance
subsidiaries were committed to fund approximately $333.7 million
of long-term investments. Also, the Company has issued a
guarantee in connection with the sale of certain tax exempt
mortgage loans which may be put to the Company in the event of
default. At September 30, 1994, the loans totaled $17.1 million.
At September 30, 1994, the Company was contingently liable
as a guarantor of $8.0 million in mortgage debt in the name of a
joint venture in which the Company is a partner. Should the
joint venture become unable to meet its obligation on this debt,
the Company would assume title to the real estate development
along with the debt.
6
<PAGE>
The Company is contingently liable to obtain a $20 million
letter of credit under indemnity agreements with its directors.
Such agreements provide insurance protection in excess of the
directors' and officers' liability insurance in force at the time
up to $20 million. Should certain events occur constituting a
change in control of the Company, the Company must obtain the
letter of credit upon which directors may draw for defense or
settlement of any claim relating to performance of their duties
as directors. The Company has similar agreements with certain of
its officers providing up to $10 million in indemnification which
are not secured by the obligation to obtain a letter of credit.
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.
The Company and its subsidiaries, like other life and
health insurers, from time to time are involved in litigation.
To date, no such lawsuit has resulted in the award of any
significant amount of damages against the Company. There are
currently several lawsuits pending against the Company in
Alabama, one of which is a class action concerning the sale of
credit insurance. Although the outcome of any litigation cannot
be predicted with certainty, the Company believes that such
litigation will not have a material adverse effect on the
financial position of the Company.
7
<PAGE>
NOTE D - BUSINESS SEGMENTS
The Company operates predominantly in the life and accident
and health insurance industry. The following table sets forth
total revenues, income (loss) before income tax, and identifiable
assets of the Company's business segments.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
------------------------------------
1994 1993
---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
TOTAL REVENUES:
Agency $ 90,949 14.9% $ 81,481 14.7%
Group 108,407 17.7 107,425 19.4
Financial Institutions 81,249 13.3 68,804 12.4
Investment Products 64,413 10.5 58,646 10.6
Guaranteed Investment
Contracts 138,972 22.7 119,396 21.6
Acquisitions 114,123 18.6 86,105 15.6
Corporate and Other 13,671 2.2 28,715 5.2
Unallocated Realized
Investment Gains (Losses) 474 0.1 2,802 0.5
-------- ----- -------- -----
$612,258 100.0% $553,374 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
INCOME (LOSS) BEFORE INCOME
TAX AND MINORITY INTEREST:
Agency $ 12,590 16.3% $ 13,921 24.2%
Group 7,045 9.1 8,623 15.0
Financial Institutions 6,825 8.8 6,061 10.6
Investment Products 3,186 4.1 2,465 4.3
Guaranteed Investment
Contracts 25,276 32.6 13,931 24.3
Acquisitions 28,605 36.9 19,013 33.1
Corporate and Other (6,535) (8.4) (9,384) (16.4)
Unallocated Realized
Investment Gains (Losses) 474 0.6 2,802 4.9
-------- ----- -------- -----
$ 77,466 100.0% $ 57,432 100.0%
-------- ----- -------- -----
-------- ----- -------- -----
<CAPTION>
SEPTEMBER 30, 1994 DECEMBER 31, 1993
------------------ -----------------
AMOUNT PERCENT AMOUNT PERCENT
--------- ------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
IDENTIFIABLE ASSETS:
Agency $ 683,013 11.7% $ 642,325 12.1%
Group 212,070 3.6 208,968 3.9
Financial Institutions 207,511 3.5 192,486 3.6
Investment Products 1,122,218 19.2 879,365 16.6
Guaranteed Investment
Contracts 2,187,962 37.4 2,041,564 38.4
Acquisitions 1,131,722 19.4 1,145,357 21.5
Corporate and Other 302,071 5.2 205,940 3.9
---------- ----- ---------- -----
$5,846,567 100.0% $5,316,005 100.0%
---------- ----- ---------- -----
---------- ----- ---------- -----
</TABLE>
8
<PAGE>
NOTE E - STATUTORY REPORTING PRACTICES
Financial statements prepared in conformity with generally
accepted accounting principles ("GAAP") differ in some respects
from the statutory accounting practices prescribed or permitted
by insurance regulatory authorities. At September 30, 1994 and
for the nine months then ended, the Company's life insurance
subsidiaries had stockholder's equity and net income prepared in
conformity with statutory reporting practices of $311.3 million
and $32.6 million, respectively.
