-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, I5qk0pD88H0tF76Jw9amrZnYtAtmFycZ3eGqBPQGSntZB+h39s6p3LwZha1DQutZ KqXiXDUv8HcNhkoXkY+Qog== 0000310826-96-000008.txt : 19961115 0000310826-96-000008.hdr.sgml : 19961115 ACCESSION NUMBER: 0000310826-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROTECTIVE LIFE INSURANCE CO CENTRAL INDEX KEY: 0000310826 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 630169720 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-31940 FILM NUMBER: 96660711 BUSINESS ADDRESS: STREET 1: 2801 HIGHWAY 280 SOUTH CITY: BIRMINGHAM STATE: AL ZIP: 35223 BUSINESS PHONE: 2058799230 MAIL ADDRESS: STREET 1: PO BOX 2606 CITY: BIRMINGHAM STATE: AL ZIP: 35202 10-Q 1 FORM 10-Q ------------------------------------ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Numbers 33-31940; 33-39345; 33-57052; 333-02249 Protective Life Insurance Company (Exact name of registrant as specified in its charter) Tennessee 63-0169720 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 2801 Highway 280 South Birmingham, Alabama 35223 (Address of principal executive offices and zip code) (205) 879-9230 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO Number of shares of Common Stock, $1.00 par value, outstanding as of November 8, 1996: 5,000,000 shares. The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format pursuant to General Instruction H(2). PROTECTIVE LIFE INSURANCE COMPANY INDEX Part I. Financial Information: Item 1. Financial Statements: Report of Independent Accountants Consolidated Condensed Statements of Income for the Three and Nine Months ended September 30, 1996 and 1995 (unaudited) Consolidated Condensed Balance Sheets as of September 30, 1996 (unaudited) and December 31, 1995 Consolidated Condensed Statements of Cash Flows for the Nine Months ended September 30, 1996 and 1995 (unaudited) Notes to Consolidated Condensed Financial Statements (unaudited) Item 2. Management's Narrative Analysis of the Results of Operations Part II. Other Information: Item 6. Exhibits and Reports on Form 8-K Signature REPORT OF INDEPENDENT ACCOUNTANTS To the Directors and Stockholder Protective Life Insurance Company Birmingham, Alabama We have reviewed the accompanying consolidated condensed balance sheet of Protective Life Insurance Company and subsidiaries as of September 30, 1996, and the related consolidated condensed statements of income for the three-month and nine-month periods ended September 30, 1996 and 1995 and consolidated condensed statements of cash flows for the nine-month periods ended September 30, 1996 and 1995. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the consolidated condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1995, and the related consolidated statements of income, stockholder's equity, and cash flows for the year then ended (not presented herein); and in our report dated February 12, 1996, we expressed an unqualified opinion which contains an explanatory paragraph regarding the changes in accounting for certain investments in debt and equity securities in 1993 on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated condensed balance sheet as of December 31, 1995, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. COOPERS & LYBRAND L.L.P. Birmingham, Alabama October 23, 1996 2
PROTECTIVE LIFE INSURANCE COMPANY CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Dollars in thousands) (Unaudited) THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 -------------------- ---------------------- 1996 1995 1996 1995 ---- ---- ---- ---- REVENUES Premiums and policy fees (net of reinsurance ceded: three months: 1996 - $81,453; 1995 - $79,908; nine months: 1996 - $247,988; 1995 - $222,351) $110,310 $101,036 $343,111 $310,502 Net investment income 124,516 118,162 369,280 342,017 Realized investment gains (losses) 861 1,337 5,882 3,443 Other income 902 799 4,100 2,804 -------- -------- -------- --------- 236,589 221,334 722,373 658,766 -------- -------- -------- -------- BENEFITS AND EXPENSES Benefits and settlement expenses (net of reinsurance ceded: three months: 1996 - $64,420; 1995 - $54,638; nine months: 1996 - $182,201; 1995 - $159,760) 157,931 141,934 466,692 416,081 Amortization of deferred policy acquisition costs 18,822 17,643 70,162 63,193 Other operating expenses (net of reinsurance ceded: three months: 1996 - $24,368; 1995 - $23,173; nine months: 1996 - $67,183; 1995 - $58,645) 32,031 30,040 95,746 91,109 -------- -------- -------- -------- 208,784 189,617 632,600 570,383 -------- -------- -------- -------- INCOME BEFORE INCOME TAX 27,805 31,717 89,773 88,383 Income tax expense 9,494 11,352 30,647 30,052 -------- -------- ------- -------- NET INCOME $ 18,311 $ 20,365 $ 59,126 $ 58,331 ======== ======== ======== ======== See notes to consolidated condensed financial statements
3
