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Previous: HOUSEHOLD INTERNATIONAL INC, 10-K, 2000-03-28 |
Next: PROTECTIVE LIFE CORP, 10-K, 2000-03-28 |
For the fiscal year ended December 31, 1999 Commission File Number 1-12332
DELAWARE 95-2492236
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification 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[ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in the definitive proxy statement or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of voting stock held by nonaffiliates of the Registrant as of March 10, 2000: $1,331,738,602
Number of shares of Common Stock, $0.50 Par Value, outstanding as of March 10, 2000: 64,526,574
Portions of the Registrant's 1999 Annual Report To Share Owners (the "1999 Annual Report To Share Owners") are incorporated by reference into Parts I, II, and IV of this Report.
Portions of the Registrant's Proxy Statement dated March 29, 2000 are incorporated by reference into Part III of this Report.
PART I
Page
Item 1. Business.....................................................................................
Item 2. Properties...................................................................................
Item 3. Legal Proceedings............................................................................
Item 4. Submission of Matters to a Vote of Security Holders..........................................
PART II
Item 5. Market for the Registrant's Common
Equity and Related Share-Owner Matters......................................................
Item 6. Selected Financial Data......................................................................
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................................................
Item 7a. Quantitative and Qualitative Disclosure About Market Risk....................................
Item 8. Financial Statements and Supplementary Data..................................................
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure........................................................
PART III
Item 10. Directors and Executive Officers of the Registrant...........................................
Item 11. Executive Compensation.......................................................................
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................................................
Item 13. Certain Relationships and Related Transactions...............................................
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K................................................................................
PART I
Protective Life Corporation is a holding company, whose subsidiaries provide financial services through the production, distribution, and administration of insurance and investment products. Founded in 1907, Protective Life Insurance Company 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.
Copies of the Company’s Proxy Statement and 1999 Annual Report to Share Owners will be furnished to anyone who requests such documents from the Company. Requests for copies should be directed to: Share-Owner Relations, Protective Life Corporation, P. O. Box 2606, Birmingham, Alabama 35202, Telephone (205) 868-3573, FAX (205) 868-3541. Copies may also be requested through the Internet from the Company’s Worldwide Web Site (www.protective.com). The information incorporated herein by reference is also electronically accessible through the Internet from the “EDGAR Database of Corporate Information” on the Securities and Exchange Commission’s World Wide Web site (www.sec.gov).
The Company 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 following table shows the percentages of pretax operating income represented by each of the strategic focuses and the Corporate and Other segment.
Retirement
Specialty Savings and Corporate
Year Ended Life Insurance Investment and
December 31 Insurance Products Products Other
------------ ----------- --------- ----------- ---------
1995 53.4% 15.9% 32.7% (2.0)%
1996 50.1 11.0 37.3 1.6
1997 49.8 18.0 23.3 8.9
1998 50.9 20.1 21.7 7.3
1999 50.4 25.3 17.3 7.0
Additional information concerning the Company’s divisions may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations” and Note I to Consolidated Financial Statements in the Company’s 1999 Annual Report to Share Owners, which are incorporated herein by reference.
In the following paragraphs, the Company reports its divisional sales, new capital invested, members, and annualized premium. These statistics are used by the Company to measure the relative progress of its marketing and acquisition efforts. These statistics were derived from the Company’s various sales tracking and administrative systems and were not derived from the Company’s financial reporting systems or financial statements. These statistics attempt to measure only one of many factors that may affect future divisional profitability, and therefore are not intended to be predictive of future profitability.
A strategic focus of the Company is to expand its life insurance operations through internal growth and acquisitions. The Individual Life, West Coast and Acquisitions Divisions support this strategy.
The Individual Life Division markets level premium term and term-like insurance, universal life and variable universal life products on a national basis primarily through networks of independent insurance agents. The Division is also developing other distribution channels. These include marketing life insurance products through regional stockbrokers and banks, through direct response and worksite arrangements, and on a “private label” basis to other insurance companies and their distribution systems. The Division has experienced increased sales even though the life insurance industry is a mature industry.
The Division has two principal agent networks. The first is based on experienced independent personal producing general agents who are recruited by regional sales managers. At December 31, 1999, Protective Life Insurance Company had over 70 regional sales managers located throughout the United States. Approximately 43% of the Division’s 1999 sales came from this distribution system.
The Division also distributes specialty insurance products in the life insurance brokerage market through another wholly-owned subsidiary, Empire General Life Assurance Corporation, representing approximately 42% of sales.
For the entire Division, sales through stockbrokers and banks represented 10% of sales, and direct response represented 4%.
The following table shows the Individual Life Division's sales measured by new premium.
Year Ended
December 31 Sales
(dollars in millions)
---------------- -----------------------
1995 $36.3
1996 45.4
1997 48.7
1998 71.2
1999 80.4
On November 1, 1999 the Company acquired a non-controlling equity interest in Matrix Direct, Inc.,
("Matrix") a privately-owned firm located in San Diego. Matrix is a leading direct marketer of life and other
insurance products. Matrix offers a full complement of direct marketing services, including market research,
media buying, fulfillment, a nationally-licensed sales group and new business processing. The Company believes
that the Matrix fulfillment and processing platform has significant potential for serving Internet marketers,
banks, brokerage firms and innovative life agents who desire to participate in direct marketing or lead
generation ventures with Matrix. The Company has the obligation, under certain conditions, to acquire additional
equity interest in Matrix.
The Division also includes ProEquities, Inc. (“ProEquities”), an affiliated, full-service, securities broker-dealer. ProEquities primarily recruits financial planners, including some members of the Division’s field force who are licensed to sell securities to affiliate with it. ProEquities makes available variable insurance products, mutual funds, and other investment products to its licensed representatives to offer to their clients and customers. At December 31, 1999, ProEquities had approximately 900 licensed representatives.
On June 3, 1997, the Company acquired West Coast Life Insurance Company (“West Coast”). Headquartered in San Francisco, West Coast sells universal life and level premium term and term-like insurance products in the life insurance brokerage market and in the “bank owned life insurance” (“BOLI”) market.
The West Coast Division primarily utilizes a distribution system comprised of brokerage general agencies (“BGAs”) who recruit a network of independent life agents. At December 31, 1999, the Division worked with approximately 160 BGAs located throughout the United States. This distribution system represented approximately 66% of the Division’s 1999 sales.
The Division also offers corporate owned life insurance products to the BOLI market through an independent marketing organization which specializes in this market. The products are sold to smaller and regional banks, and represent approximately 34% of the Division’s sales.
The following table shows the West Coast Division’s sales measured by new premium including sales prior to the Company’s acquisition of West Coast for comparison purposes.
Year Ended BGA BOLI Total
December 31 Sales Sales Sales
------------ ------- -------- --------
(dollars in millions)
1996 $10.3 $ 4.6 $14.9
1997 19.5 10.3 29.8
1998 22.1 18.5 40.6
1999 39.0 19.8 58.8
The Company is an active participant in the consolidation of the life insurance industry. The Acquisitions Division focuses on acquiring, converting, and servicing policies acquired from other companies. The Division’s primary focus is on life insurance policies that were sold to individuals. These acquisitions may be accomplished through acquisitions of companies or through the reinsurance of blocks of policies from other insurers. Forty transactions have been closed by the Division since 1970, including 13 since 1989. Blocks of policies acquired through the Division are usually administered as “closed” blocks; i.e., no new policies are being marketed. Therefore, the amount of insurance in force for a particular acquisition is expected to decline with time due to lapses and deaths of the insureds.
Most acquisitions closed by the Division do not include the acquisition of an active sales force. In transactions where some marketing capacity was included, the Division generally either ceased future marketing efforts or redirected those efforts to another Division of the Company. However, in the case of the acquisition of West Coast which was closed by the Acquisitions Division, the Company elected to continue the marketing of new policies and to operate and report West Coast as a separate division of the Company.
The Division believes that its highly focused and disciplined approach to the acquisition process and its extensive experience in the assimilation, conservation, and servicing of purchased policies give it a significant competitive advantage over many other companies that attempt to make similar acquisitions. The Division expects acquisition opportunities to continue to be available as the life insurance industry continues to consolidate; however, management believes that the Company may face increased competition for future acquisitions.
Total revenues and income before income tax from the Acquisitions Division are expected to decline with time unless new acquisitions are made. Therefore, the Division’s revenues and earnings may fluctuate from year to year depending upon the level of acquisition activity.
The following table shows the number of transactions closed by the Acquisitions Division and the approximate amount of new (statutory) capital invested for each year in which an acquisition was made.
Number New
Year Ended of Capital
December 31 Transactions Invested
------------- --------------- ---------------------
(dollars in millions)
1995 1 $ 16.6
1996 3 47.1
1997 1 (1) 116.8 (1)
1998 1 77.8
-----------
(1) West Coast
Although acquisition opportunities were pursued, no transactions were completed in 1999.
From time to time other of the Company's Divisions have acquired companies and blocks of policies which are included in their respective results.
A second strategic focus of the Company is to participate in specialized segments of the insurance industry that offer attractive growth opportunities. The Dental and Consumer Benefits and Financial Institutions Divisions support this strategy.
In 1997, the Division (formerly known as the Group Division) substantially exited from the traditional group major medical business, fulfilling the Division's strategy to focus primarily on dental and related products. Accordingly, the Division was renamed.
The Division's primary strategic emphasis is on indemnity and prepaid dental products. The Division was a pioneer in developing indemnity dental products for the voluntary payroll deduction market. In 1995, the Division entered the prepaid dental market when it acquired DentiCare of Florida, Inc. The Division's strategy is to promote a "dual choice" option by offering prepaid dental products through the Division's indemnity dental distribution channels.