NOTE F - RECENTLY ADOPTED ACCOUNTING STANDARDS
At December 31, 1993, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." For purposes
of adopting SFAS No. 115 the Company has classified all of its
investments in fixed maturities, equity securities, and short-
term investments as "available for sale." As prescribed by SFAS
No. 115, these investments are recorded at their market values
with the resulting net unrealized gain or loss, net of income
tax, recorded as an component of stockholders' equity. The
effect of adopting SFAS No. 115 at December 31, 1993 was to
increase fixed maturities by $65.6 million, decrease deferred
policy acquisition costs by $12.4 million, increase the liability
for deferred income taxes by $18.6 million, and increase
stockholders' equity by $34.6 million. The effect of having
adopted SFAS No. 115 at September 30, 1994 (compared to financial
statements prepared under previous accounting standards) was to
decrease fixed maturities by $165.8 million, increase deferred
policy acquisition costs by $26.3 million, decrease the liability
for deferred income taxes by $48.8 million, and decrease
stockholders' equity by $90.7 million.
NOTE G - CONSOLIDATED PRO FORMA RESULTS
On July 30, 1993, the Company's principal subsidiary,
Protective Life Insurance Company ("Protective Life"), acquired
Wisconsin National Life Insurance Company ("Wisconsin National").
Summarized below are the consolidated results of operations for
the nine months ended September 30, 1993, on an unaudited pro
forma basis, as if the Wisconsin National acquisition had
occurred as of January 1, 1993. The pro forma information is
based on the Company's historical consolidated results of
operations for the nine months ended September 30, 1993 and on
data provided by Wisconsin National, using financial statement
classifications consistent with those used by the Company after
giving effect to certain pro forma adjustments. The pro forma
financial information does not purport to be indicative of
9
<PAGE>
results of operations that would have occurred had the
transactions occurred on the basis assumed above nor are they
indicative of the future operations of the combined enterprises.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1993
-------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C>
Total revenues $585,133
Net income $ 39,652
Net income per share $ 2.90
</TABLE>
NOTE H - SUBSEQUENT EVENTS
On October 3, 1994, Protective Life acquired, via a 100%
coinsurance transaction, a block of individual life insurance
policies. The statutory purchase price was approximately $41.5
million.
On November 7, 1994, the Company's Board of Directors
authorized a program for the repurchase of up to 300,000 shares
of Company Common Stock.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Protective Life Corporation provides financial services
through the production, distribution, and administration of
insurance and investment products. Founded in 1907, Protective
Life Insurance Company ("Protective Life") is the Company's
principal operating subsidiary.
Unless the context otherwise requires, the "Company" refers
to the consolidated group of Protective Life Corporation and its
subsidiaries.
RESULTS OF OPERATIONS
PREMIUMS AND POLICY FEES
The following table sets forth for the periods shown the
amount of premiums and policy fees and the percentage change from
the prior period:
<TABLE>
<CAPTION>
PREMIUMS AND POLICY FEES
NINE MONTHS ----------------------------
ENDED AMOUNT PERCENTAGE
SEPTEMBER 30 (IN THOUSANDS) INCREASE
------------ -------------- ----------
<S> <C> <C>
1993 $273,609 14.8%
1994 289,362 5.8
</TABLE>
Premiums and policy fees increased $15.8 million or 5.8% in
the first nine months of 1994 over the first nine months of 1993.
Increases in premiums and policy fees from the Agency and
Financial Institutions Divisions represent increases of $7.2
million and $12.4 million, respectively. The 1993 acquisition of
Wisconsin National Life Insurance Company ("Wisconsin National")
resulted in an $8.6 million increase in premiums and policy fees
in 1994. The reinsurance in 1993 of a block of universal life
policies resulted in a $3.4 million increase in premiums and
policy fees in 1994. The reinsurance of a block of payroll
deduction policies effective April 2, 1994 resulted in a $6.0
million increase. Decreases in older acquired blocks of policies
represented a $2.8 million decrease in premiums and policy fees.
