The accompanying unaudited consolidated condensed financial statements of Protective Life Insurance Company and subsidiaries (“Protective Life”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. The year-end consolidated condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. For further information, refer to the consolidated financial statements and notes thereto included in the Protective Life’s annual report on Form 10-K for the year ended December 31, 2000.
Protective Life is a wholly-owned subsidiary of Protective Life Corporation ("PLC").
Under insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. Protective Life does not believe such assessments will be materially different from amounts already provided for in the financial statements. Most of these laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer’s own financial strength.
A number of civil jury verdicts have been returned against insurers and other providers of financial services involving sales practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or other persons with whom the insurer does business, and other matters. Increasingly these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive non-economic compensatory damages. In some states, juries, judges and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages, which creates the potential for unpredictable material adverse judgments in any given lawsuit. In addition, in some class action and other lawsuits, companies have made material settlement payments. Protective Life, like other financial service companies, in the ordinary course of business, is involved in such litigation or, alternatively, in arbitration. Although the outcome of any such litigation or arbitration cannot be predicted, 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, results of operations, or liquidity of Protective Life.
NOTE C - OPERATING SEGMENTS
Protective Life 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 sets forth operating segment income and assets for the periods shown. Adjustments represent the inclusion of unallocated realized investment gains (losses) and the recognition of income tax expense and the cumulative effect of change in accounting principle. There are no asset adjustments.
OPERATING SEGMENT INCOME FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2001
----------------------------------------------------------------
(IN THOUSANDS)
SPECIALTY INSURANCE
LIFE INSURANCE PRODUCTS
INDIVIDUAL DENTAL FINANCIAL
LIFE WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ------------ ------------ -------- ------------
Premiums and policy fees ......... $ 96,489 $ 33,870 $ 52,538 $ 85,975 $ 129,614
Reinsurance ceded ................ (75,625) (27,376) (9,193) (8,334) (68,339)
-------- -------- ------- ------- --------
Net of reinsurance ceded ...... 20,864 6,494 43,345 77,641 61,275
Net investment income ............ 19,803 26,351 46,228 2,444 11,823
Realized investment gains (losses)
Other income ..................... 394 4,526 7,751
-------- -------- -------- -------- --------
Total revenues ............ 41,061 32,845 89,573 84,611 80,849
-------- -------- -------- -------- --------
Benefits and settlement expenses . 22,777 21,009 59,715 50,593 34,911
Amortization of deferred policy
acquisition costs ............. 873 4,192 7,000 1,898 13,938
Amortization of goodwill ......... 1,368 707
Other operating expenses ......... 2,482 (3,914) 6,912 24,015 22,828
-------- -------- -------- -------- --------
Total benefits and expenses 26,132 21,287 73,627 77,874 72,384
-------- -------- -------- -------- --------
Income before income tax ......... 14,929 11,558 15,946 6,737 8,465
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER ADJUSTMENTS CONSOLIDATED
-------- ---------- ---------- ----------- ------------
Premiums and policy fees ......... $ 6,948 $ 15,311 $ 420,745
Reinsurance ceded ................ (3,675) (192,542)
------- -------- ---------
Net of reinsurance ceded ...... 6,948 11,636 228,203
Net investment income ............ $ 66,373 44,188 (5,292) 211,918
Realized investment gains (losses) 5,233 1,046 $ (10,764) (4,485)
Other income ..................... 875 (62) 13,484
-------- -------- --------- -------- ---------
Total revenues ............ 71,606 53,057 6,282 (10,764) 449,120
-------- -------- --------- -------- ---------
Benefits and settlement expenses . 57,117 36,246 5,924 296,072
Amortization of deferred policy
acquisition costs ............. 503 5,693 487 26,804
Amortization of goodwill ......... 2,075
Other operating expenses ......... 986 5,956 7,798 67,063
-------- -------- -------- ---------
Total benefits and expenses 58,606 47,895 14,209 392,014
-------- -------- -------- ---------
Income before income tax ......... 13,000 5,162 (7,927) 57,106
Income tax expense ............... 18,561 18,561
Cumulative effect of change in
accounting principle
Net income ................ $ 38,545
=========
OPERATING SEGMENT INCOME FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2000
----------------------------------------------------------------
(IN THOUSANDS)
SPECIALTY INSURANCE
LIFE INSURANCE PRODUCTS
INDIVIDUAL DENTAL FINANCIAL
LIFE WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ -------- ------------
Premiums and policy fees ......... $ 84,161 $ 30,978 $ 33,045 $ 69,763 $ 121,150
Reinsurance ceded ................ (62,308) (24,177) (7,240) (23,107) (66,531)
-------- -------- -------- -------- --------