The Division has significantly grown its prepaid dental business through acquisitions. The Division acquired two small prepaid dental plans in 1996, and three small plans in 1997. In September 1998, the Division acquired United Dental Care, Inc. ("United Dental Care"), a leading provider of prepaid dental coverages. With the United Dental Care acquisition, the Division has become the third largest provider of prepaid dental coverages.
The following table shows the approximate number of the Dental and Consumer Benefits Division's members in all of its dental programs and annualized dental premium in-force at December 31.
Annualized Dental
Members Premium
------------- ----------------------
(in millions) (dollars in millions)
1995 0.6 $ 74.8
1996 0.8 101.2
1997 1.2 146.1
1998 3.0 321.6
1999 2.7 326.7
Members declined in 1999 primarily due to the exit from unprofitable lines of business within United Dental Care.
The Division offers a variety of discounted fee-for-service, club-based programs to individual consumers and groups through its Protective Consumer Direct where enrolled consumers have access to a network of providers who have agreed to a discounted fee schedule.
The Division also has group life, group disability, and individual cancer coverages.
The Financial Institutions Division specializes in marketing credit life and disability insurance products through banks, consumer finance companies and automobile dealers. The Division is one of the largest independent writers of credit insurance in the United States. The majority of these policies cover consumer loans made by financial institutions located primarily in the southeastern United States and automobile dealers throughout the United States. The demand for credit life and credit health insurance is related to the general level for consumer loans.
The Division markets through employee field representatives, independent brokers and wholly-owned subsidiaries. The Company believes it has been a beneficiary of a “flight to quality,” as financial institutions and automobile dealers increasingly prefer to do business with insurers having quality products, strong balance sheets and high-quality training and service capabilities.
In September 1997, the Division acquired the Western Diversified Group. The Western Diversified Group markets credit insurance and related products through automobile dealers primarily in the midwestern United States. The Western Diversified Group includes a small property and casualty insurer that sells automobile extended service contracts, which the Division has begun to market nationally through its other distribution channels.
The Division has also coinsured closed blocks of credit policies in 1996 and 1997, and in 1999 the Division recaptured a closed block of credit policies that it had previously ceded to another insurer.
The following table shows the Financial Institutions Division’s sales measured by new premium including sales of Western Diversified since the date of acquisition.
Year Ended
December 31 Sales
--------------- ----------------------
(dollars in millions)
1995 $136.3
1996 147.2
1997 189.3
1998 273.5
1999 283.4
A significant portion of the Division’s sales are reinsured with producer-owned reinsurers.
On January 20, 2000, the Company acquired Lyndon Insurance Group (“Lyndon”). Lyndon manufacturers and markets a variety of specialty insurance products, including credit life insurance, credit disability insurance, and vehicle and marine service agreements. Lyndon distributes products on a national basis through financial institutions and automobile dealers. Lyndon had new premium sales of approximately $200 million in its continuing product lines in 1999 and has total assets of approximately $500 million. Lyndon’s home office is in St. Louis, Missouri.
A third strategic focus of the Company is to offer products that respond to the shift in consumer preference to savings products brought about by demographic trends as “baby-boomers” move into the saving stage of their life cycle. The two Divisions that support this strategy are the Stable Value Products and Investment Products Divisions.
The Stable Value Products Division (formerly the Guaranteed Investment Contracts (“GICs”) Division) markets GICs to 401(k) and other qualified retirement savings plans. GICs are generally contracts which specify a return on deposits for a specified period and often provide flexibility for withdrawals at book value (hence, “stable value”) in keeping with the benefits provided by the plan. The demand for GICs is related to the relative attractiveness of the “fixed rate” investment option in a 401(k) plan compared to the equity-based investment options available to plan participants. The Division also markets related products, including fixed and floating rate funding agreements offered to the trustees of municipal bond proceeds, bank trust departments and money market funds, and long-term annuity contracts offered to fund certain state obligations. The Division’s emphasis is on a consistent and disciplined approach to product pricing and asset/liability management, careful underwriting of early withdrawal risks and maintaining low distribution and administration costs.
In August 1999, the market for funding agreements was disrupted when an unrelated insurer was placed under insurance department supervision due to its inability to redeem approximately $6.8 billion of contracts which contractholders could terminate upon seven or thirty day's notice.
Most GIC contracts and funding agreements written by the Division have maturities of three to five years. At December 31, 1999, the Division had $55 million, $50 million, and $101 million of contracts which may be terminated upon seven, thirty, and ninety days notice, respectively.
The rate of growth in the Division’s account balances has slowed as the amount of maturing contracts has increased relative to the amount of sales. The following table shows the Stable Value Products Division’s sales and account balances (consisting of Stable Value Contract and certain annuity account balances).
Year Ended Account
December 31 Sales Balances
---------------------- ---------- ------------
(dollars in millions)
1995 $751 $2,524
1996 686 2,627
1997 696 2,869
1998 827 2,879
1999 970 2,850
The Investment Products Division manufactures, sells, and supports fixed and variable annuity products. These products are primarily sold through stockbrokers and ProEquities, but are also sold through financial institutions and the Individual Life Division’s sales force.
The Division offers modified guaranteed annuities which guarantee an interest rate for a fixed period. Because contract values are “market-value adjusted” upon surrender prior to maturity, these products afford the Company a measure of protection from changes in interest rates. Since 1994, the Division has offered variable annuities which offer the policyholder the opportunity to invest in various investment accounts.
The following table shows the Investment Products Division's sales. The demand for annuity products is related to the general level of interest rates and performance of the equity markets.
Year Ended Fixed Variable Total
December 31 Annuities Annuities Annuities
------------ --------- ----------- -------------
(dollars in millions)
1995 $118 $189 $307
1996 199 169 368
1997 180 324 504
1998 97 472 569
1999 350 361 711
The following table shows the Investment Products account balances.
Year Ended Fixed Variable Total
December 31 Annuities Annuities Annuities
------------ --------- ----------- -------------
(dollars in millions)
1995 $1,105 $ 392 $1,497
1996 1,192 625 1,817
1997 1,229 1,057 2,286
1998 1,105 1,555 2,660
1999 1,269 2,085 3,354
The Company has an additional business segment referred to as Corporate and Other. The Corporate and Other segment primarily consists of net investment income and expenses not attributable to the Divisions described above (including net investment income on capital and interest on substantially all debt). This segment also includes earnings from various investment-related transactions, the Company’s participation in a joint venture which owns a small life insurance company in Hong Kong and the operations of several small subsidiaries. The earnings of this segment may fluctuate from year to year.
On March 22, 2000, the Company and its joint venture partner completed their previously announced sale of CRC Protective Life Insurance Company of Hong Kong.
The types of assets in which the Company may invest are influenced by various state laws which prescribe qualified investment assets. Within the parameters of these laws, the Company invests its assets giving consideration to such factors as liquidity needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure.
A significant portion of the Company’s bond portfolio is invested in mortgage-backed securities. Mortgage-backed securities are constructed from pools of residential mortgages, and may have cash flow volatility as a result of changes in the rate at which prepayments of principal occur with respect to the underlying loans. Prepayments of principal on the underlying residential loans can be expected to accelerate with decreases in interest rates and diminish with increases in interest rates. Due to the potential cash flow volatility of mortgage-backed securities, the Company has focused on sequential, planned amortization class (“PAC”), targeted amortization class (“TAC”) securities, and Non-Accelerated Securities (“NAS”). These types have less cash flow volatility than other types of mortgage-backed securities. The Company has not invested in the higher risk tranches of mortgage-backed securities (except mortgage-backed securities issued in securitization transactions sponsored by the Company). In addition, the Company has entered into hedging transactions to reduce the volatility in market value of its mortgage-backed securities.
The table below shows a breakdown of the Company’s mortgage-backed securities portfolio by type at December 31, 1999. PACs pay down according to a schedule. TACs pay down in amounts approximating a targeted schedule. NAS receive no principal payments in the first five years, after which NAS receive an increasing percentage of pro rata principal payments until the tenth year, after which NAS receive principal as principal of the underlying mortgages is received. Sequentials, like PACs, TACs, and NAS receive scheduled payments with any “excess” cash flow going to repay the earliest maturing tranches first. All four of these types of structured mortgage-backed securities give the Company some measure of protection against both prepayment and extension risk.
Accretion directed securities have a stated maturity but may repay more quickly. Pass through securities receive principal as principal of the underlying mortgages is received. Support tranches are designed to receive cash after the more stable tranches (i.e., PACs, TACs, and sequentials) are satisfied. The CMBS are commercial mortgage-backed securities issued in securitization transactions sponsored by the Company, in which the Company securitized portions of its mortgage loan portfolio.
Percentage of
Mortgage-Backed
Type Securities
----------- --------------------
PAC 14.3%
TAC 6.7
NAS 14.5
Sequential 26.3
Accretion Directed 7.9
Pass Through 15.9
Support 1.6
CMBS 12.8
------------------
100.0%
==================
The Company obtains ratings of its fixed maturities from Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Corporation (“S&P”). If a bond is not rated by Moody’s or S&P, the Company uses ratings from the Securities Valuation Office of the National Association of Insurance Commissioners (“NAIC”), or the Company rates the bond based upon a comparison of the unrated issue to rated issues of the same issuer or rated issues of other issuers with similar risk characteristics. At December 31, 1999, approximately 99.6% of bonds were rated by Moody’s, S&P, or the NAIC.