The 1993 sale of the Company's 80% ownership interest in
Southeast Health Plan of Alabama, Inc. ("SEHP"), a Birmingham-
based health maintenance organization decreased 1994 premiums and
policy fees $19.3 million.
11
<PAGE>
NET INVESTMENT INCOME
The following table sets forth for the periods shown the
amount of net investment income and the percentage change from
the prior period:
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
NINE MONTHS ----------------------------
ENDED AMOUNT PERCENTAGE
SEPTEMBER 30 (IN THOUSANDS) INCREASE
------------ -------------- ----------
<S> <C> <C>
1993 $262,073 26.7%
1994 304,647 16.2
</TABLE>
Net investment income in the first nine months of 1994 was
$42.5 million or 16.2% higher, than the corresponding period of
the preceding year primarily due to increases in the average
amount of invested assets. Invested assets have increased
primarily due to receiving annuity and guaranteed investment
contract ("GIC") deposits and to acquisitions. Annuity and GIC
deposits are not considered revenues in accordance with generally
accepted accounting principles. These deposits are included in
the liability section of the balance sheet. The Wisconsin
National acquisition and the reinsurance of a block of universal
life policies and a block of payroll deduction policies resulted
in an increase in net investment income of $16.0 million in the
first nine months of 1994.
REALIZED INVESTMENT GAINS
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 proper matching of assets and
liabilities. Accordingly, the Company has classified its fixed
maturities as "available for sale." The sales of investments
that have occurred have largely resulted from portfolio
management decisions to maintain proper matching of assets and
liabilities.
The following table sets forth realized investment gains
for the periods shown:
<TABLE>
<CAPTION>
NINE MONTHS REALIZED
ENDED INVESTMENT GAINS
SEPTEMBER 30 (IN THOUSANDS)
------------ ----------------
<S> <C>
1993 $ 763
1994 4,855
</TABLE>
Realized investment gains for the first nine months of 1994
were $4.1 million higher than the corresponding period of 1993.
Realized investment gains in the first nine months of 1993 were
reduced by an $8.7 million increase in the Company's allowance
for uncollectible amounts on investments (primarily related to
mortgage loans) which was recorded as a realized investment loss.
In 1994, realized investment gains on the sale of equity
securities were partially offset by realized investment losses
incurred from sales of fixed maturity investments that occurred
to maintain proper matching of assets and liabilities.
12
<PAGE>
Recently, rising interest rates have caused market values
to fall below amortized cost for many of the Company's fixed
maturity investments. Therefore, some realized investment losses
may be incurred upon future sales of investments to maintain
proper matching of assets and liabilities. The Company does not
anticipate such realized investment losses will be material.
OTHER INCOME
The following table sets forth other income for the periods
shown:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED OTHER INCOME
SEPTEMBER 30 (IN THOUSANDS)
------------ --------------
<S> <C>
1993 $16,929
1994 13,394
</TABLE>
Other income consists primarily of revenues of the
Company's broker-dealer subsidiary, fees from
administrative-services-only types of group accident and health
insurance contracts, and revenues of the Company's wholly-owned
insurance marketing organizations and other small noninsurance
subsidiaries. Other income in the first nine months of 1994 was
$3.5 million lower than the corresponding period of 1993. Other
income in the first nine months of 1993 included $5.0 million
attributable to SEHP as well as a $2.7 million gain on the sale
of SEHP. Other income in the first nine months of 1994 included
a $4.2 million final payment relating to the sale of SEHP.