Net of reinsurance ceded ...... 21,853 6,801 25,805 46,656 54,619
Net investment income ............ 15,630 22,787 29,077 1,876 11,390
Realized investment gains (losses)
Other income ..................... (879) 9 4,291 7,439
-------- -------- -------- -------- --------
Total revenues ............ 36,604 29,588 54,891 52,823 73,448
-------- -------- -------- -------- --------
Benefits and settlement expenses . 16,355 21,252 32,141 32,960 34,725
Amortization of deferred policy
acquisition costs ............. 8,423 4,205 4,252 1,676 12,598
Amortization of goodwill ......... 505
Other operating expenses ......... 2,036 (5,357) 5,929 11,980 16,653
-------- -------- -------- -------- --------
Total benefits and expenses 26,814 20,100 42,322 46,616 64,481
-------- -------- -------- -------- --------
Income before income tax ......... 9,790 9,488 12,569 6,207 8,967
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER ADJUSTMENTS CONSOLIDATED
-------- ---------- -------- ----------- ------------
Premiums and policy fees ......... $ 7,849 $ 30,906 $ 377,852
Reinsurance ceded ................ (16,317) (199,680)
------- -------- ---------
Net of reinsurance ceded ...... 7,849 14,589 178,172
Net investment income ............ $ 61,417 35,138 (1,020) 176,295
Realized investment gains (losses) (2,183) 37 $ (3,706) (5,852)
Other income ..................... 870 877 12,607
-------- -------- -------- ------- ---------
Total revenues ............ 59,234 43,894 14,446 (3,706) 361,222
-------- -------- -------- ------- ---------
Benefits and settlement expenses . 53,270 28,963 13,451 233,117
Amortization of deferred policy
acquisition costs ............. 229 6,230 441 38,054
Amortization of goodwill ......... 505
Other operating expenses ......... 879 4,349 4,315 40,784
-------- -------- -------- ------- ---------
Total benefits and expenses 54,378 39,542 18,207 312,460
-------- -------- -------- ------- ---------
Income before income tax ......... 4,856 4,352 (3,761) 48,762
Income tax expense ............... 17,274 17,274
Cumulative effect of change in
accounting principle
Net income ................ $ 31,488
========
OPERATING SEGMENT INCOME FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2001
------------------------------------------------------------------
(IN THOUSANDS)
SPECIALTY INSURANCE
LIFE INSURANCE PRODUCTS
INDIVIDUAL DENTAL FINANCIAL
LIFE WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ --------- ------------
Premiums and policy fees ......... $ 282,106 $ 94,888 $ 154,893 $ 267,716 $ 377,891
Reinsurance ceded ................ (202,041) (60,915) (29,541) (35,117) (202,576)
--------- -------- --------- --------- ---------
Net of reinsurance ceded ...... 80,065 33,973 125,352 232,599 175,315
Net investment income ............ 54,703 75,622 131,793 7,163 35,366
Realized investment gains (losses)
Other income ..................... 819 (52) 13,473 22,531
--------- --------- --------- --------- ---------
Total revenues ............ 135,587 109,595 257,093 253,235 233,212
--------- --------- --------- --------- ---------
Benefits and settlement expenses . 87,371 72,734 173,086 153,369 108,515
Amortization of deferred policy
acquisition costs ............. 8,217 11,336 14,341 5,410 36,440
Amortization of goodwill ......... 4,104 2,120
Other operating expenses ......... 3,374 (7,351) 21,517 67,561 60,019
--------- --------- --------- --------- ---------
Total benefits and expenses 98,962 76,719 208,944 230,444 207,094
--------- --------- --------- --------- ---------
Income before income tax ......... 36,625 32,876 48,149 22,791 26,118
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER ADJUSTMENTS CONSOLIDATED
---------- ----------- ---------- ----------- ------------
Premiums and policy fees ......... $ 21,420 $ 61,317 $ 1,260,231
Reinsurance ceded ................ (24,117) (554,307)
Net of reinsurance ceded ...... 21,420 37,200 705,924
Net investment income ............ $ 196,117 122,047 (8,996) 613,815
Realized investment gains (losses) 7,928 1,070 $ (12,014) (3,016)
Other income ..................... 2,599 713 40,083
--------- --------- -------- -------- -----------
Total revenues ............ 204,045 147,136 28,917 (12,014) 1,356,806
--------- --------- -------- -------- -----------
Benefits and settlement expenses . 167,617 99,782 37,572 900,046
Amortization of deferred policy
acquisition costs ............. 1,111 17,011 1,337 95,203
Amortization of goodwill ......... 6,224
Other operating expenses ......... 2,967 17,809 25,226 191,122
--------- --------- -------- ------- -----------
Total benefits and expenses 171,695 134,602 64,135 1,192,595
--------- --------- -------- ------- -----------
Income before income tax ......... 32,350 12,534 (35,218) 164,211
Income tax expense ............... 55,931 55,931
Cumulative effect of change in
accounting principle .......... (8,341) (8,341)
---------
Net income ................ $ 99,939
=========
OPERATING SEGMENT INCOME FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2000
-----------------------------------------------------------------
(IN THOUSANDS)
SPECIALTY INSURANCE
LIFE INSURANCE PRODUCTS
INDIVIDUAL DENTAL FINANCIAL
LIFE WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ -------- ------------
Premiums and policy fees .......... $ 250,557 $ 99,939 $ 101,803 $ 198,136 $ 355,686
Reinsurance ceded ................. (178,942) (78,426) (22,151) (60,069) (197,362)
--------- -------- -------- -------- ---------
Net of reinsurance ceded ....... 71,615 21,513 79,652 138,067 158,324