At December 31, 1999, approximately $6,041.0 million of the Company’s $6,310.6 million bond portfolio was invested in U.S. Government or agency-backed securities or investment grade bonds and only approximately $269.6 million of its bond portfolio was rated less than investment grade, of which $81.5 million were securities issued in Company-sponsored commercial mortgage loan securitizations.
Risks associated with investments in less than investment grade debt obligations may be significantly higher than risks associated with investments in debt securities rated investment grade. Risk of loss upon default by the borrower is significantly greater with respect to such debt obligations than with other debt securities because these obligations may be unsecured or subordinated to other creditors. Additionally, there is often a thinly traded market for such securities and current market quotations are frequently not available for some of these securities. Issuers of less than investment grade debt obligations usually have higher levels of indebtedness and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than investment-grade issuers.
The Company also invests a significant portion of its portfolio in mortgage loans. Results for these investments have been excellent due to careful management and a focus on a specialized segment of the market. The Company generally does not lend on speculative properties and has specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers. The average size of loans made during 1999 was $3.1 million. The average size mortgage loan in the Company’s portfolio is approximately $2.0 million. The largest single loan amount is $17.0 million.
The following table shows a breakdown of the Company’s mortgage loan portfolio by property type at December 31, 1999:
Percentage of
Mortgage Loans
Property Type on Real Estate
------------------- -----------------
Retail 79%
Apartments 8
Office Buildings 6
Warehouses 6
Other 1
-------
Total 100%
=======
Retail loans are generally on strip shopping centers located in smaller towns and anchored by one or more strong regional or national retail stores. The anchor tenants enter into long-term leases with the Company's borrowers. These centers provide the basic necessities of life, such as food, pharmaceuticals, and clothing, and have been relatively insensitive to changes in economic conditions. The following are some of the largest anchor tenants (measured by the Company's exposure) in the strip shopping centers at December 31, 1999:
Percentage of
Mortgage Loans
Anchor Tenants on Real Estate
------------------------------ -------------------
Food Lion, Inc. 4%
Winn Dixie Stores, Inc. 3
Wal-Mart Stores, Inc. 2
Rite-Aid Corporation 2
CVS Corporation 2
The Company’s mortgage lending criteria generally require that the loan-to-value ratio on each mortgage be at or under 75% at the time of origination. Projected rental payments from credit anchors (i.e., excluding rental payments from smaller local tenants) generally exceed 70% of the property’s projected operating expenses and debt service.
For several years the Company has offered a commercial loan product under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. Approximately $501.2 million of the Company’s mortgage loans have this participation feature.
Many of the Company’s mortgage loans have call or interest rate reset provisions between 3 and 10 years. However, if interest rates were to significantly increase, the Company may be unable to call the loans or increase the interest rates on its existing mortgage loans commensurate with the significantly increased market rates.
At December 31, 1999, $22.9 million or 1.2% of the mortgage loan portfolio was nonperforming. It is the Company’s policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company’s general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place.
In 1996, the Company sold approximately $554 million of its mortgage loans in a securitization transaction. In 1997, the Company sold approximately $445 million of its loans in a second securitization transaction. In 1998 the Company securitized $146 million of its mortgage loans and in 1999 the Company securitized $263 million. The securitizations’ senior tranches were sold, and the Company retained the junior tranches. The Company continues to service the securitized mortgage loans.
As a general rule, the Company does not invest directly in real estate. The investment real estate held by the Company consists largely of properties obtained through foreclosures or the acquisition of other insurance companies. In the Company’s experience, the appraised value of a foreclosed property often approximates the mortgage loan balance on the property plus costs of foreclosure. Also, foreclosed properties often generate a positive cash flow enabling the Company to hold and manage the property until the property can be profitably sold.
The Company has an allowance for uncollectible amounts on investments. This allowance was $21.1 million at December 31, 1999.
The following table shows the investment results of the Company for the years 1995 through 1999:
Cash, Accrued Percentage
Investment Income, Earned on Realized
Year Ended and Investments Net Average of Cash Investment
December 31 at December 31 Investment Income and Investments Gains (Losses)
------------ --------------------- ------------------- ------------------- ----------------
(dollars in thousands)
1995 $6,097,455 $475,924 8.2% $1,612
1996 6,743,770 517,483 8.1 5,510
1997 8,192,538 591,376 8.0 830
1998 8,718,455 636,396 7.7 3,121
1999 8,877,038 676,401 7.6 (1,057)
For further information regarding the Company’s investments, the maturity of and the concentration of risk among the Company’s invested assets, derivative financial instruments, and liquidity, see Notes A and B to the Consolidated Financial Statements, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in the Company’s 1999 Annual Report to Share Owners.
The Company’s total consolidated life insurance in force at December 31, 1999 was $129.8 billion. The following table shows sales by face amount and insurance in force for the Company’s divisions.
Year Ended December 31
---------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------------------------------------
(dollars in thousands)
New Business Written
Individual Life..................... $16,305,923 $ 16,188,344 $10,588,594 $ 9,245,002 $ 7,564,983
West Coast.......................... 10,612,852 5,050,309 1,984,928
Dental and Consumer Benefits........ 123,648 113,056 124,230 115,748 119,357
Financial Institutions.............. 6,665,219 5,257,957 4,183,216 3,956,581 3,563,177
---------------------------------------------------------------------------
Total.......................... $ 33,707,642 $ 26,609,666 $16,880,968 $13,317,331 $11,247,517
==========================================================================
Business Acquired
West Coast.......................... $10,237,731
Acquisitions........................ $ 7,787,284 $ 1,286,673 $ 6,129,159
Financial Institutions.............. $ 620,000 3,364,617 1,607,463
---------------------------------------------------------------------------
Total.......................... $ 620,000 $ 7,787,284 $13,602,348 $ 2,894,136 $ 6,129,159
==========================================================================
Insurance in Force at End of Year(1)
Individual Life..................... $ 67,026,950 $ 50,587,419 $39,715,608 $35,765,841 $32,500,935
West Coast.......................... 24,600,268 15,498,799 12,004,967
Acquisitions........................ 22,054,734 27,606,592 20,955,836 20,037,857 16,778,359
Dental and Consumer Benefits........ 6,065,604 6,665,815 6,393,076 6,054,947 6,371,313
Financial Institutions.............. 10,069,030 9,632,466 10,183,997 7,468,761 6,233,256
---------------------------------------------------------------------------
Total.......................... $129,816,586 $109,991,091 $89,253,484 $69,327,406 $61,883,863
==========================================================================
(1) Reinsurance assumed has been included; reinsurance ceded (1999-$92,566,755; 1998-$64,846,246;
1997-$34,139,554; 1996-$18,840,221; 1995-$17,524,366) has not been deducted.
The ratio of voluntary terminations of individual life insurance to mean individual life insurance in force, which is determined by dividing the amount of insurance terminated due to lapses during the year by the mean of the insurance in force at the beginning and end of the year, adjusted for the timing of major acquisitions and assumptions was:
Ratio of
Year Ended Voluntary
December 31 Terminations
-------------- ------------------
1995........................................ 6.9%
1996........................................ 6.4
1997........................................ 6.9
1998........................................ 6.4
1999........................................ 6.0
Net terminations reflect voluntary lapses, some of which may be due to the replacement of the Company’s products with competitors’ products. Also, a higher percentage of voluntary lapses typically occurs in the first 15 months of a policy, and accordingly, lapses will tend to increase or decrease in proportion to the change in the amount of new insurance written during the immediately preceding periods.
The amount of investment products in force is measured by account balances. The following table shows guaranteed investment contract and annuity account balances. Most of the variable annuity account balances are reported in the Company’s financial statements as liabilities related to separate accounts.
Guaranteed Modified
Year Ended Investment Guaranteed Fixed Variable
December 31 Contracts Annuities Annuities Annuities
--------------- --------------- ---------------- ------------- -------------
(dollars in thousands)
1995 $2,451,693 $741,849 $472,656 $ 392,237
1996 2,474,728 862,747 390,461 624,714
1997 2,684,676 926,071 453,418 1,057,186
1998 2,691,697 818,566 432,237 1,554,969
1999 2,680,009 941,692 391,085 2,085,072
The underwriting policies of the Company’s insurance subsidiaries are established by management. With respect to individual insurance, the subsidiaries use information from the application and, in some cases, inspection reports, attending physician statements, or medical examinations to determine whether a policy should be issued as applied for, rated, or rejected. Medical examinations of applicants are required for individual life insurance in excess of certain prescribed amounts (which vary based on the type of insurance) and for most individual insurance applied for by applicants over age 50. In the case of “simplified issue” policies, which are issued primarily through the Financial Institutions Division and the Individual Life Division in the payroll deduction market, coverage is rejected if the responses to certain health questions contained in the application indicate adverse health of the applicant. For other than “simplified issue” policies, medical examinations are requested of any applicant, regardless of age and amount of requested coverage, if an examination is deemed necessary to underwrite the risk. Substandard risks may be referred to reinsurers for full or partial reinsurance of the substandard risk.
The Company’s insurance subsidiaries require blood samples to be drawn with individual insurance applications for coverage at age 16 and above except in the payroll deduction market where the face amount must be $100,000 or more before blood testing is required. Blood samples are tested for a wide range of chemical values and are screened for antibodies to the HIV virus. Applications also contain questions permitted by law regarding the HIV virus which must be answered by the proposed insureds.
Group insurance underwriting policies are administered by experienced group underwriters. The underwriting policies are designed for single employer groups. Initial premium rates are based on prior claim experience and manual premium rates with relative weights depending on the size of the group and the nature of the benefits.