INCOME BEFORE INCOME TAX AND MINORITY INTEREST
The following table sets forth income or loss before income
tax and minority interest by business segment for the periods
shown:
<TABLE>
<CAPTION>
INCOME (LOSS) BEFORE INCOME TAX
AND MINORITY INTEREST
NINE MONTHS ENDED SEPTEMBER 30
-------------------------------
(IN THOUSANDS)
BUSINESS SEGMENT 1993 1994
---------------- ------- -------
<S> <C> <C>
Agency $13,921 $12,590
Group 8,623 7,045
Financial Institutions 6,061 6,825
Investment Products 2,465 3,186
Guaranteed Investment Contracts 13,931 25,276
Acquisitions 19,013 28,605
Corporate and Other (9,384) (6,535)
Unallocated Realized Investment Gains (Losses) 2,802 474
------- -------
$57,432 $77,466
------- -------
------- -------
Percentage Increase 29.8% 34.9%
</TABLE>
13
<PAGE>
Agency pretax earnings decreased $1.3 million in the first
nine months of 1994 as compared to the first nine months of 1993
primarily due to $1.8 million of expenses to develop new
marketing ventures.
Group pretax earnings were $1.6 million lower in the first
nine months of 1994 as compared to the first nine months of 1993
due to start up expenses of approximately $2.1 million related to
the establishment of a special marketing unit to sell dental
plans through mail and telephone solicitations. Lower
traditional group life and health earnings were offset by
improved earnings from dental products.
Pretax earnings of the Financial Institutions Division were
$0.8 million higher in the first nine months of 1994 as compared
to the same period in 1993 due to the growth in premiums and
policy fees.
Investment Products Division pretax earnings were $0.7
million higher in the first nine months of 1994 compared to the
same period of 1993. The Division's earnings have increased due
to the growth in annuity deposits, though the increase was
partially offset by realized investment losses from the sale of
investments to maintain proper matching of assets and
liabilities, and increased expenses of approximately $1.7 million
related to the development and introduction of a variable
annuity. Variable annuity deposits are reported in the
accompanying financial statements as "liabilities related to
separate accounts."
The Guaranteed Investment Contract ("GIC") Division had
pretax earnings of $25.3 million in the first nine months of 1994
and $13.9 million in the corresponding period of 1993. Realized
investment gains associated with this Division were $7.6 million
higher in the first nine months of 1994 as compared to the same
period last year. GIC earnings have also increased due to
improved investment results and to the growth in GIC deposits
placed with the Company. At September 30, 1994, GIC deposits
totaled $2.3 billion compared to $2.0 billion one year earlier.
Pretax earnings from the Acquisitions Division increased
$9.6 million in the first nine months of 1994 as compared to the
same period of 1993. Earnings from the Acquisitions Division are
normally 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. As previously
discussed, the Company completed its acquisition of Wisconsin
National and acquired by reinsurance a block of universal life
policies during the 1993 third quarter. These two acquisitions
represent all of the increase.
In the ordinary course of business, the Acquisitions
Division regularly considers acquisitions of smaller insurance
companies or blocks of policies. On April 2, 1994 the Division
acquired by reinsurance a small block of payroll deduction
policies. On October 3, 1994 the Division acquired, through a
coinsurance transaction, a block of 130,000 individual life
insurance policies from Reliance Standard Life Insurance Company.
The statutory purchase price paid was approximately $41.5
million. The block of policies currently generates approximately
$25 million in annual premiums and involves $110 million in
reserves.
The Corporate and Other segment consists of several small
insurance lines of business, net investment income and expenses
not identified with the preceding operating divisions (including
interest on substantially all debt), and the operations of several
small noninsurance
14
<PAGE>
subsidiaries. Pretax earnings for this segment improved $2.8 million
in the first nine months of 1994 as compared to the first nine months
of 1993 due to a decrease in expenses. Reflected in the decrease in expenses
are $1.5 million of dividends on the Company's Monthly Income Preferred
Securities (the proceeds of which were used to repay debt) which are
reported as minority interest in net income of consolidated subsidiaries
rather than expenses of the Corporate and Other segment.
Unallocated realized investment gains (losses) decreased
due to realized investment losses incurred in the first nine
months of 1994 from sales of investments that occurred to
maintain proper matching of assets and liabilities.
INCOME TAXES
The following table sets forth the effective income tax
rates for the periods shown:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED ESTIMATED EFFECTIVE
SEPTEMBER 30 INCOME TAX RATES
------------ -------------------
<S> <C>
1993 32%
1994 32
</TABLE>
In August, 1993, the corporate income tax rate was
increased from 34% to 35% which resulted in an increase in income
tax expense of $1.3 million or $0.09 per share due to a
recalculation of the Company's deferred income tax liability.