Net investment income ............. 44,966 66,999 87,992 6,640 33,692
Realized investment gains (losses)
Other income ...................... (2,446) 9 11,028 22,467
--------- -------- --------- --------- ---------
Total revenues ............. 114,135 88,512 167,653 155,735 214,483
--------- -------- --------- --------- ---------
Benefits and settlement expenses .. 62,365 64,670 96,691 100,633 99,674
Amortization of deferred policy
acquisition costs .............. 22,957 10,120 13,179 4,715 35,371
Amortization of goodwill .......... 1,372
Other operating expenses .......... (665) (12,651) 18,635 35,714 52,681
-------- -------- --------- --------- ---------
Total benefits and expenses 84,657 62,139 128,505 141,062 189,098
-------- -------- --------- --------- ---------
Income before income tax .......... 29,478 26,373 39,148 14,673 25,385
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER ADJUSTMENTS CONSOLIDATED
-------- ---------- --------- ----------- ------------
Premiums and policy fees ......... $ 22,858 $ 89,110 $ 1,118,089
Reinsurance ceded ................ (48,394) (585,344)
-------- -------- ----------
Net of reinsurance ceded ...... 22,858 40,716 532,745
Net investment income ............ $ 178,850 95,810 (1,988) 512,961
Realized investment gains (losses) (2,272) 457 $ (5,447) (7,262)
Other income ..................... 2,260 5,392 38,710
--------- --------- -------- ------- -----------
Total revenues ............ 176,578 121,385 44,120 (5,447) 1,077,154
--------- --------- -------- ------- -----------
Benefits and settlement expenses . 152,299 78,837 36,460 691,629
Amortization of deferred policy
acquisition costs ............. 658 18,298 1,720 107,018
Amortization of goodwill ......... 1,372
Other operating expenses ......... 2,907 13,011 24,684 134,316
--------- --------- -------- ---------
Total benefits and expenses 155,864 110,146 62,864 934,335
--------- --------- -------- ---------
Income before income tax ......... 20,714 11,239 (18,744) 142,819
Income tax expense ............... 50,504 50,504
---------
Net income ................ $ 92,315
=========
OPERATING SEGMENT ASSETS
SEPTEMBER 30, 2001
--------------------------------------------------------------
(IN THOUSANDS)
SPECIALTY INSURANCE
LIFE INSURANCE PRODUCTS
INDIVIDUAL DENTAL FINANCIAL
LIFE WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ --------- ------------
Investments and other assets .... $1,516,896 $1,734,832 $2,429,131 $ 192,332 $1,077,983
Deferred policy acquisition costs
and goodwill ................. 497,935 315,094 292,569 212,247 165,541
--------- --------- --------- --------- ---------
Total assets ............. $2,014,831 $2,049,926 $2,721,700 $ 404,579 $1,243,524
========= ========= ========== ======== =========
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER CONSOLIDATED
------------ ----------- ----------- ------------
Investments and other assets .... $ 3,995,087 $ 3,985,603 $ 1,863,111 $16,794,975
Deferred policy acquisition costs
and goodwill ................. 6,899 144,246 (24,118) 1,610,413
--------- --------- --------- ----------
Total assets ............. $ 4,001,986 $ 4,129,849 $ 1,838,993 $18,405,388
========= ========= ========= ==========
OPERATING SEGMENT ASSETS
DECEMBER 31, 2000
---------------------------------------------------------------
(IN THOUSANDS)
SPECIALTY INSURANCE
LIFE INSURANCE PRODUCTS
INDIVIDUAL DENTAL FINANCIAL
LIFE WEST COAST ACQUISITIONS BENEFITS INSTITUTIONS
---------- ---------- ------------ -------- ------------
Investments and other assets .... $1,237,867 $1,576,577 $1,604,854 $ 192,906 $1,369,915
Deferred policy acquisition costs
and goodwill ................. 354,320 276,518 223,430 214,770 150,984
--------- --------- --------- ------- ---------
Total assets ............. $1,592,187 $1,853,095 $1,828,284 $ 407,676 $1,520,899
========= ========= ========= ======= =========
RETIREMENT SAVINGS AND
INVESTMENT PRODUCTS
STABLE CORPORATE
VALUE INVESTMENT AND TOTAL
PRODUCTS PRODUCTS OTHER CONSOLIDATED
---------- ---------- --------- ------------
Investments and other assets .... $ 3,340,099 $ 3,844,168 $ 428,951 $13,595,337
Deferred policy acquisition costs
and goodwill ................. 2,144 127,334 81,711 1,431,211
---------- --------- ------- ----------
Total assets ............. $ 3,342,243 $ 3,971,502 $ 510,662 $15,026,548
========== ========= ======= ==========
NOTE D - STATUTORY REPORTING PRACTICES
Financial statements prepared in conformity with accounting principles generally accepted in the United States of America (i.e., GAAP) differ in some respects from the statutory accounting practices prescribed or permitted by insurance regulatory authorities. At September 30, 2001, and for the nine months then ended, Protective Life and its life insurance subsidiaries had combined share-owner’s equity and a net loss prepared in conformity with statutory reporting practices of $629.2 million and $63.5 million, respectively. The net loss was primarily due to the payment of a reinsurance-ceding commission to coinsure a block of individual life policies from Standard Insurance Company.
The National Association of Insurance Commissioners (“NAIC”) has adopted the Codification of Statutory Accounting Principles (“Codification”). Codification changed statutory accounting rules in several areas and was effective January 1, 2001. The adoption of Codification did not have a material effect on Protective Life’s statutory capital.