The Company’s insurance subsidiaries cede insurance to other insurance companies. The ceding insurance company remains liable with respect to ceded insurance should any reinsurer fail to meet the obligations assumed by it. The Company sets a limit on the amount of insurance retained on the life of any one person. In the individual lines it will not retain more than $500,000, including accidental death benefits, on any one life; for group insurance, the maximum amount retained on any one life is $100,000. In many cases the retention is less. At December 31, 1999, the Company had insurance in force of $129.8 billion of which approximately $92.6 billion was ceded to reinsurers.
Over the past several years, the Company’s reinsurers have reduced the net cost of reinsurance to the Company. Consequently, the Company has increased the amount of reinsurance which it cedes on newly-written individual life insurance policies, and has also ceded a portion of the mortality risk of existing business of the Individual Life, West Coast, and Acquisitions Divisions. Although the Company does not anticipate increases to occur, the reinsurance premium rates in many of the Company’s reinsurance agreements are not guaranteed, and could be increased by the reinsurer.
The applicable insurance laws under which the Company’s insurance subsidiaries operate require that each insurance company report policy liabilities to meet future obligations on the outstanding policies. These liabilities are the amounts which, with the additional premiums to be received and interest thereon compounded annually at certain assumed rates, are calculated in accordance with applicable law to be sufficient to meet the various policy and contract obligations as they mature. These laws specify that the liabilities shall not be less than liabilities calculated using certain named mortality tables and interest rates.
The policy liabilities and accruals carried in the Company’s financial reports (presented on the basis of accounting principles generally accepted in the United States) differ from those specified by the laws of the various states and carried in the insurance subsidiaries’ statutory financial statements (presented on the basis of statutory accounting principles mandated by state insurance regulations). For policy liabilities other than those for universal life policies, annuity contracts, GICs, and funding agreements, these differences arise from the use of mortality and morbidity tables and interest rate assumptions which are deemed under generally accepted accounting principles to be more appropriate for financial reporting purposes than those required for statutory accounting purposes; from the introduction of lapse assumptions into the calculation; and from the use of the net level premium method on all business. Policy liabilities for universal life policies, annuity contracts, GICs, and funding agreements are carried in the Company’s financial reports at the account value of the policy or contract.
Existing federal laws and regulations affect the taxation of the Company’s products. Income tax payable by policyholders on investment earnings is deferred during the accumulation period of certain life insurance and annuity products. Congress has from time to time considered proposals that, if enacted, would have had an adverse impact on the federal income tax treatment of such products, or would increase the tax-deferred status of competing products. In addition, life insurance products are often used to fund estate tax obligations. If the estate tax were eliminated, the demand for certain insurance products would be adversely affected.
The Company’s insurance subsidiaries are taxed by the federal government in a manner similar to companies in other industries. However, certain restrictions on consolidating recently acquired life insurance companies and on consolidating life insurance company income with non-insurance income are applicable to the Company; thus, the Company is not able to consolidate all of the operating results of its subsidiaries for federal income tax purposes.
Under pre-1984 tax law, certain income of the Company was not taxed currently, but was accumulated in a memorandum account designated as “Policyholders’ Surplus” to be taxed only when such income was distributed to share owners or when certain limits on accumulated amounts were exceeded. Consistent with current tax law, amounts accumulated in Policyholders’ Surplus have been carried forward, although no accumulated income may be added to these accounts. As of December 31, 1999, the aggregate accumulation in the Policyholders’ Surplus account was $70.5 million. Under current income tax laws, the Company does not anticipate paying income tax on amounts in the Policyholders’ Surplus accounts.
Life and health insurance is a mature industry. In recent years, the industry has experienced little growth in life insurance sales, though the aging population has increased the demand for retirement savings products. Life and health insurance is a highly competitive industry, and the Company encounters significant competition in all lines of business from other insurance companies, many of which have greater financial resources than the Company, as well as competition from other providers of financial services.
The life and health insurance industry is consolidating, with larger, potentially more efficient organizations emerging from consolidation. Also, some mutual insurance companies are converting to stock ownership which will give them greater access to capital markets. Additionally, commercial banks, insurance companies, and investment banks may now combine, provided certain requirements are satisfied.
The Company’s ability to compete is dependent upon, among other things, its ability to attract and retain distribution channels to market its insurance and investment products, its ability to develop competitive and profitable products, its ability to maintain low unit costs, and its maintenance of strong ratings from rating agencies. Irrational competition from other insurers could adversely affect the Company’s competitive position.
The Company’s insurance subsidiaries are subject to government regulation in each of the states in which they conduct business. Such regulation is vested in state agencies having broad administrative power dealing with many aspects of the insurance business, including premium rates, marketing practices, advertising, policy forms, and capital adequacy, and is concerned primarily with the protection of policyholders rather than share owners.
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, for example, requiring immediate expensing of policy acquisition costs and more conservative computations of policy liabilities. 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 the December 31, 1999 statutory financial reports, the Company’s insurance subsidiaries are adequately capitalized under the formula.
The Company’s insurance subsidiaries are required to file detailed annual reports with the supervisory agencies in each of the jurisdictions in which they do business and their business and accounts are subject to examination by such agencies at any time. Under the rules of the NAIC, insurance companies are examined periodically (generally every five years) by one or more of the supervisory agencies on behalf of the states in which they do business. To date, no such insurance department examinations have produced any significant adverse findings regarding any insurance company subsidiary of the Company.
Under insurance guaranty fund laws in most states, insurance companies doing business in such a state can be assessed up to prescribed limits for policyholder losses incurred by insolvent or failed insurance companies. Although the Company cannot predict the amount of any future assessments, most insurance guaranty fund laws currently provide that an assessment may be excused or deferred if it would threaten an insurer’s financial strength. The Company’s insurance subsidiaries were assessed immaterial amounts in 1999, which will be partially offset by credits against future state premium taxes.
In addition, many states, including the states in which the Company’s insurance subsidiaries are domiciled, have enacted legislation or adopted regulations regarding insurance holding company systems. These laws require registration of and periodic reporting by insurance companies domiciled within the jurisdiction which control or are controlled by other corporations or persons so as to constitute an insurance holding company system. These laws also affect the acquisition of control of insurance companies as well as transactions between insurance companies and companies controlling them. Most states, including Tennessee, where Protective Life Insurance Company (“Protective Life”) is domiciled, require administrative approval of the acquisition of control of an insurance company domiciled in the state or the acquisition of control of an insurance holding company whose insurance subsidiary is incorporated in the state. In Tennessee, the acquisition of 10% of the voting securities of an entity is generally deemed to be the acquisition of control for the purpose of the insurance holding company statute and requires not only the filing of detailed information concerning the acquiring parties and the plan of acquisition, but also administrative approval prior to the acquisition.
The Company’s insurance subsidiaries are subject to various state statutory and regulatory restrictions on the insurance subsidiaries’ ability to pay dividends to Protective Life Corporation. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval. Dividends in larger amounts are subject to approval by the insurance commissioner of the state of domicile. The maximum amount that would qualify as ordinary dividends to the Company by Protective Life in 2000 is estimated to be $175.5 million. No assurance can be given that more stringent restrictions will not be adopted from time to time by states in which the Company’s insurance subsidiaries are domiciled, which restrictions could have the effect, under certain circumstances, of significantly reducing dividends or other amounts payable to the Company by such subsidiaries without affirmative prior approval by state regulatory authorities.
The Company’s insurance subsidiaries act as fiduciaries and are subject to regulation by the United States Department of Labor when providing a variety of products and services to employee benefit plans governed by the Employee Retirement Income Security Act (“ERISA”). Severe penalties are imposed on insurers that breach their fiduciary duties to the plans under ERISA.
Certain policies, contracts and annuities offered by the Company’s insurance subsidiaries are subject to regulation under the federal securities laws administered by the Securities and Exchange Commission. The federal securities laws contain regulatory restrictions and criminal, administrative and private remedial provisions.
Additional issues related to regulation of the Company and its insurance subsidiaries are discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in the Company’s 1999 Annual Report to Share Owners.
The NAIC has adopted the Codification of Statutory Accounting Principles (“Codification”). The Codification changes current statutory accounting rules in several areas. The Company has not estimated the potential effect the Codification will have on the statutory capital of the Company’s insurance subsidiaries. The Codification will become effective January 1, 2001.
The NAIC has adopted a model regulation, commonly referred to as “Triple X” (i.e., Roman numeral XXX), for universal life and level premium term and term-like insurance products. Over half of the states have already adopted Triple X effective January 1, 2000 or have indicated they plan to adopt Triple X in 2000. Triple X potentially increases the amount of regulatory capital employed in the sale of these products. Insurers may react to Triple X by changing product features and/or premium rates, or by maintaining the status quo. Therefore, the regulatory and competitive environments are unclear. The Company has assessed the impact of Triple X on its products and has introduced new products in response to Triple X. The Company cannot predict what effect Triple X may have on its life insurance sales, or how its response to Triple X will affect its competitive position.
Legislation has been enacted that permits commercial banks, insurance companies and investment banks to combine, provided certain requirements are satisfied. While the Company cannot predict the impact of this legislation, it could cause the Company to experience increased competition as larger, potentially more efficient organizations emerge from such combinations.
During 1999, an unrelated insurer was placed under insurance department supervision due to its inability to redeem approximately $6.8 billion in contracts under which contract holders could terminate the contracts upon seven or thirty days notice. The Company cannot predict what effect this unrelated insurer’s difficulties will have on certain stable value product markets in which the Company participates.