The effective income tax rate for 1993, excluding the effect of
the tax increase, was 32%. Management's estimate of the
effective income tax rate for 1994 is 32%.
NET INCOME
The following table sets forth net income and the net
income per share for the periods shown:
<TABLE>
<CAPTION>
NET INCOME
NINE MONTHS --------------------------------------
ENDED TOTAL PERCENTAGE
SEPTEMBER 30 (IN THOUSANDS) PER SHARE INCREASE
------------ -------------- --------- ----------
<S> <C> <C> <C>
1993 $37,774 $2.76 24.7%
1994 51,685 3.77 36.8
</TABLE>
Compared to the same period in 1993, net income per share
in the first nine months of 1994 increased 36.8%, reflecting
improved earnings in the GIC, Acquisitions, Financial
Institutions and Investment Products Divisions and the Corporate
and Other segment which were partially offset by lower earnings
in the Agency and Group Divisions.
15
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115 at December 31, 1993 which requires
the Company to carry its investment in fixed maturities and
certain other securities at market value instead of amortized
cost. Under SFAS No. 115, unrealized gains and losses, net of
income tax, on such investments are reported as a component of
stockholders' equity. The market values of fixed maturities
increase or decrease as interest rates fall or rise. Therefore,
although the adoption of SFAS No. 115 will not affect the
Company's operations, its reported stockholders' equity may
fluctuate significantly as interest rates change.
During the first nine months of 1994, interest rates rose
over two percentage points. Even though the Company believes its
asset/liability matching practices and certain product features
provide significant protection for the Company against the
effects of changes in interest rates, the new accounting rule
required reporting a $125.3 million decrease in stockholders'
equity at September 30, 1994 as compared to December 31, 1993.
In May 1993, the Financial Accounting Standards Board
("FASB") issued SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan." In October 1994, the FASB amended SFAS
No. 114 with the issuance of SFAS No. 118, "Accounting by
Creditors for Impairment of Loan - Income Recognition and
Disclosures." The Company anticipates that the impact of
adopting SFAS Nos. 114 and 118 on its financial condition will be
immaterial.
In October 1994, the FASB issued SFAS No. 119, "Disclosure
About Derivative Financial Instruments and Fair Value of
Financial Instruments." The Company anticipates that the impact
of adopting SFAS No. 119 on its financial condition and
presentation will be immaterial.
The American Institute of Certified Public Accountants has
issued Statement of Position 93-6, "Employers' Accounting For
Employee Stock Ownership Plans" ("ESOP"). Under certain
"grandfathering" provisions in the Statement, employers may elect
not to apply the new accounting rules to shares acquired by ESOPs
before December 31, 1992. The Company does not plan to apply the
new rules to its existing ESOP.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations usually produce a positive cash
flow. This cash flow is used to fund an investment portfolio to
finance future benefit payments including those arising from
various types of deposit contracts. Since future benefit
payments largely represent long-term obligations reserved using
certain assumed interest rates, the Company's investments are
predominantly in medium and long-term, fixed-rate investments
such as bonds and mortgage loans which provide a sufficient
return to cover these obligations.
Many of the Company's products contain surrender charges
and other features which reward persistency and penalize the
early withdrawal of funds. With respect to such products,
surrender charges are generally sufficient to cover the Company's
unamortized deferred policy acquisition costs with respect to the
policy being surrendered. GICs and certain annuity contracts
have market-value adjustments which protect the Company against
investment losses
16
<PAGE>
if interest rates are higher at the time of surrender as compared to
interest rates at the time of issue.