PROTECTIVE LIFE INSURANCE COMPANY CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands) SEPTEMBER 30 DECEMBER 31 1996 1995 ------------- ------------ (Unaudited) ASSETS Investments: Fixed maturities $4,507,650 $3,891,932 Equity securities 56,085 38,711 Mortgage loans on real estate 1,516,409 1,835,057 Investment in real estate, net 19,219 20,788 Policy loans 165,706 143,372 Other long-term investments 23,637 43,875 Short-term investments 147,492 46,891 ----------- ----------- Total investments 6,436,198 6,020,626 Cash 11,959 6,198 Accrued investment income 69,002 61,004 Accounts and premiums receivable, net 31,818 35,492 Reinsurance receivables 349,806 271,018 Deferred policy acquisition costs 477,153 410,183 Property and equipment, net 35,293 34,211 Receivables from related parties 8,895 1,961 Other assets 12,727 13,096 Assets held in separate accounts 488,298 324,904 ----------- ----------- TOTAL ASSETS $7,921,149 $7,178,693 ========== ========== LIABILITIES Policy liabilities and accruals $2,586,716 $2,121,921 Guaranteed investment contract deposits 2,514,374 2,451,693 Annuity deposits 1,304,141 1,280,069 Other policyholders' funds 142,368 134,380 Other liabilities 112,994 109,538 Accrued income taxes 4,406 838 Deferred income taxes 27,146 67,420 Indebtedness to related parties 24,693 34,693 Liabilities related to separate accounts 488,298 324,904 ----------- ----------- TOTAL LIABILITIES 7,205,136 6,525,456 ---------- ---------- COMMITMENTS AND CONTINGENT LIABILITIES - NOTE C REDEEMABLE PREFERRED STOCK, $1 par value, at redemption value; Shares authorized and issued: 2,000 2,000 2,000 ------------ ----------- STOCKHOLDER'S EQUITY Common Stock, $1 par value Shares authorized and issued: 5,000,000 5,000 5,000 Additional paid-in capital 223,194 144,494 Net unrealized gains (losses) on investments (Net of income tax: 1996 - ($9,328); 1995 - $31,157) (17,323) 57,863 Retained earnings 508,721 449,645 Note receivable from PLC Employee Stock Ownership Plan (5,579) (5,765) ------------ ------------ TOTAL STOCKHOLDER'S EQUITY 714,013 651,237 ----------- ----------- $7,921,149 $7,178,693 ========== ========== See notes to consolidated condensed financial statements
4
PROTECTIVE LIFE INSURANCE COMPANY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) NINE MONTHS ENDED SEPTEMBER 30 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 59,126 $ 58,331 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of deferred policy acquisition 70,162 63,194 Capitalization of deferred policy acquisition costs (70,146) (61,286) Depreciation expense 3,997 3,233 Deferred income tax 211 (5,952) Accrued income tax 3,568 10,672 Interest credited to universal life and investment products 206,763 213,303 Policy fees assessed on universal life and investment products (84,362) (74,772) Change in accrued investment income and other receivables (84,380) (116,522) Change in policy liabilities and other policyholders' funds of traditional life and health products 53,332 131,225 Change in other liabilities 2,842 (10,224) Other (net) (1,776) (3,515) ----------- ----------- Net cash provided by operating activities 159,337 207,687 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Maturities and principal reductions of investments Investments available for sale 457,488 219,760 Other 94,816 49,536 Sale of investments Investments available for sale 750,557 863,479 Other 561,440 4,243 Cost of investments acquired Investments available for sale (2,049,715) (1,329,735) Other (335,397) (243,788) Acquisitions and bulk reinsurance assumptions 172,726 Purchase of property and equipment (5,222) (4,859) Sale of property and equipment 143 112 ------------- ------------- Net cash used in investing activities (353,164) (441,252) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Capital contribution from PLC 78,699 18,000 Proceeds from borrowings under line of credit arrangements and debt 742,750 981,100 Principal payments on line of credit arrangements and debt (742,750) (964,100) Principal payment on surplus note to PLC (10,000) Dividends to PLC (50) (100) Investment product deposits and change in universal life deposits 842,765 734,707 Investment product withdrawals (711,826) (535,234) ----------- ---------- Net cash provided by financing activities 199,588 234,373 ----------- ---------- INCREASE (DECREASE) IN CASH 5,761 808 CASH AT BEGINNING OF PERIOD 6,198 ----------- --------- CASH AT END OF PERIOD $ 11,959 $ 808 =========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest on notes and mortgages payable $ 3,721 $ 5,143 Income taxes $ 26,809 $ 25,332 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Reduction of principal on note from ESOP $ 186 $ 171 Acquisitions and bulk reinsurance assumptions Assets acquired $ 200,737 $ 613 Liabilities assumed (253,480) (21,800) ------------ ----------- Net $ (52,743) $(21,187) ============ =========== See notes to consolidated condensed financial statements