NOTE E - INVESTMENTS
As prescribed by Statement of Financial Accounting Standard (“SFAS”) No. 115, certain investments are recorded at their market values with the resulting net unrealized gains and losses reduced by a related adjustment to deferred policy acquisition costs, net of income tax, recorded as a component of share-owner’s equity. The market values of fixed maturities increase or decrease as interest rates fall or rise. Therefore, although the application of SFAS No. 115 does not affect Protective Life’s operations, its reported share-owner’s equity will fluctuate significantly as interest rates change.
Protective Life’s balance sheets at September 30, 2001 and December 31, 2000, prepared on the basis of reporting investments at amortized cost rather than at market values, are as follows:
September 30 December 31
------------ -----------
(In Thousands)
Total investments ............... $12,483,615 $10,258,809
Deferred policy acquisition costs 1,409,259 1,192,696
All other assets ................ 4,337,685 3,654,604
---------- ----------
$18,230,559 $15,106,109
========== ==========
Deferred income taxes ........... $ 109,536 $ 100,256
All other liabilities ........... 16,319,635 13,424,068
---------- ----------
16,429,171 13,524,324
Share-owner's equity ............ 1,801,388 1,581,785
---------- ----------
$18,230,559 $15,106,109
========== ==========
NOTE F - RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 2001, Protective Life adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”. SFAS No. 133, as amended by SFAS No. 137 and 138, will require Protective Life to record derivative financial instruments, at fair value on the balance sheet. Changes in fair value of a derivative instrument are reported in net income or other comprehensive income, depending on the designated use of the derivative instrument. The adoption of SFAS No. 133 resulted in a cumulative after-tax charge to net income of $8.3 million and a cumulative after-tax increase to other comprehensive income of $4.0 million on January 1, 2001. The charge to net income and increase to other comprehensive income primarily resulted from the recognition of derivative instruments embedded in the Company’s corporate bond portfolio. In addition, the charge to net income includes the recognition of the ineffectiveness on existing hedging relationships including the difference in spot and forward exchange rates related to foreign currency swaps used as an economic hedge of foreign-currency-denominated stable value contracts. Prospectively, the adoption of SFAS No. 133 may introduce volatility into Protective Life’s reported net income and other comprehensive income depending on future market conditions and Protective Life’s hedging activities.
In September 2000 the Financial Accounting Standards Board (“FASB”) issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinquishments of Liabilities, a replacement of SFAS No. 125". SFAS No. 140 revises the standards for accounting for securitizations and other transfers of financial assets. This Statement is effective for transfers and servicing of financial assets and extinquishments of liabilities occurring after March 31, 2001. The adoption of this accounting standard did not have a material effect on Protective Life’s financial position or results of operations.
In June 2001, the FASB issued SFAS Nos. 141, “Business Combinations”, and 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires that business combinations initiated after June 30, 2001, be accounted for using the purchase method. SFAS No. 142 revises the standards for accounting for acquired goodwill and other intangible assets. This statement is effective for fiscal years beginning after December 15, 2001, and effective for any goodwill or intangible asset acquired after June 30, 2001. Protective Life does not expect the adoption of SFAS No. 142 to have a material effect on Protective Life’s financial position or results of operations.
In July 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 requires that companies record the fair value of a liability for an asset retirement obligation in the period in which the liability is incurred. The Statement is effective for fiscal years beginning after June 15, 2002. Protective Life does not expect the adoption of SFAS No. 143 to have a material effect on Protective Life’s financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 requires that the same accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and expands the use of discontinued operations accounting to include more types of transactions. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Protective Life does not expect the adoption of SFAS No. 144 to have a material effect on Protective Life’s financial position or results of operations.
NOTE G - DERIVATIVES AND HEDGING ACTIVITIES
Protective Life utilizes a risk management strategy that incorporates the use of derivative instruments, primarily to reduce its exposure to interest rate risk as well as currency exchange risk.
Combinations of interest rate swap contracts, options and futures contracts are sometimes used as hedges against changes in interest rates for certain investments, primarily outstanding mortgage loan commitments and mortgage-backed securities. Interest rate swap contracts generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date. Interest rate futures generally involve exchange traded contracts to buy or sell treasury bonds and notes in the future at specified prices. Interest rate options represent contracts that allow the holder of the option to receive cash or purchase, sell or enter into a financial instrument at a specified price within a specified period of time. Protective Life uses interest rate swap contracts, caps, and floors to modify the interest characteristics of certain investments. Swap contracts are also used to alter the effective durations of assets and liabilities. Protective Life uses foreign currency swaps to reduce its exposure to currency exchange risk on certain stable value contracts denominated in foreign currencies, primarily the European euro and the British pound.
Derivative instruments expose Protective Life to credit and market risk. Protective Life minimizes its credit risk by entering into transactions with highly rated counterparties. Protective Life manages the market risk associated with interest rate and foreign exchange contracts by establishing and monitoring limits as to the types and degrees of risk that may be undertaken.
Protective Life monitors its use of derivatives in connection with its overall asset/liability management programs and procedures. Protective Life’s asset/liability committee is responsible for implementing various hedging strategies that are developed through its analysis of data from financial simulation models and other internal and industry sources. The resulting hedging strategies are then incorporated into Protective Life’s overall interest rate and currency exchange risk management strategies.