The Company has adopted Statement of Financial Accounting
Standards No. 115, "Accounting For Certain Investments In Debt
And Equity Securities." Accordingly, the Company's investments
in debt and equity securities are reported in the financial
statements at market value, and investments in mortgage loans are
reported at amortized cost. At September 30, 1994, the fixed
maturity investments (bonds, bank loan participations, and
redeemable preferred stocks) had a market value of $3,395.4
million, which is 4.2% below amortized cost (less allowances for
uncollectible amounts on investments) of $3,537.3 million. The
Company had $1,393.7 million in mortgage loans at September 30,
1994. While the Company's mortgage loans do not have quoted
market values, at September 30, 1994, the Company estimates the
market value of its mortgage loans to be $1,425.9 million (using
discounted cash flows from the next call date) which is 2.3% in
excess of amortized book value. Most of the Company's mortgage
loans have significant prepayment penalties. These assets are
invested for terms approximately corresponding to anticipated
future benefit payments. Thus, market value fluctuations should
not adversely affect liquidity.
At September 30, 1994, delinquent mortgage loans and
foreclosed real estate were 0.5% of assets. Bonds rated less
than investment grade were 1.2% of assets. Additionally, the
Company had bank loan participations that were less than
investment grade representing 2.9% of assets. The Company does
not expect these investments to adversely affect its liquidity or
ability to hold its other investments to maturity. The Company's
allowance for uncollectible amounts on investments was $35.9
million at September 30, 1994.
Policy loans at September 30, 1994 were $139.5 million, a
decrease of $1.6 million from December 31, 1993. Policy loan
rates are generally in the 4.5% to 8.0% range. Such rates at
least equal the assumed interest rates used for future policy
benefits.
The Company believes its asset/liability matching practices
and certain product features provide significant protection for
the Company against the effects of changes in interest rates.
However, approximately one-fourth of the Company's liabilities
relate to products (primarily whole life insurance) the
profitability of which may be affected by changes in interest
rates. The effect of such changes in any one year is not
expected to be material. Additionally, the Company believes its
asset/liability matching practices provide sufficient liquidity
to enable it to fulfill its obligation to pay benefits under its
various insurance and deposit contracts.
The Company's asset/liability matching practices involve
the monitoring of asset and liability durations for various
product lines; cash flow testing under various interest rate
scenarios; and the continuous rebalancing of assets and
liabilities with respect to yield, risk, and cash flow
characteristics.
Rising interest rates during the first nine months of 1994
caused the duration of the Company's assets to increase somewhat
above the duration of its liabilities. During the first nine
months of 1994, interest rates rose over two percentage points.
As a result, the estimated modified duration of the Company's
corporate bonds and collateralized mortgage obligations increased
from approximately 3.0 years to 3.6 years while the duration of
its mortgages and liabilities increased only slightly. The
Company responded to the duration mismatch by
17
<PAGE>
adjusting the composition of its assets to bring the durations of
assets and liabilities back into balance.
A combination of futures contracts and options on treasury
notes are currently being used as hedges for asset/liability
management of certain investments, primarily mortgage loans on
real estate, and liabilities arising from interest-sensitive
products such as GICs and annuities. Realized investment gains
and losses of such contracts are deferred and amortized over the
life of the hedged asset. The Company also uses interest rate
swap contracts to convert certain investments from a variable to
a fixed rate of interest and from a fixed to a variable rate of
interest.
In anticipation of receiving GIC and annuity deposits, the
life insurance subsidiaries were committed at September 30, 1994
to fund mortgage loans and to purchase fixed maturity and other
long-term investments in the amount of $333.7 million. The
Company's subsidiaries held $136.7 million in cash and short-term
investments at September 30, 1994. Protective Life Corporation
had an additional $1.2 million in cash and short-term investments
available for general corporate purposes.
While the Company generally anticipates that the cash flows
of its subsidiaries will be sufficient to meet their investment
commitments and operating cash needs, the Company recognizes that
investment commitments scheduled to be funded may from time to
time exceed the funds then available. Therefore, the Company has
arranged sources of credit for its insurance subsidiaries to
utilize to fund investments in such circumstances. The Company
expects that the rate received on its investments will equal or
exceed its borrowing rate. Additionally, the Company may from
time to time sell short-duration GICs to complement its cash
management practices.