During 1999, most financial services companies, including the Company, experienced a decrease in the market price of their common stock. Although the Company believes it has sufficient internally generated capital to fund its immediate growth and capital needs, a lower stock price may limit the Company’s ability to raise capital to fund other growth opportunities and acquisitions.
The President’s Fiscal Year 2001 budget contains proposals that, if enacted, could adversely affect the life insurance industry. The proposals represent $12.9 billion in new taxes on the life insurance industry. Most of the proposals were proposed and defeated in the 2000 budget. One proposal would tax the balances accumulated in a tax memorandum account designated as Policyholders’ Surplus. The Company’s accumulation in this account at December 31, 1999 was approximately $70.5 million. A second proposal would require insurers to capitalize higher percentages of acquisition expenses for tax purposes, resulting in the earlier payment of tax. A third proposal would reduce the attractiveness of corporate-owned life insurance products. The Company has not estimated the potential effect these proposals may have on the Company.
On March 22, 2000, the Company and its joint venture partner completed their previously announced sale of CRC Protective Life Insurance Company of Hong Kong.
In March 2000, a small insurer, to whom the Company has ceded certain accident and health policies, was placed into rehabilitation by its state of domicile. Based upon the information currently available, the Company does not believe this development will have a material adverse effect on the Company.
At December 31, 1999 the Company had approximately 2,628 authorized positions, including approximately 1,520 in Birmingham, Alabama. Most employees are covered by contributory major medical, dental, group life, and long-term disability insurance plans. The cost of these benefits to the Company in 1999 was approximately $5.0 million. In addition, substantially all of the employees are covered by a pension plan. The Company also matches employee contributions to its 401(k) Plan and makes discretionary profit sharing contributions for employees not otherwise covered by a bonus or sales incentive plan. See Note K to Consolidated Financial Statements.
The Company’s Home Office is located at 2801 Highway 280 South, Birmingham, Alabama. This campus includes the original 142,000 square-foot building which was completed in 1976 and a second contiguous 220,000 square-foot building which was completed in 1985. In addition, parking is provided for approximately 1,200 vehicles. During 2000, the Company will begin construction of a third contiguous building which will have approximately 315,000 square feet and parking for approximately 1,560 vehicles.
The Company leases administrative and marketing office space in approximately 45 cities including approximately 137,355 square feet in Birmingham, with most leases being for periods of three to five years. The aggregate annualized rent is approximately $6.8 million.
There are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which the Company or any of its subsidiaries is a party or of which any of the Company’s properties is the subject. See also “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in the Company’s 1999 Annual Report to Share Owners for certain information relating to litigation involving the Company.
No matter was submitted during the fourth quarter of 1999 to a vote of security holders of the Company.
The Company’s Common Stock is listed and principally traded on the New York Stock Exchange (NYSE symbol: PL). The following table sets forth the highest and lowest closing prices of the Company’s Common Stock, $0.50 par value, as reported by the New York Stock Exchange during the periods indicated, along with the dividends paid per share of Common Stock during the same periods. Closing prices and dividends have been adjusted for the Company’s two-for-one stock split effective April 1, 1998.
Range Dividends
------------------- ----------
High Low
------ -------
1998
First Quarter........................... $36.50 $28.94 $.10
Second Quarter.......................... 38.38 31.75 .11
Third Quarter........................... 40.88 30.00 .11
Fourth Quarter.......................... 40.13 28.63 .11
1999
First Quarter........................... $39.81 $32.75 $.11
Second Quarter.......................... 40.00 34.00 .12
Third Quarter........................... 39.44 28.50 .12
Fourth Quarter.......................... 36.50 28.63 .12
On March 10, 2000, there were approximately 2,600 owners of record of Company Common Stock.
The Company (or its predecessor) has paid cash dividends each year since 1926 and each quarter since 1934. The Company expects to continue to pay cash dividends, subject to the earnings and financial condition of the Company and other relevant factors. The ability of the Company to pay cash dividends is dependent in part on cash dividends received by the Company from its life insurance subsidiaries. See Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in the Company’s 1999 Annual Report to Share Owners. Such subsidiary dividends are restricted by the various insurance laws of the states in which the subsidiaries are incorporated. See Item 1 - “Business - Regulation”.
Year Ended December 31
----------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- -------------- -------------- -------------- -----------
(dollars in thousands, except per share amounts)
INCOME STATEMENT DATA
Premium and policy fees $ 1,299,317 $ 1,122,010 $ 856,549 $ 802,327 $ 765,749
Reinsurance ceded (538,033) (459,215) (334,214) (308,174) (333,173)
------------- ------------- ---------- -------- ----------
Net of reinsurance ceded 761,284 662,795 522,335 494,153 432,576
Net investment income................. 676,401 636,396 591,376 517,483 475,924
Realized investment gains(losses)..... (1,057) 3,121 830 5,510 1,612
Other income.......................... 97,254 64,103 32,784 20,857 11,768
------------- -------------- ----------- ----------- -----------
Total revenues.............. 1,533,882 1,366,415 1,147,325 1,038,003 921,880
Benefits and expenses................. 1,278,107 1,145,691 967,952 898,262 800,846
Income tax expense.................... 92,079 77,845 60,987 47,512 41,152
Minority interest..................... 10,606 12,098 6,393 3,217 3,217
Extraordinary loss(1) 1,763
------------- -------------- ----------- ----------- -----------
Net income............................ $ 151,327 $ 130,781 $ 111,993 $ 89,012 $ 76,665
============= ============ =========== ============ =========
PER SHARE DATA(1)(2)
Operating income per share - basic(3).$ 2.36 $ 2.04 $ 1.79 $ 1.45 $ 1.34
Income before extraordinary
loss - basic............. $ 2.34 $ 2.06 $ 1.79 $ 1.47 $ 1.34
Net income per share - basic..........$ 2.31 $ 2.06 $ 1.79 $ 1.47 $ 1.34
Average shares outstanding - basic.. 65,604,311 63,521,587 62,429,250 60,570,782 57,320,224
Operating income per share - diluted(3)$ 2.34 $ 2.02 $ 1.78 $ 1.44 $ 1.33
Income before extraordinary
loss - diluted...................$ 2.32 $ 2.04 $ 1.78 $ 1.46 $ 1.33
Net income per share - diluted........$ 2.29 $ 2.04 $ 1.78 $ 1.46 $ 1.33
Average shares
outstanding - diluted............ 66,161,367 64,087,744 62,849,618 60,969,664 57,705,698
Cash dividends........................$ .47 $ .43 $ .39 $ .35 $ .31
Share-owners' equity..................$ 13.41 $ 14.65 $ 12.30 $ 9.99 $ 9.15
Share-owners' equity excluding net
unrealized gains and losses
on investments...................$ 15.68 $ 13.80 $ 11.30 $ 9.88 $ 8.14
December 31
-------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ------------- -------------- -------------- -------------
(dollars in thousands)
BALANCE SHEET DATA
Total assets..........................$ 12,994,164 $11,989,495 $ 10,511,635 $ 8,263,205 $ 7,231,257
Long-term debt........................$ 181,023 $ 152,286 $ 120,000 $ 168,200 $ 115,500
Total debt............................$ 236,023 $ 172,035 $ 120,000 $ 181,000 $ 115,500
9% Cumulative Monthly Income
Preferred Securities, Series A $ 55,000 $ 55,000 $ 55,000 $ 55,000
8.25% Trust Originated Preferred
Securities $ 75,000 $ 75,000 $ 75,000
6.5% FELINE PRIDES $ 115,000 $ 115,000 $ 115,000
Share-owners' equity $ 865,223 $ 944,194 $ 758,197 $ 615,316 $ 526,557
Share-owners' equity excluding
unrealized gains and losses
on investments $ 1,011,304 $ 889,137 $ 696,470 $ 608,628 $ 468,694
(1) Due to early extinguishment of debt,net of income tax.
(2) Prior periods have been restated to reflect a two-for-one stock split on April 1, 1998.
(3) Net income excluding realized investment gains and losses and related amortization and extraordinary loss.
Information regarding the Company’s financial condition and results of operations is included under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 1999 Annual Report to Share Owners and is incorporated herein by reference.
The information required by this item is included in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" - Liquidity and Capital Resources in the Company’s 1999 Annual Report to Share Owners and is incorporated herein by reference.
The financial statements and supplementary data for the Company and its subsidiaries, which are included under the caption “Consolidated Financial Statements” in the Company’s 1999 Annual Report to Share Owners, are incorporated herein by reference.
Our report on the consolidated financial statements of Protective Life Corporation and subsidiaries has been incorporated by reference in this Form 10-K from page 29 of the 1999 Annual Report to Share Owners of Protective Life Corporation. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the index on page 28 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
None
Except for the information concerning executive officers of the Company set forth below, the information called for by this Item 10 is incorporated herein by reference to the section entitled “Election of Directors and Information about Nominees” in the Company’s definitive proxy statement for the Annual Meeting of Share Owners, May 1, 2000, to be filed with the Securities and Exchange Commission by the Company pursuant to Regulation 14A within 120 days after the end of its 1999 fiscal year.