All derivatives are recognized on the balance sheet at their fair value. On the date the derivative contract is entered into, Protective Life designates the derivative as (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fair value” hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge), or (3) as an other derivative either held for investment purposes or held as a natural hedging instrument designed to act as an economic hedge against the changes in value or cash flows of a hedged item (“other” derivative). Changes in the fair value of a derivative that is highly effective as – and that is designated and qualifies as – a fair-value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on firm commitments), are recorded in current-period earnings. Changes in the fair value of a derivative that is highly effective as – and that is designated and qualified as – a cash-flow hedge are recorded in other comprehensive income, until earnings are affected by the variability of cash flows. Changes in the fair value of other derivatives are recognized in current earnings and reported in Realized Investment Gains (Losses) – Derivative Financial Instruments in Protective Life’s consolidated condensed statements of income.
Protective Life formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as fair-value or cash-flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. Protective Life also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, Protective Life discontinues hedge accounting prospectively, as discussed below.
Protective Life discontinues hedge accounting prospectively when (1) it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative expires or is sold, terminated, or exercised; (3) the derivative is dedesignated as a hedge instrument, because it is unlikely that a forecasted transaction will occur; (4) because a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designation of the derivative as a hedge instrument is no longer appropriate.
When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair-value hedge, the derivative will continue to be carried on the balance sheet at its fair value, and the hedged asset or liability will no longer be adjusted for changes in fair value. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the derivative will continue to be carried on the balance sheet at its fair value, and any asset or liability that was recorded pursuant to recognition of the firm commitment will be removed from the balance sheet and recognized as a gain or loss in current-period earnings. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the derivative will continue to be carried on the balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive income will be recognized immediately in earnings. In all other situations in which hedge accounting is discontinued, the derivative will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current-period earnings.
Fair-Value Hedges
Protective Life has designated, as a fair value hedge, callable interest rate swaps used to modify the interest characteristics of certain stable value contracts. In assessing hedge effectiveness, Protective Life excludes the embedded call option’s time value component from each derivative’s total gain or loss. For the nine months ended September 30, 2001, total measured ineffectiveness for the fair value hedging relationships was insignificant while the excluded time value component resulted in a pre-tax gain of $1.2 million. Both the measured ineffectiveness and the excluded time value component are reported in Realized Investment Gains (Losses) – Derivative Financial Instruments in Protective Life’s consolidated condensed statements of income.
Cash-Flow Hedges
Protective Life has not designated any hedging relationships as a cash flow hedge.
Other Derivatives
Protective Life uses certain interest rate swaps, caps, floors, options and futures contracts as economic hedges against the changes in value or cash flows of outstanding mortgage loan commitments and certain owned investments of Protective Life. For the nine months ended September 30, 2001, Protective Life recognized total pre-tax gains of $5.7 million representing the change in fair value of these derivative instruments.
On its foreign currency swaps, Protective Life recognized a $0.9 million pre-tax loss for the first nine months of fiscal 2001 while recognizing a $6.1 million foreign exchange pre-tax gain on the related foreign-currency-denominated stable value contracts. The net gain primarily results from the difference in the forward and spot exchange rates used to revalue the currency swaps and the stable value contracts, respectively. This net gain is reflected in Realized Investment Gains (Losses) – Derivative Financial Instruments in Protective Life’s consolidated condensed statements of income.
Protective Life has entered into asset swap arrangements to effectively sell the equity options embedded in owned convertible bonds in exchange for a interest rate swap that converts the remaining host bond to a variable rate instrument. For the nine months ended September 30, 2001, Protective Life recognized a $12.0 million pre-tax gain for the change in the asset swaps’ fair value and recognized a $17.2 million pre-tax loss to separately record the embedded equity options at fair value.
NOTE H - COMPREHENSIVE INCOME
The following table sets forth Protective Life’s comprehensive income for the periods shown:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- ------------------
2001 2000 2001 2000
---- ---- ---- ----
Net income .................................... $ 38,545 $ 31,488 $ 99,939 $ 92,315
Increase in net unrealized gains
on investments (net of income tax:
three months: 2001 - $58,125; 2000 - $39,584
nine months: 2001 - $83,247; 2000 - $32,645) 107,946 73,513 154,601 60,626
Reclassification adjustment for amounts
included in net income (net of income tax:
three months: 2001 - $3,815; 2000 -$2,426
nine months: 2001 - $3,477; 2000 - $2,745) . 7,085 4,506 6,457 5,097
Transition adjustment on derivative financial
instruments (net of income tax:
nine months: 2001 - $2,127) ................ 3,951
------- ------- ------- -------
Comprehensive income .......................... $153,576 $109,507 $264,948 $158,038
======= ======= ======= =======
NOTE I - SUPPLEMENTAL CASH FLOW INFORMATION
The following table sets forth supplemental cash flow information for the periods presented below:
NINE MONTHS ENDED
SEPTEMBER 30
----------------------
2001 2000
---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:
Interest on debt ........................... $ 921 $ 2,447
Income taxes ............................... 431 12,383
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Reduction of principal on note from ESOP ..... 342 307
Acquisitions and bulk reinsurance assumptions
Assets acquired, net of cash ............... 658,200 496,221
Liabilities assumed ........................ (795,954) (345,318)
Equity from subsidiary transfer ............ (7,772)
--------- ---------
Net ........................................ $(145,526) $ 150,903
========= =========
NOTE J - ACQUISITION
On October 1, 2001, PLC announced that Protective Life had completed the acquisition of the stock of Inter-State Assurance Company and First Variable Life Insurance Company from Ilona Financial Group, Inc., a subsidiary of Irish Life & Permanent plc of Dublin, Ireland. The purchase price was approximately $250 million. The companies’ business primarily consists of universal life insurance products and fixed and variable annuities, representing approximately 170,000 policies, $160 million of annual premiums, and $1.6 billion of reserves.