On June 10, 1994, a special purpose finance subsidiary of
the Company, PLC Capital L.L.C. ("PLC Capital"), issued $55
million of 9% Cumulative Monthly Income Preferred Securities,
Series A ("MIPS"), guaranteed by the Company. PLC Capital was
formed solely to issue MIPS and other securities and lend the
proceeds thereof to the Company in exchange for subordinated
debentures of the Company. The Company has the right under the
subordinated debentures to extend interest payment periods up to
60 months, and, as a consequence, monthly dividends on the MIPS
may be deferred (but will continue to accumulate, together with
additional dividends on any accumulated but unpaid dividends at
the dividend rate) by PLC Capital during any such extended
interest payment period. The MIPS are redeemable by PLC Capital
at any time on or after June 30, 1999. The MIPS and dividends
thereon are reported in the accompanying financial statements as
"minority interest in consolidated subsidiaries." In related
transactions, the Company entered into interest-rate swap
agreements with two financial institutions which effectively
converted the MIPS from a fixed dividend rate to the floating 30
day London Interbank Offered Rate ("LIBOR") plus 60.5 basis
points, approximately 5.7% at September 30, 1994. Net proceeds
of approximately $52.3 million were used to repay a term note and
other bank borrowings.
On July 1, 1994, the Company issued $75 million of 7.95%
Senior Notes due July 1, 2004. The notes are not redeemable by
the Company prior to maturity. Net proceeds of $74.4 million
were used to repay bank borrowings; and on July 5, 1994, the
Company reduced its revolving line of credit to $53 million. In
related transactions, the Company has entered into
18
<PAGE>
interest-rate swap agreements to swap $40 million of the notes from a fixed
rate of interest to the floating 30 day LIBOR plus 34.5 basis points.
At September 30, 1994, Protective Life Corporation had
borrowed $27 million of its $53 million revolving line of credit
on short-term notes bearing interest rates averaging 5.4%.
On November 7, 1994, the Company's Board of Directors
authorized a program for the repurchase of up to 300,000 shares
of Company Common Stock.
Protective Life Corporation's cash flow is dependent on
cash dividends from its subsidiaries, payments on surplus notes,
revenues from investment, data processing, legal, and management
services rendered to the subsidiaries, and investment income. At
December 31, 1993, approximately $172 million of consolidated
stockholders' equity represented net assets of the Company's
insurance subsidiaries that cannot be transferred to the Company
in the form of dividends, loans, or advances. In addition, the
states in which the Company's insurance subsidiaries are
domiciled impose certain restrictions on the insurance
subsidiaries' ability to pay dividends to Protective Life
Corporation. Also, distributions, including cash dividends to
Protective Life Corporation from its life insurance subsidiaries,
in excess of approximately $184 million, would be subject to
federal income tax at rates then effective. The Company does not
anticipate involuntarily making distributions that would be
subject to income tax.
For the foregoing reasons and due to the expected growth of
the Company's insurance sales, the Company will retain
substantial portions of the earnings of its life insurance
subsidiaries in those companies primarily to support their future
growth. Because Protective Life Corporation's cash disbursements
have from time to time exceeded its cash receipts, such
shortfalls have been funded through various external financings.
Therefore, Protective Life Corporation may from time to time
require additional external financing.
To give the Company flexibility in connection with future
acquisition opportunities, the Company recently registered debt
securities, preferred and common stock of Protective Life
Corporation, and additional preferred securities of PLC Capital
L.L.C., under the Securities Act of 1933 on a delayed (or
"shelf") basis.
A life insurance company's statutory capital is computed
according to rules prescribed by the National Association of
Insurance Commissioners ("NAIC"), as modified by the insurance
company's state of domicile. Statutory accounting rules are
different from generally accepted accounting principles and are
intended to reflect a more conservative view by, for example,
requiring immediate expensing of policy acquisition costs. The
achievement of long-term growth will require growth in the
statutory capital of the Company's insurance subsidiaries. The
subsidiaries may secure additional statutory capital through
various sources, such as internally generated statutory earnings
or equity contributions by the Company from funds generated
through debt or equity offerings.
The NAIC's risk-based capital requirements require
insurance companies to calculate and report information under a
risk-based capital formula. These requirements are intended to
allow insurance regulators to identify inadequately capitalized
insurance companies based upon the types and mixtures of risks
inherent in the insurer's operations. The formula includes
components for asset risk, liability risk, interest rate
exposure, and other factors. Based upon
19
<PAGE>
the September 30, 1994 statutory financial reports of the Company's
insurance subsidiaries, the Company's insurance subsidiaries are
adequately capitalized under the formula.