5 PROTECTIVE LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated condensed financial statements of Protective Life Insurance Company ("Protective Life") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. The year-end consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. For further information, refer to the consolidated financial statements and notes thereto included in Protective Life's annual report on Form 10-K for the year ended December 31, 1995. Protective Life is a wholly-owned subsidiary of Protective Life Corporation ("PLC"). NOTE B - COMMITMENTS AND CONTINGENT LIABILITIES Under insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. Protective Life does not believe any assessments will be materially different from amounts already provided for in the financial statements. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's own financial strength. A substantial number of class action and other civil lawsuits have been filed against life and health insurers in the jurisdictions in which Protective Life does business involving the insurers' sales practices, alleged agent misconduct, failure to properly supervise agents, and other matters. Some of the lawsuits have resulted in the award of substantial settlements with, or judgments against, the insurers, including material amounts of punitive damages that are disproportionate to the actual damages. In some states (including Alabama), juries have substantial discretion in awarding punitive damages, which creates the potential for unpredictable material adverse judgments in any given punitive damage suit. In addition, in some class action and other lawsuits involving insurers' sales practices, insurers have made material settlement payments. Protective Life and its subsidiaries, like other life and health insurers, in the course of business are involved in such litigation. Pending litigation includes a class action filed in Jefferson County (Birmingham), Alabama with respect to the previously discussed cancer premium refunds. Although the outcome of any litigation cannot be predicted with certainty, Protective Life believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse effect on the financial position of Protective Life. 6 NOTE C - STATUTORY REPORTING PRACTICES Financial statements prepared in conformity with generally accepted accounting principles (i.e., GAAP) differ in some respects from the statutory accounting practices prescribed or permitted by insurance regulatory authorities. At September 30, 1996 and for the nine months then ended, Protective Life and its life insurance subsidiaries had consolidated stockholder's equity and net income prepared in conformity with statutory reporting practices of $458.9 million and $79.5 million, respectively. NOTE D - INVESTMENTS At December 31, 1993, Protective Life adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." For purposes of adopting SFAS No. 115 Protective Life has classified all of its investments in fixed maturities, equity securities, and short-term investments as "available for sale." As prescribed in SFAS No. 115, these investments are recorded at their market values with the resulting net unrealized gain or loss, net of income tax and a related adjustment to deferred policy acquisition costs, recorded as a component of stockholder's equity. Protective Life's balance sheets at September 30, 1996 and December 31, 1995, prepared on the basis of reporting investments at amortized cost rather than at market values, are as follows: SEPTEMBER 30, 1996 DECEMBER 31, 1995 ------------------ ----------------- (IN THOUSANDS) Total investments $6,464,855 $5,915,357 Deferred policy acquisition costs 475,137 426,432 All other assets 1,007,808 747,884 ---------- ---------- $7,947,800 $7,089,673 ========== ========== Deferred income taxes $ 36,474 $ 36,263 All other liabilities 7,177,990 6,458,036 ---------- ---------- 7,214,464 6,494,299 Redeemable preferred stock 2,000 2,000 Stockholder's equity 731,336 593,374 ---------- ---------- $7,947,800 $7,089,673 ========== ========== NOTE E - RECENTLY ADOPTED ACCOUNTING STANDARDS At January 1, 1996, Protective Life adopted SFAS No. 120, "Accounting and Reporting by Mutual Life Insurance Enterprises and by Insurance Enterprises for Certain Long-Duration Contracts"; SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed of"; and SFAS No. 122, "Accounting for Mortgage Servicing Rights". The adoption of these accounting standards did not have a material effect on Protective Life's financial statements. 7 NOTE F - RECLASSIFICATIONS Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior year amounts comparable to those of the current year. Such reclassifications had no effect on previously reported net income, total assets, or stockholder's equity. 8 ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS Protective Life Insurance Company ("Protective Life") is a wholly-owned and the principal operating subsidiary of Protective Life Corporation ("PLC"), an insurance holding company whose common stock is traded on the New York Stock Exchange. Founded in 1907, Protective Life provides financial services through the production, distribution, and administration of insurance and investment products. In accordance with General Instruction H(2)(a), Protective Life includes the following analysis with the reduced disclosure format. Protective Life has six operating divisions: Acquisitions, Financial Institutions, Group, Guaranteed Interest Contracts, Individual Life, and Investment Products. Protective Life also has an additional business segment which is described herein as Corporate and Others. Revenues The following table sets forth revenues by source for the period shown, and the percentage change from the prior period: NINE MONTHS PERCENTAGE ENDED INCREASE/ SEPTEMBER 30 (DECREASE) (in Thousands) 1996 1995 ---- ---- Premiums and policy fees $343,111 $310,502 10.5% Net investment income 369,280 342,017 8.0 Realized investment gains 5,882 3,443 70.8 Other income 4,100 4,992 (17.9) --------- --------- $722,373 $660,954 ========= ========= Premiums and policy fees increased $32.6 million or 10.5% in the first nine months of 1996 over the first nine months of 1995. The coinsurance by the Acquisitions Division of a block of policies in the first quarter of 1996 resulted in a $12.1 million increase in premiums and policy fees. Decreases in older acquired blocks resulted in a $7.7 million decrease in premiums and policy fees. Premiums and policy fees from the Financial Institutions Division increased $5.6 million in the first nine months of 1996 as compared to the first nine months of 1995. This resulted from the reinsurance of a block of policies in the second quarter of 1996 representing a $26.9 million increase in premium and policy fees. This increase was largely offset by decreases resulting from a reinsurance arrangement, begun in 1995, whereby all of the Division's new credit sales are being ceded to a reinsurer. Premium and policy fees from the Group Division increased $6.3 million in the first nine months of 1996 as compared to the same period in 1995. Premium 9 and policy fees related to the Division's dental business increased $14.9 million in the first nine months of 1996 as compared to the same period in 1995. This increase was partially offset by a reduction to premiums related to a refund of premiums to certain cancer insurance policyholders and to decreases in traditional group health premiums. Increases in premiums and policy fees from the Individual Life and Investment Product Divisions were $13.1 million and $2.8 million, respectively. On October 7, 1996 Protective Life announced that it will make voluntary refunds to certain of its cancer insurance policyholders and will reduce premium rates charged to such policyholders until certain conditions are met. The estimated refunds reduced the Group Division's premiums and policy fees, as noted above. Net investment income in the first nine months of 1996 increased by $27.3 million over the corresponding period of the preceding year, primarily due to increases in the average amount of invested assets. Invested assets have increased primarily due to receiving annuity and guaranteed investment contract ("GIC") deposits and to acquisitions. The assumption of a block of policies in the first quarter of 1996 and a block of policies in the second quarter of 1996 resulted in an increase in net investment income of $13.5 million in the first nine months of 1996 as compared to the same period in 1995. Protective Life generally purchases its investments with the intent to hold to maturity by purchasing investments that match future cash-flow needs. However, Protective Life may sell any of its investments to maintain approximate matching of assets and liabilities. Accordingly, Protective Life has classified its fixed maturities and certain other securities as "available for sale." The sales of investments that have occurred have resulted principally from portfolio management decisions to maintain approximate matching of assets and liabilities. Realized investment gains for the first nine months of 1996 were $2.4 million higher than the corresponding period of 1995. In the 1996 first quarter, Protective Life sold $554 million of its commercial mortgage loans in a securitization transaction, resulting in a $6.1 million realized investment gain. Other income consists primarily of fees from administrative-services-only types of group accident and health insurance contracts, and from rental of space in its administrative building to PLC and affiliates. 10 Income Before Income Tax The following table sets forth income or loss before income tax by business segment for the periods shown: INCOME (LOSS) BEFORE INCOME TAX NINE MONTHS ENDED SEPTEMBER 30 (IN THOUSANDS) BUSINESS SEGMENT 1996 1995 - ---------------- ---- ---- Acquisitions $38,888 $35,550 Financial Institutions 6,794 5,546 Group (166) 6,966 Guaranteed Investment Contracts 22,309 23,270 Individual Life 11,943 14,016 Investment Products 8,654 7,004 Corporate and Other (4,439) (4,578) Unallocated Realized Investment Gains (Losses) 5,790 609 ------- ------- $89,773 $88,383 ======= ======= Pretax earnings from the Acquisitions Division increased $3.3 million in the first nine months of 1996 as compared to the same period of 1995. Earnings from the Acquisitions Division are expected to decline over time (due to the lapsing of policies resulting from deaths of insureds or terminations of coverage) unless new acquisitions are made. The Division's two most recent acquisitions resulted in a $5.9 million increase in pretax earnings. Older acquired blocks represented a $2.6 million decrease in the first nine months of 1996 as compared to the same period in 1995. Pretax earnings of the Financial Institutions Division were $1.2 million higher in the first nine months of 1996 as compared to the same period in 1995. Included in the Division's 1996 results are earnings of $2.1 million from the coinsurance of a block of policies in the second quarter of 1996. The reinsurance arrangement begun in 1995 to reinsure all