NOTE K - 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 share-owner’s equity.
NOTE L - PENDING SALE OF DENTAL BENEFITS DIVISION
On July 10, 2001, PLC announced that it had entered into an agreement to sell substantially all of its Dental Benefits Division to Fortis, Inc. for approximately $300 million. Substantially all of the Dental Benefits Division is owned by Protective Life. Protective Life anticipates that the transaction will close in December 2001, and will be accounted for as discontinued operations. The transaction is subject to regulatory approval and certain customary closing conditions. Protective Life will realize a pretax gain on the sale, but will incur income tax expense and exit costs that currently are estimated to result in a loss after income tax of approximately $23.9 million. Protective Life will also discontinue other health insurance lines that are operated by the Dental Benefits Division, but are currently reported in the Corporate and Other segment. These other health insurance lines reported a loss in the second quarter of 2001 of approximately $16.0 million due to reserve strengthening.
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF THE
RESULTS OF OPERATIONS
Protective Life Insurance Company (“Protective Life”) is a wholly-owned subsidiary of Protective Life Corporation (“PLC”), an insurance holding company whose common stock is traded on the New York Stock Exchange under the symbol “PL”. Founded in 1907, Protective Life provides financial services through the production, distribution, and administration of insurance and investment products. Unless the context otherwise requires “Protective Life” refers to the consolidated group of Protective Life Insurance Company and its subsidiaries.
In accordance with General Instruction H(2)(a), Protective Life includes the following analysis with the reduced disclosure format.
Protective Life 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. Protective Life’s Divisions are: Individual Life, West Coast, Acquisitions, Dental Benefits, Financial Institutions, Stable Value Products, and Investment Products. Protective Life also has an additional business segment which is Corporate and Other.
This report includes “forward-looking statements” which express expectations of future events and/or results. All statements based on future expectations rather than on historical facts are forward-looking statements that involve a number of risks and uncertainties, and Protective Life cannot give assurance that such statements will prove to be correct. Please refer to Exhibit 99 herein for more information about factors which could affect future results.
The following discussion and analysis primarily relates to the nine months ended September 30, 2001, as it compares to the same period last year. Unless otherwise noted, the general factors discussed also apply to the quarter ended September 30, 2001, as it compares to the same quarter last year. Where needed for a more complete understanding of Protective Life’s operating results, information related to the quarters ended September 30, 2001 and 2000 has been provided. It is management’s opinion that quarterly operating results for insurance enterprises are not necessarily indicative of results to be achieved in succeeding quarters, and that a review of operating results over a longer period yields a better understanding of Protective Life’s performance.
Revenues
The following table sets forth revenues by source for the period shown, and the percentage change from the prior period:
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
(IN THOUSANDS)
2001 2000 2001 2000
---- ---- ---- ----
Premiums and policy fees ......... $ 228,203 $ 178,172 $ 705,924 $ 532,745
Net investment income ............ 211,918 176,295 613,815 512,961
Realized investment gains (losses)
Derivative financial instruments 6,415 1,080 6,918 580
All other investments .......... (10,900) (6,932) (9,934) (7,842)
Other income ..................... 13,484 12,607 40,083 38,710
------- ------- --------- ---------
$ 449,120 $ 361,222 $ 1,356,806 $ 1,077,154
======= ======= ========= =========
Premiums and policy fees, net of reinsurance ceded, increased $173.2 million or 32.5% in the first nine months of 2001 over the nine months of 2000. Premiums and policy fees in the Individual Life Division increased $8.5 million in the first nine months of 2001 as compared to the same period in 2000. Premiums and policy fees in the West Coast Division increased $12.5 million in the first nine months of 2001 as compared to the same period in 2000. Premiums and policy fees in the Acquisitions Division are expected to decline with time unless new acquisitions are made. In the first quarter of 2001 Protective Life coinsured a block of individual life policies from Standard Insurance Company. This coinsurance arrangement resulted in a $52.2 million increase in premium and policy fees. Premiums and policy fees from older acquired blocks decreased $6.5 million in the first nine months of 2001 as compared to the same period last year. In October 2000, PLC transferred ownership of twenty companies (that provide prepaid dental products) to Protective Life. In May 2001, PLC transferred ownership of five additional companies (that provide prepaid dental products) to Protective Life. The operations of these companies are included in Protective Life’s Dental Benefits Division and resulted in a $88.9 million increase in premium and policy fees in the Division in the first nine months of 2001. Premiums and policy fees related to the Dental Benefits Division’s other businesses increased $5.6 million in the first nine months of 2001 as compared to the same period in 2000. Premiums and policy fees from the Financial Institutions Division increased $17.0 million in the first nine months of 2001 as compared to the first nine months of 2000. Premiums and policy fees from the Investment Products Division decreased $1.4 million in the first nine months of 2001 as compared to the same period last year. Premiums and policy fees relating to various health insurance lines in the Corporate and Other segment decreased $3.5 million in the first nine months of 2001 as compared to the same period in 2000.