Under insurance guaranty fund laws, in most states,
insurance companies doing business in a participating state can
be assessed up to prescribed limits for policyholder losses
incurred by insolvent companies. The Company does not believe
that any such assessments will be materially different from
amounts already provided for in the financial statements.
A number of civil jury verdicts have been returned against
life and health insurers in the state of Alabama and other
jurisdictions in which the Company does business involving the
insurers' sales practices, alleged agent misconduct, failure to
properly supervise agents, and other matters. Some of the
lawsuits have resulted in the award of substantial judgments
against the insurer, including material amounts of punitive
damages. In Alabama and some other states, juries have
substantial discretion in awarding punitive damages in these
circumstances. The Company and its subsidiaries, like other life
and health insurers, from time to time are involved in such
litigation. To date, no such lawsuit has resulted in the award
of any significant amount of damages against the Company. There
are currently several lawsuits pending against the Company in
Alabama, one of which is a class action concerning the sale of
credit insurance. Although the outcome of any litigation cannot
be predicted with certainty, the Company believes that such
litigation will not have a material adverse effect on the
financial position of the Company.
The Company is not aware of any material pending or
threatened regulatory action with respect to the Company or any
of its subsidiaries.
20
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a). Exhibit 15 - Letter re: unaudited interim
financial statements
(b). Exhibit 27 - Financial data schedule
(c). A report on Form 8-K was filed July 27, 1994, concerning the
Company's 1994 second quarter earnings press release.
A report on Form 8-K was filed July 1, 1994, concerning
the filing of certain exhibits to the Registration
Statement on Form S-3 of the Company and PLC Capital
L.L.C., with regard to the Company's 7.95% Senior Notes
due July 1, 2004.
21
<PAGE>
SIGNATURE
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 CORPORATION
Date: November 11, 1994 /s/ Jerry W. DeFoor
---------------------------
Jerry W. DeFoor
Vice President and Controller,
and Chief Accounting Officer
(Duly authorized officer)
22
<PAGE>
Exhibit 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Protective Life Corporation
We are aware that our report dated October 25, 1994, except for
Note H, as to which the date is November 7, 1994, on our review
of interim consolidated financial information of Protective Life
Corporation and subsidiaries for the period ended September 30,
1994, and included in the Company's quarterly report on Form 10-Q
for the quarter then ended, is incorporated by reference in the
Company's registration statements on Form S-8 and Form S-3.
Pursuant to Rule 436(c) under the Securities Act of 1933, this
report should not be considered a part of the registration
statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
October 25, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated statement of income condensed consolidated balance
sheet on pages 3 and 4 of the Company's Form 10-Q for the quarterly period
ended September 30, 1994, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<DEBT-HELD-FOR-SALE> 3,395,374
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 45,197
<MORTGAGE> 1,393,667
<REAL-ESTATE> 29,541
<TOTAL-INVEST> 5,164,285
<CASH> 2,519
<RECOVER-REINSURE> 91,273
<DEFERRED-ACQUISITION> 374,612
<TOTAL-ASSETS> 5,846,567
<POLICY-LOSSES> 1,520,348
<UNEARNED-PREMIUMS> 100,238
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 179,107
<NOTES-PAYABLE> 102,046
<COMMON> 7,834
0
0
<OTHER-SE> 264,292
<TOTAL-LIABILITY-AND-EQUITY> 5,846,567
289,362
<INVESTMENT-INCOME> 304,647
<INVESTMENT-GAINS> 4,855
<OTHER-INCOME> 13,394
<BENEFITS> 376,536
<UNDERWRITING-AMORTIZATION> 60,218
<UNDERWRITING-OTHER> 98,038
<INCOME-PRETAX> 77,466
<INCOME-TAX> 24,789
<INCOME-CONTINUING> 51,685<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,685
<EPS-PRIMARY> 3.77
<EPS-DILUTED> 3.77
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1> Net of minority interest in net income of consolidated subsidiaries
of $992.
</FN>
</TABLE>