of the Division's new credit insurance sales and thereby improve the Division's return on investment, reduced the Division's reported earnings for the first nine months of 1996 by approximately $3.8 million, as contemplated at the date of the arrangement. Group Division pretax earnings were $7.1 million lower the first nine months of 1996 as compared to the first nine months of 1995. The previously discussed estimate for the refund of cancer premiums and related expenses resulted in a $6.8 million decrease in the Division's pretax earnings. Dental earnings improved $1.9 million and traditional group health earnings declined by $2.2 million. The Guaranteed Investment Contract ("GIC") Division had pretax operating earnings of $30.1 million in the first nine months of 1996 and $24.1 million in the corresponding period of 1995. This was due to improved operating spreads and to the growth of GIC deposits placed with Protective Life. Realized investment losses associated with this Division in the first nine months of 1996 were $7.8 million, as compared to $0.8 million in the same period last year. As a result, 11 total pretax earnings were $22.3 million in the first nine months of 1996 compared to $23.2 million for the same period in 1995. The Individual Life Division had pretax operating earnings of $10.8 million in the first nine months of 1996 as compared to $14.0 million in the same period of 1995. The decrease was primarily due to higher expenses in the first nine months of 1996 as compared to the same period last year. Realized investment gains, net of related amortization of deferred policy acquisition costs, associated with this Division were $1.1 million in 1996. As a result, total pretax earnings were $11.9 million in the first nine months of 1996 compared to $14.0 million as in the first nine months of 1995 in which there were no realized investment gains. Investment Products Division pretax operating earnings were $6.2 million which was $1.4 million higher in the first nine months of 1996 compared to the same period of 1995. Realized investment gains associated with the Division, net of related amortization of deferred policy acquisition costs, were $2.4 million as compared to $2.2 million last year, resulting in total pretax earnings of $8.6 million in the first nine months of 1996 as compared to $7.0 million in the same period of 1995. The Corporate and Other segment consists of several small insurance lines of business, net investment income and other operating expenses not identified with the preceding operating divisions (including interest on substantially all debt), and the operations of a small noninsurance subsidiary. Pretax losses for this segment were $0.1 million lower the first nine months of 1996 as compared to the first nine months of 1995. Income Taxes The following table sets forth the effective tax rates for the periods shown: NINE MONTHS ENDED ESTIMATED EFFECTIVE SEPTEMBER 30 INCOME TAX RATES 1996 34.1% 1995 34.0 The effective income tax rate for the full year of 1995 was 34%. Management's estimate of the effective income tax rate for 1996 is also 34%. 12 Net Income The following table sets forth net income for the periods shown, and the percentage change from the prior period: NET INCOME NINE MONTHS PERCENTAGE ENDED TOTAL INCREASE/ SEPTEMBER 30 (IN THOUSANDS) (DECREASE) 1996 $59,126 1.4% 1995 58,331 14.6 Compared to the same period in 1995, net income in the first nine months of 1996 increased $0.8 million, reflecting improved operating earnings in the Acquisitions, Financial Institutions, Guaranteed Investment Contracts and Investment Products Divisions and the Corporate and Other segment and higher realized investment gains net of related amortization of deferred policy acquisition costs which were offset by lower earnings in the Group and Individual Life Divisions. Recently Issued Accounting Standards In June 1996 the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". Protective Life anticipates that the impact of adopting this accounting standard will be immaterial to its financial condition. This statement is effective for transactions entered into after January 1, 1997. 13 Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial data schedule SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PROTECTIVE LIFE INSURANCE COMPANY Date: November 12, 1996 /s/ Jerry W. DeFoor ------------------- Jerry W. DeFoor Vice President and Controller, and Chief Accounting Officer (Duly authorized officer) 14 EX-27 2
7 This schedule contains summary financial information extracted from the consolidated financial statements of Protective Life Insurance Company and is qualified in its entirety by reference to such fiancial statements. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 4,507,650 0 0 56,085 1,516,409 19,219 6,436,198 11,959 349,806 477,153 7,921,149 2,309,156 277,560 0 142,368 0 2,000 0 5,000 709,013 7,921,149 343,111 369,280 5,882 4,100 466,692 70,162 95,746 89,773 30,647 59,126 0 0 0 59,126 0 0 0 0 0 0 0 0 0 Protective Life Insurance Company is a wholly-owned subsidiary of Protective Life Corporation (NYSE: PL) and is not required to present EPS information.
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