Net investment income in the first nine months of 2001 increased by $100.9 million over the corresponding period of the preceding year primarily due to an increase in the average amount of invested assets. The January 2001 acquisition of a block of individual life policies resulted in an increase in investment income of $41.9 million.
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 proper matching of assets and liabilities. Accordingly, Protective Life has classified its fixed maturities and certain other securities as “available for sale.” The sales of investment that have occurred have resulted principally from portfolio management decisions to maintain approximate matching of assets and liabilities.
Realized investment gains related to derivative financial instruments were $6.9 million for the first nine months of 2001 compared to gains of $0.6 million in the same period of 2000. Realized investment losses related to all other investments were $9.9 million for the first nine months of 2001 compared to a loss of $7.8 million for the corresponding period of 2000. During the third quarter of 2001, Protective Life recorded other than temporary impairments in its investments of $12.6 million.
Other income consists primarily of revenues from Protective Life’s direct response business, service contract business, non-insurance subsidiaries and rental of space in its administrative building to PLC. In the first nine months of 2001 as compared to the same period of 2000, revenues from Protective Life’s direct response business and service contract business increased $1.7 million and decreased $2.0 million, respectively. Income from other sources increased $1.7 million.
Income Before Income Tax
The following table sets forth operating income or loss and income or loss before income tax by business segment for the periods shown:
OPERATING INCOME (LOSS) AND INCOME (LOSS) BEFORE INCOME TAX
(IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ ------------------
2001 2000 2001 2000
---- ---- ---- ----
Operating Income (Loss)(1)
Life Insurance
Individual Life .............................. $ 14,929 $ 9,790 $ 36,625 $ 29,478
West Coast ................................... 11,558 9,488 32,876 26,373
Acquisitions ................................. 15,946 12,569 48,149 39,148
Specialty Insurance Products
Dental Benefits .............................. 6,737 6,207 22,791 14,673
Financial Institutions ....................... 8,465 8,967 26,118 25,385
Retirement Savings and Investment Products
Stable Value Products ........................ 7,767 7,039 24,422 22,986
Investment Products .......................... 5,162 4,352 12,534 11,239
Corporate and Other ............................... (7,927) (3,761) (35,218) (18,744)
-------- -------- --------- ---------
Total operating income ................. 62,637 54,651 168,297 150,538
======== ======== ========= =========
Realized Investment Gains (Losses)
Stable Value Products ........................ 5,233 (2,183) 7,928 (2,272)
Investment Products .......................... 1,046 37 1,070 457
Unallocated Realized Investment Gains (Losses) (10,764) (3,706) (12,014) (5,447)
Related Amortization of Deferred Policy
Acquisition Costs
Investment Products .......................... (1,046) (37) (1,070) (457)
------- ------- ------- -------
Total net .............................. (5,531) (5,889) (4,086) (7,719)
------- ------- ------- -------
Income (Loss) Before Income Tax
Life Insurance
Individual Life .............................. 14,929 9,790 36,625 29,478
West Coast ................................... 11,558 9,488 32,876 26,373
Acquisitions ................................. 15,946 12,569 48,149 39,148
Specialty Insurance Products
Dental Benefits .............................. 6,737 6,207 22,791 14,673
Financial Institutions ....................... 8,465 8,967 26,118 25,385
Retirement Savings and Investment Products
Stable Value Products ........................ 13,000 4,856 32,350 20,714
Investment Products .......................... 5,162 4,352 12,534 11,239
Corporate and Other ............................... (7,927) (3,761) (35,218) (18,744)
Unallocated Realized Investment Gains (Losses) .... (10,764) (3,706) (12,014) (5,447)
-------- -------- --------- ---------
Total income before income tax ......... $ 57,106 $ 48,762 $ 164,211 $ 142,819
======== ======== ========= =========
(1) Income before income tax excluding realized investment gains and losses and related amortization of deferred policy acquisition
costs.
The Individual Life Division’s pretax operating income was $36.6 million in the first nine months of 2001 compared to $29.5 million in the same period of 2000. The Division’s mortality experience was $1.8 million less favorable than expected in the first nine months 2001 (including life insurance claims related to the attacks on September 11 which after reinsurance netted to $0.5 million) as compared to $2.5 million better than expected in the first nine months of 2000. The higher claims were offset by earnings growth. Also, the Division received $3.1 million of additional investment income in the first nine months of 2001 from an internal duration/interest rate swap with Protective Life’s Stable Value Products Division.
West Coast had pretax operating income of $32.9 million for the first nine months of 2001 compared to $26.4 million for the same period last year. The increase reflects the Division’s growth through sales.
Pretax operating income from the Acquisitions Division was $48.1 million in the first nine months of 2001 as compared to $39.1 million in the same period of 2000. The coinsurance of a block of life insurance policies from Standard Life Insurance Company resulted in $9.4 million of the increase in earnings in the first nine months of 2001 as compared to the same period last year. Additionally, the Division received $2.0 million additional investment income in the first nine months of 2001 from an internal rate swap with the Company’s Stable Value Products Division. These increases were partially offset by a change in mortality experience. The Division’s mortality experience was $1.6 million less favorable than expected in the first nine months of 2001 as compared to $2.9 million better than expected in the first nine months of 2000. Earnings from the Acquisitions Division are normally expected to decline over time (due to the lapsing of policies resulting from deaths of insureds or terminations of coverage) unless new acquisitions are made.