The executive officers of the Company are as follows:
Name Age Position
--------------------- -------------- --------------------------------------
Drayton Nabers, Jr. 59 Chairman of the Board and
Chief Executive Officer and Director
John D. Johns 48 President, Chief Operating Officer
and Director
R. Stephen Briggs 50 Executive Vice President
Jim E. Massengale 57 Executive Vice President,
Acquisitions
A. S. Williams III 63 Executive Vice President,
Investments and Treasurer
Danny L. Bentley 42 Senior Vice President, Dental
and Consumer Benefits
Richard J. Bielen 39 Senior Vice President, Investments
Thomas Davis Keyes 47 Senior Vice President, Information Services
Carolyn King 49 Senior Vice President,
Investment Products
Deborah J. Long 46 Senior Vice President, Secretary and
General Counsel
Steven A. Schultz 46 Senior Vice President,
Financial Institutions
Wayne E. Stuenkel 46 Senior Vice President
and Chief Actuary
Judy Wilson 42 Senior Vice President,
Stable Value Products
Jerry W. DeFoor 47 Vice President and Controller,
and Chief Accounting Officer
J. William Hamer, Jr. 55 Vice President, Human Resources
All executive officers are elected annually and serve at the pleasure of the Board of Directors. None of the executive officers is related to any director of the Company or to any other executive officer.
Mr. Nabers has been Chairman of the Board and Chief Executive Officer and a Director of the Company since August 1996. From May 1994 to August 1996, Mr. Nabers was Chairman of the Board, President and Chief Executive Officer and a Director of the Company. Mr. Nabers has served in various capacities with the Company and its subsidiaries since 1979 and has served as a member of the Board since August 1982. He is also a director of Energen Corporation, National Bank of Commerce of Birmingham, and Alabama National Bancorporation.
Mr. Johns has been President and Chief Operating Officer of the Company since August 1996 and a Director of the Company since May 1997. He was Executive Vice President and Chief Financial Officer of the Company from October 1993 to August 1996. He is also a director of Alabama National Bancorporation and John H. Harland Company.
Mr. Briggs has been Executive Vice President of the Company since October 1993 and has responsibility for the Individual Life Division. Mr. Briggs has been associated with the Company and its subsidiaries since 1971.
Mr. Massengale has been Executive Vice President, Acquisitions of the Company since August 1996 and also has responsibility for the West Coast Division. He was Senior Vice President of the Company from May 1992 to August 1996. Mr. Massengale has been employed by the Company and its subsidiaries since 1983.
Mr. Williams has been Executive Vice President, Investments and Treasurer of the Company since August 1996. He was Senior Vice President, Investments and Treasurer of the Company from July 1981 to August 1996. Mr. Williams has been employed by the Company and its subsidiaries since 1964.
Mr. Bentley has been Senior Vice President, Dental and Consumer Benefits of the Company since August 1996. From May 1989 to August 1996, he served as Vice President, Group Marketing of Protective Life. Mr. Bentley has been employed by the Company and its subsidiaries since 1980.
Mr. Bielen has been Senior Vice President, Investments of the Company since August 1996. From August 1991 to August 1996, he served as Vice President, Investments of Protective Life.
Mr. Keyes has been Senior Vice President, Information Services of the Company since April 1999. He was Vice President, Information Services of the Company from May 1993 to April 1999. He has been employed by Protective Life Corporation in various capacities since 1982.
Ms. King has been Senior Vice President, Investment Products of the Company since April 1995.
Ms. Long has been Senior Vice President, Secretary and General Counsel of the Company since November 1996. She was Senior Vice President and General Counsel of the Company from February 1994 to November 1996.
Mr. Schultz has been Senior Vice President, Financial Institutions of the Company since March 1993. Mr. Schultz has been employed by the Company and its subsidiaries since 1989.
Mr. Stuenkel has been Senior Vice President and Chief Actuary of the Company since March 1987. Mr. Stuenkel is a Fellow of the Society of Actuaries and has been employed by the Company and its subsidiaries since 1978.
Ms. Wilson has been Senior Vice President, Stable Value Products of the Company since January 1995. Ms. Wilson has been employed by the Company and its subsidiaries since 1991.
Mr. DeFoor has been Vice President and Controller, and Chief Accounting Officer of the Company since April 1989. Mr. DeFoor is a certified public accountant and has been employed by the Company and its subsidiaries since 1982.
Mr. Hamer has been Vice President, Human Resources of the Company since 1981.
These executive officers also serve as executive officers and/or directors of various other Company subsidiaries.
Directors and executive officers of the Company are required to file reports with the Securities and Exchange Commission showing changes in their beneficial ownership of the Company’s Common Stock. The Company has reviewed copies of these reports and written representations from the individuals required to file reports. Based on this review, we believe that each of the Company’s directors and executive officers has complied with the reporting requirements in 1999, with three exceptions. Reports for Messrs. Cabaniss and Cooper for the acquisition of 400 shares of Common Stock issued to them as part of their annual director compensation were inadvertently filed late. One report for Mr. French for the acquisition of 2,000 shares of Common Stock by Dunn Investment Company, of which he is the Chairman of the Board, President and Chief Executive Officer, was also inadvertently filed late.
The information called for by Items 11 through 13 is incorporated herein by reference from the Company’s definitive proxy statement for the Annual Meeting of Share Owners, May 1, 2000, to be filed with the Securities and Exchange Commission by the Company pursuant to Regulation 14A within 120 days after the end of its 1999 fiscal year.
(a) The following documents are filed as part of this report:
1. Financial Statements:
The following financial statements set forth in the
Company's 1999 Annual Report to Share Owners as indicated in
the following table are incorporated by reference (see Exhibit 13).
Report of Independent Accountants.......................................................
Consolidated Statements of Income for the years
ended December 31, 1999, 1998, and 1997...............................................
Consolidated Balance Sheets as of December 31,
1999 and 1998 ........................................................................
Consolidated Statements of Share-Owners' Equity
for the years ended December 31, 1999, 1998, and 1997.................................
Consolidated Statements of Cash Flows
for the years ended December 31, 1999, 1998, and 1997.................................
Notes to Consolidated Financial Statements..............................................
2. Financial Statement Schedules:
The Report of Independent Accountants which covers the financial
statement schedules appears on page 24 of this report. The following
schedules are located in this report on the pages indicated.
Schedule II - Condensed Financial Information
of Registrant.........................................................................
Schedule III - Supplementary Insurance Information......................................
Schedule IV - Reinsurance...............................................................
All other schedules to the consolidated financial statements
required by Article 7 of Regulation S-X are not required under
the related instructions or are inapplicable and therefore have
been omitted.
3. Exhibits:
Included as exhibits are the items listed below. The Company
will furnish a copy of any of the exhibits listed upon the payment
of $5.00 per exhibit to cover the cost of the Company in furnishing
the exhibit.
Item Number Document
----------- ---------
*3(a) 1998 Restated Certificate of Incorporation of the Company filed with the
Secretary of State of Delaware on November 12, 1998, filed as Exhibit 3(a) to
the Company's Annual Report on Form 10-K/A for the year ended December 31, 1998.
*3(b) 1998 Restated By-laws of the Company effective November 2, 1998
filed as Exhibit 3(b) to the Company's Annual Report on Form 10-K/A for
the year ended December 31, 1998.
4(a) Reference is made to Exhibit 3(a) above.
4(b) Reference is made to Exhibit 3(b) above.
*4(h) Rights Agreement, dated as of August 7, 1995, between the Company and The Bank
of New York as successor to AmSouth Bank (formerly, AmSouth Bank N.A.), as
Rights Agent filed as Exhibit 2 to the Company's Form 8-K Current Report
filed August 7, 1995 and filed as Exhibit 1 to the Company's Form 8-A
Registration Statement filed August 7, 1995.
*4(i) Rights Certificate filed as Exhibit 1 to the Company's Form 8-A filed
August 7, 1995.
*4(j) Certificate of Trust of PLC Capital Trust I filed as Exhibit 4(a) to the
Company's Registration Statement on Form S-3 filed April 11, 1997 (No.
333-25027).
*4(k) Declaration of Trust of PLC Capital Trust I filed as Exhibit 4(b) to the
Company's Registration Statement on Form S-3 filed April 11, 1997 (No.
333-25027).
*4(l) Form of Amended and Restated Declaration of Trust for PLC Capital Trust I
filed as Exhibit 4(c) to Amendment No. 1, filed April 21, 1997, to the
Company's Registration Statement on Form S-3 (No. 33-25027).
*4(m) Form of Preferred Security Certificate for PLC Capital Trust I (included as
Exhibit A-1 of Exhibit 4(k)).
*4(n) Form of Guarantee with respect to Preferred Securities of PLC Capital Trust I
filed as Exhibit 4(i) to the Company's Registration Statement on Form S-3
filed April 11, 1997 (No.333-25027).
*4(o) Certificate of Trust of PLC Capital Trust II filed as Exhibit 4(aa) to
the Company's Registration Statement on Form S-3 filed July 8, 1997 (No.
333-30905).
*4(p) Declaration of Trust of PLC Capital Trust II filed as Exhibit 4(dd) to
the Company's Registration Statement on Form S-3 filed July 8, 1997 (No.
333-30905).
*incorporated by reference
*4(q) Form of Amended and Restated Declaration of Trust of PLC Capital II filed as
Exhibit 4(gg) to the Company's Registration Statement on Form S-3 filed
July 8, 1997 (No. 333-30905).
*4(r) Form of Preferred Security Certificate for PLC Capital Trust II (included
in Exhibit 4(q)).
*4(s) Form of Guarantee Agreement with respect to Preferred Securities to be issued by
PLC Capital Trust II filed as Exhibit 4(v) to the Company's Registration
Statement on Form S-3 filed July 8, 1997 (No. 333-30905).
*4(t) Form of Purchase Contract Agreement between the Company and The Bank of New
York, as Purchase Contract Agent, filed as Exhibit 4(y) to the Company's
Current Report on Form 8-K filed November 20, 1997.
*4(u) Form of Pledge Agreement, among the Company, The Bank of New York, as Purchase
Contract Agent, and the Chase Manhattan Bank, as Collateral Agent, filed as
Exhibit 4(z) to the Company's Current Report on Form 8-K filed
November 20, 1997.
*10(a)+ The Company's Annual Incentive Plan (effective as of January1, 1997)
filed as Exhibit 10(b) to the Company's Form 10-Q Quarterly Report filed
May 14, 1997.
*10(b)+ The Company's 1992 Performance Share Plan filed as Exhibit 10(b)(3) to the
Company's Form 10-Q Quarterly Report filed May 15, 1992.
*10(b)(1)+ First Amendment to the Company's 1992 Performance Share Plan and filed as
Exhibit 10(b)(1) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
*10(b)(2)+ The Company's 1997 Long-Term Incentive Plan (formerly, the "1997
Performance Share Plan"), filed as Exhibit 10(a) to the Company's Form
10-Q Quarterly Report filed May 15, 1998.
*10(c)+ Excess Benefit Plan amended and restated as of January 1, 1989 filed as
Exhibit 10(c)(1) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1991.
*10(d)+ Form of Indemnity Agreement for Directors filed as Exhibit 19.1 to the
Company's Form 10-Q Quarterly Report filed August 14, 1986.
*10(d)(1)+ Form of Indemnity Agreement for Officers filed as Exhibit 10(d)(1) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
*incorporated by reference
+Management contract or compensatory plan or arrangement
*10(e) Reference is made to Exhibit 4(g) above.
*10(f)+ Form of the Company's Employment Continuation Agreement filed as Exhibit
10(a) to the Company's Form 10-Q Quarterly Report filed September 30,
1997.
*10(g)+ The Company's Deferred Compensation Plan for Directors Who Are Not
Employees of the Company as amended through March 3, 1997, filed as
Exhibit 10(e) to the Company's Form 10-Q Quarterly Report filed May 14,
1997.
*10(h)+ The Company's Deferred Compensation Plan for Officers as amended through
March 3, 1997, filed as Exhibit 10(d) to the Company's Form 10-Q
Quarterly Report filed May 14, 1997.
*10(i)+ The Company's 1996 Stock Incentive Plan as amended through March 3, 1997,
filed as Exhibit 10(c) to the Company's Form 10-Q Quarterly Report filed
May 14, 1997.
*10(i)(1)+ The Company's specimen letter confirming grants under the Company's 1996
Stock Incentive Plan, filed as Exhibit 10(2) to the Company's Form 10-Q
Quarterly Report filed November 13, 1996.
13 Selected portions of the 1999 Annual Report To Share Owners which are
incorporated herein by reference.
21 Organization Chart of the Company and Affiliates.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney.
27 Financial Data Schedule.
99 Safe Harbor for Forward-Looking Statements.
*incorporated by reference
+Management contract or compensatory plan or arrangement
(b) Current Reports on Form 8-K:
(1) Form 8-K, dated February 11, 1999
- Item 5
- Item 7
(2) Form 8-K, dated April 23, 1999
- Item 5
- Item 7
(3) Form 8-K, dated July 27, 1999
- Item 5
- Item 7
(4) Form 8-K, dated October 26, 1999
- Item 5
- Item 7
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PROTECTIVE LIFE CORPORATION
By:/s/Drayton Nabers, Jr.
----------------------
Drayton Nabers, Jr.
Chairman of the Board and
Chief Executive Officer
March 28, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Signature Capacity in Which Signed Date
/s/Drayton Nabers, Jr. Chairman of the Board and March 28, 2000
DRAYTON NABERS, JR. Chief Executive Officer
(Principal Executive Officer)
and Director
/s/John D. Johns President and Chief Operating Officer March 28, 2000
JOHN D. JOHNS (Principal Financial Officer)
and Director
/s/Jerry W. DeFoor Vice President and Controller, March 28, 2000
JERRY W. DEFOOR and Chief Accounting Officer
(Principal Accounting Officer)
* Director March 28, 2000
WILLIAM J. CABANISS, JR.
* Director March 28, 2000
JOHN J. MCMAHON, JR.
* Director March 28, 2000
A. W. DAHLBERG
* Director March 28, 2000
RONALD L. KUEHN, JR.
* Director March 28, 2000
JAMES S. M. FRENCH
* Director March 28, 2000
ROBERT A. YELLOWLEES
* Director March 28, 2000
ELAINE L. CHAO
* Director March 28, 2000
DONALD M. JAMES
* Director March 28, 2000
J. GARY COOPER
* Director March 28, 2000
H. CORBIN DAY
*Drayton Nabers, Jr., by signing his name hereto, does sign this document on behalf of each of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed with the Securities and Exchange Commission.
By:/s/Drayton Nabers, Jr.
-----------------------
DRAYTON NABERS, JR.
Attorney-in-fact
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
STATEMENTS OF INCOME
PROTECTIVE LIFE CORPORATION (Parent Company)
Years Ended December 31, 1999, 1998, and 1997
(in thousands)
1999 1998 1997
-------- -------- ------
REVENUES
Dividends from subsidiaries* $ 18,980 $ 77,639 $ 5,317
Service fees from subsidiaries* 82,559 56,683 54,712
Net investment income 10,506 9,295 10,433
Realized investment gains (losses) (5,817) 985 (994)
Other income (loss) 1,327 (406) 2,186
---------- ---------- ----------
107,555 144,196 71,654
--------- --------- ---------
EXPENSES
Operating and administrative 44,074 36,737 36,309
Interest - subsidiaries* 17,217 20,351 11,303
Interest - others 12,215 3,541 8,148
--------- ---------- ----------
73,506 60,629 55,760
--------- --------- ---------
INCOME BEFORE FEDERAL INCOME
TAX AND OTHER ITEMS BELOW 34,049 83,567 15,894
INCOME TAX EXPENSE 11,136 9,843 2,342
--------- ---------- ---------
INCOME BEFORE EQUITY IN UNDISTRIBUTED
INCOME OF SUBSIDIARIES 22,913 73,724 13,552
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARIES* 130,177 57,057 98,441
INCOME BEFORE EXTRAORDINARY LOSS
Extraordinary loss on early
extinguishment of debt, net of tax 1,763
---------- ---------- ----------
NET INCOME $151,327 $130,781 $111,993
======== ======== ========
*Eliminated in consolidation.
See notes to condensed financial statements.
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
BALANCE SHEETS
PROTECTIVE LIFE CORPORATION (Parent Company)
(in thousands)
December 31
------------------------
1999 1998
---------- -----------
ASSETS
Investments:
Fixed maturities $ 20,791 $ 26,000
Long-term investments 17,616 11,424
Short-term investments 2,000
Investments in subsidiaries (equity method)* 1,323,233 1,380,593
---------- ----------
1,363,640 1,418,017
Cash 1,623 515
Accrued investment income 2,160
Receivables from subsidiaries* 27,324 22,578
Property and equipment, net 741 1,007
Accrued income taxes 8,850
Other 8,571 10,590
------------ -----------
Total Assets $1,404,059 $1,461,557
========== ==========
LIABILITIES
Accrued expenses and other liabilities $ 69,690 $ 62,609
Accrued income taxes 10,816
Deferred income taxes 28,769 20,834
Debt:
Banks 114,000 48,500
Senior Notes 75,000 75,000
Medium-Term Notes 44,685 44,923
Subsidiaries* 195,876 265,497
------------- ----------
Total Liabilities 538,836 517,363
------------- ----------
SHARE-OWNERS' EQUITY
Preferred Stock
Junior Participating Cumulative
Preferred Stock
Common Stock 34,667 34,667
Additional paid-in capital 256,057 254,705
Treasury stock (12,960) (13,140)
Stock Held in Trust (621)
Unallocated stock in Employee Stock Ownership Plan (4,043) (4,277)
Retained earnings (including undistributed
income of subsidiaries: 1999 - $814,940; 1998 - $684,763) 738,204 617,182
Accumulated other comprehensive income
Net unrealized gains (losses) on
investments (all from subsidiaries, net
of income tax: 1999 - $(78,659); 1998 - $29,646) (146,081) 55,057
-------------- ------------
Total Share-Owners' Equity 865,223 944,194
-------------- -----------
$ 1,404,059 $1,461,557
-------------------------- =========== ==========
*Eliminated in consolidation.
See notes to condensed financial statements.
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
STATEMENTS OF CASH FLOWS
PROTECTIVE LIFE CORPORATION (Parent Company)
Years Ended December 31, 1999, 1998, and 1997
(in thousands)
1999 1998 1997
------------ -------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $151,327 $130,781 $111,993
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in undistributed net income
of subsidiaries* (130,177) (57,057) (98,441)
Deferred income taxes 7,935 15,446 (5,668)
Accrued income taxes 19,666 (8,850) (7,636)
Accrued expenses 4,380 14,507 4,443
Accrued investment income (2,160)
Receivables from subsidiaries (8,746) (7,342) 2,118
Other (net) 5,884 361 4,708
----------- ----------- ----------
Net cash provided by operating activities 48,109 87,846 11,517
--------- --------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of and/or additional investments
in subsidiaries* (28,638) (115,960) (112,448)
Return of capital from subsidiaries 14,621 1,280
Principal payments received on loan
to subsidiary* 4,000 2,000
Change in fixed maturities and long-term
investments 301 (2,242) (2,993)
Change in short-term investments (2,000) 7,000 (7,000)
---------- --------- -----------
Net cash used in investing activities (11,716) (109,202) (121,161)
--------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under line of
credit arrangements and long-term debt 106,800 52,000 79,901
Principal payments on line of credit
arrangements and debt (41,538) (3,577) (140,900)
Borrowing (repayment of subsidiary debt) (69,621) 195,876
Purchase of Treasury Stock (1,839)
Purchase of Common Stock (621)
Dividends to Share Owners (30,305) (26,857) (24,113)
--------- --------- -----------
Net cash provided by (used in) financing
activities (35,285) 21,566 108,925
--------- --------- ----------
INCREASE (DECREASE) IN CASH 1,108 210 (719)
CASH AT BEGINNING OF YEAR 515 305 1,024
--------- ---------- -----------
CASH AT END OF YEAR $ 1,623 $ 515 $ 305
======== ========== ===========
*Eliminated in consolidation.
See notes to condensed financial statements.
SCHEDULE II - CONDENSED FINANCIAL INFORMATION
OF REGISTRANT
PROTECTIVE LIFE CORPORATION (Parent Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
The Company publishes consolidated financial statements that are its primary financial statements. Therefore,
these parent company condensed financial statements are not intended to be the primary financial statements of
the Company, and should be read in conjunction with the consolidated financial statements and notes thereto of
Protective Life Corporation and subsidiaries.
NOTE 1 - DEBT
At December 31, 1999, the Company had borrowed $59.0 million under its $70.0 million revolving line of credit and
had an additional $55.0 million of bank borrowings. $75.0 million of Senior Notes due 2004, $44.7 million of
Medium-Term Notes due 2011, $77.3 million of subordinated debentures due 2027 and $118.6 million of subordinated
debentures due 2003 were outstanding at December 31, 1999. The subordinated debentures were issued to affiliates
in connection with the issuance by such affiliates of 8.25% Trust Originated Preferred Securities (TOPrS), and
6.5% Trust Originated Preferred Securities (TOPrS) issued as part of the Company's FELINE PRIDES, respectively.
NOTE 2 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1999 1998 1997
-------- -------- ------
CASH PAID (RECEIVED) DURING THE YEAR FOR:
Interest Paid to Non-Affiliates $ 12,215 $ 9,285 $ 8,244
Interest Paid to Subsidiary* 17,218 20,351 10,768
---------- ------- -------
$ 29,433 $29,636 $19,012
========= ======= =======
Income Taxes (reduced by amounts received
from affiliates under a tax sharing agreement) $(18,584) $ (464) $(2,026)
========= ======== =======
NONCASH INVESTING AND FINANCING ACTIVITIES
Reissuance of Treasury Stock to ESOP $ 440 $ 205 $ 85
========== ======== =========
Unallocated Stock in ESOP $ 234 $ 315 $ 333
========== ======== ========
Reissuance of Treasury Stock $ 1,092 $ 3,097 $ 1,383
========= ======= =======
Issuance of Common Stock $85,126
=======
NOTE 3 - SUBSIDIARY SURPLUS DEBENTURES
Protective Life Insurance Company ("Protective Life") has issued surplus debentures to the Company in order to
finance acquisitions and growth. At December 31, 1999, the balance of the surplus debentures was $14.0 million.
The surplus debentures are included in receivables from subsidiaries. Protective Life must obtain the approval
of the Tennessee Commissioner of Insurance before it may pay interest or repay principal on the surplus
debentures.
*Eliminated in consolidation.
SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES
(in thousands)
COL. A COL. B COL. C COL. D COL. E COL. F COL. G COL. H COL. I COL. J
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
GIC and
Future Annuity Net Amortization
Deferred Policy Deposits and Premiums Benefits of Deferred
Policy Benefits Other and Net and Policy Other
Acquisition and Unearned Policyholders' Policy Investment Settlement Acquisition Operating
Segment Costs Claims Premiums Funds Fees Income(1) Expenses Costs Expenses(1)
------- ----------- -------- -------- -------------- ------------ ------------ ---------- --------------- -----------
Year Ended
December 31, 1999:
Individual Life $372,359 $1,210,187 $ 338 $ 17,159 $ 92,506 $ 60,070 $ 74,455 $ 23,434 $ 68,923
West Coast 200,605 1,279,554 0 74,831 23,207 78,128 73,176 6,047 (2,649)
Acquisitions 235,903 1,374,445 558 260,267 114,866 129,806 129,581 19,444 31,967
Dental 25,819 130,463 3,076 79,032 398,175 17,946 265,221 10,704 110,190
Financial Institutions 51,339 149,746 504,965 9,045 107,969 24,506 55,899 24,718 57,382
Stable Value Products 1,156 167,415 0 2,680,009 0 210,208 175,290 744 4,709
Investment Products 124,335 254,492 0 1,320,453 24,248 106,645 88,642 19,820 21,014
Corporate and Other 8 2,852 34 88 313 49,092 2,318 1 17,077
------------- ------------ ----------- -------------- ----------- ---------- ---------- ------------ ----------
TOTAL $1,011,524 $4,569,154 $508,971 $4,440,884 $761,284 $ 676,401 $864,582 $104,912 $308,613
========== ========== ======== ========== ======== ========= ======== ======== ========
Year Ended
December 31, 1998:
Individual Life $ 301,941 $1,054,253 $ 355 $ 10,802 $126,166 $ 55,903 $106,306 $ 30,543 $ 48,231
West Coast 144,455 1,006,280 0 77,254 22,380 63,492 54,617 4,924 5,354
Acquisitions 255,347 1,383,759 553 233,846 96,735 112,154 112,051 18,894 28,194
Dental 23,836 114,693 5,728 81,572 286,235 15,995 195,903 10,352 78,809
Financial Institutions 39,212 215,451 385,006 105,434 112,272 25,313 52,629 28,526 55,197
Stable Value Products 1,448 172,674 0 2,691,697 0 213,136 178,745 735 2,876
Investment Products 75,177 194,726 0 1,233,528 18,809 105,890 85,045 17,213 19,637
Corporate and Other 9 944 39 88 198 44,513 469 1 10,440
--------------------------------------------------------- ----------- ---------- ------------------------- ----------
TOTAL $ 841,425 $4,142,780 $391,681 $4,434,221 $662,795 $636,396 $785,765 $111,188 $248,738
=========== ========== ======== ========== ======== ======== ======== ======== ========
Year Ended
December 31, 1997:
Individual Life $252,321 $ 920,924 $ 356 $ 16,334 $ 127,480 $ 54,647 $114,678 $ 27,374 $ 37,921
West Coast 108,126 739,463 0 95,495 14,122 30,194 28,304 961 6,849
Acquisitions 138,052 1,025,340 1,437 311,151 102,635 110,155 116,506 16,606 24,050
Dental 22,459 120,925 6,541 80,564 193,239 24,202 134,384 15,711 52,365
Financial Institutions 52,837 159,422 391,085 6,791 72,263 16,462 27,643 30,812 21,120
Stable Value Products 1,785 180,690 0 2,684,676 0 211,915 179,235 618 3,946
Investment Products 56,074 177,150 0 1,184,268 12,367 105,321 82,019 15,110 15,749
Corporate and Other 1,083 380 1,438 183 229 38,480 339 35 15,617
----------------------------------- -------------- ------------ ---------- ------------------------ ----------
TOTAL $632,737 $3,324,294 $400,857 $4,379,462 $522,335 $591,376 $683,108 $107,227 $177,617
======== ========== ======== ========== ======== ======== ======== ======== ========
(1) Allocations of Net Investment Income and Other Operating Expenses are based on a number of
assumptions and estimates and results would change if different methods were applied.
SCHEDULE IV - REINSURANCE
PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES
(dollars in thousands)
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------ ------ ------ ------ ---------
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed
Amount Companies Companies Amount to Net
----------- ------------ --------------- ------------- -----------
Year Ended
December 31, 1999:
Life insurance
in force $120,577,512 $92,566,755 $ 9,239,074 $ 37,249,831 24.8%
============ =========== ========== =========== =====
Premiums and
policy fees:
Life insurance $ 540,430 $ 364,680 $ 131,856 $ 307,606 42.9% -----
Accident/health
insurance 565,545 172,852 27,266 419,959 6.5% -----
Property and liability
insurance 34,110 501 110 33,719 .3%
--------------- ---------------- ----------------- ---------------
TOTAL $ 1,140,085 $ 538,033 $ 159,232 $ 761,284
=============== ============== =============== ==============
Year Ended
December 31, 1998:
Life insurance
in force $ 91,980,657 $ 64,846,246 $ 18,010,434 $ 45,144,845 39.9%
============= ============= ============== ============= ====
Premiums and
policy fees:
Life insurance $ 537,000 $ 294,363 $ 87,964 $ 330,601 26.6%
Accident/health
insurance 456,378 164,852 14,279 305,805 4.7%
Property and liability
insurance 26,389 0 0 26,389 0.0%
------------ ---------------- ------------- ------------
TOTAL $ 1,019,767 $ 459,215 $ 102,243 $ 662,795
============= ============= =============== ============
Year Ended
December 31, 1997:
Life insurance
in force $78,240,282 $ 34,139,554 $ 11,013,202 $ 55,113,930 20.0%
=========== =========== =========== =========== ====
Premiums and
policy fees:
Life insurance $ 387,108 $ 147,184 $ 74,738 $ 314,662 23.8%
Accident/health
insurance 378,704 187,539 10,510 201,675 5.3%
Property and liability
insurance 6,139 176 35 5,998 0.6%
-------------- --------------- ---------------- --------------
TOTAL $ 771,951 $ 334,899 $ 85,283 $ 522,335
============ ============ ============= ============
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