The Dental Benefits Division’s pretax operating income was $22.8 million in the first nine months of 2001 compared to $14.7 million in the first nine months of 2000. The aforementioned transfer of companies from PLC resulted in a $5.5 million increase in pretax operating income. Earlier this year, Protective Life announced that it had entered into an agreement to sell substantially all of its Dental Benefits Division to Fortis, Inc. The companies anticipate that the transaction will be completed in December, subject to regulatory approval and customary closing conditions.
Pretax operating income of the Financial Institutions Division was $26.1 million in the first nine months of 2001 as compared to $25.4 million in the same period of 2000. Service contract claims were seasonally higher in the 2001 third quarter consistent with last year. Incurred credit insurance claims were also higher in the current quarter, but were offset by a release of reserves. The Division’s future results may be negatively affected by the slowing economy. Lower consumer lending and fewer automobile purchases could negatively affect the Division’s sales. Also, the level of claims typically increases in a slowing economy.
The Stable Value Products Division had pretax operating income of $24.4 million in the first nine months of 2001 as compared to $23.0 million in the corresponding period of 2000. This increase is due primarily to higher account balances. Operating spreads in the first nine months of 2001 were lower than last year. Internal duration/interest rate swaps between the Division and the Individual Life and Acquisitions Divisions shifted investment income to those Divisions as short-term interest rates have fallen and the yield curve has steepened. Realized investments gains associated with this Division in the first nine months of 2001 were $7.9 million as compared to losses of $2.3 million in the same period last year. As a result, total pretax earnings were $32.4 and $20.7 million in the first nine months of 2001 and 2000, respectively.
The Investment Products Division’s pretax operating income was $12.5 million in the first nine months of 2001 compared to $11.2 million in the same period of 2000. The 2001 operating results include a $2.0 million tax benefit related to the Division’s variable annuities which was partially offset by a $0.9 million increase in reserves related to minimum death benefit guarantees. An additional $1.0 million of tax benefit is expected in the 2001 fourth quarter. The Division’s future results may also be negatively affected by the slowing economy. Volatile equity markets could negatively affect sales of variable annuities and the fees the Division assesses on variable annuity contracts. Lower interest rates could negatively affect sales of fixed annuities. The Division had no realized investment gains or losses (net of related amortization of deferred policy acquisition costs) in the first nine months of 2001 or 2000.
The Corporate and Other segment consists primarily of net investment income on unallocated capital, and other operating expenses not identified with the preceding operating divisions (including management fees paid to PLC and interest on substantially all debt), several lines of business which Protective Life is not actively marketing (mostly health insurance), and the operations of a small noninsurance subsidiary. Pretax operating losses of this segment were $35.2 million in the first nine months of 2001 as compared to pretax operating loss of $18.7 million in the first nine months of 2000. The first nine months of 2001 included a loss of $16.0 million related to reserve strengthening in the health insurance lines that will be discontinued when the sale of the Dental Benefits Division is completed. (See section entitled “Other Matters” included herein). Excluding the other health insurance lines’ reserve strengthening in the second quarter of 2001, the Corporate and Other business segment had a pretax operating loss of $19.2 million in the first nine months of 2001, compared to a loss of $18.7 million in the same period of 2000.
Income Taxes
The following table sets forth the effective tax rates for the periods shown:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------- ------------------
2001 2000 2001 2000
---- ---- ---- ----
Estimated Effective Income
Tax Rates ............. 32.5% 35.4% 34.1% 35.4%
The effective income tax rate for the full year of 2000 was 35.4%. Management’s estimate of the effective income tax rate for 2001 is approximately 34.1%.
Net Income
The following table sets forth net income for the periods shown, and the percentage change from the prior period:
THREE MONTHS ENDED NINE MONTHS ENDED
NET INCOME SEPTEMBER 30 SEPTEMBER 30
---------- ------------------ -----------------
2001 2000 2001 2000
---- ---- ---- ----
Total (in thousands) $38,545 $31,488 $99,939 $92,315
Compared to the same period in 2000, net income in the first nine months of 2001 increased $7.6 million, reflecting improved operating earnings in all Divisions which were offset by lower realized investment losses (net of related amortization of deferred policy acquisition costs), lower operating results in the Corporate and Other segment and a charge to earnings resulting from the cumulative effect of a change in accounting principle.
Recently Issued Accounting Standards
In September 2000 the Financial Accounting Standards Board issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinquishments of Liabilities, a replacement of SFAS No. 125". SFAS No. 140 revises the standards for accounting for securitizations and other transfers of financial assets. This Statement is effective for transfers and servicing of financial assets and extinquishments of liabilities occurring after March 31, 2001.
In June 2001, the FASB issued SFAS Nos. 141, “Business Combinations”, and 142, “Goodwill and Other Intangible Assets”. SFAS No. 141 requires that business combinations initiated after June 30, 2001, be accounted for using the purchase method. SFAS No. 142 revises the standards for accounting for acquired goodwill and other intangible assets. This statement is effective for fiscal years beginning after December 15, 2001, and effective for any goodwill or intangible asset acquired after June 30, 2001. Protective Life does not expect the adoption of SFAS No. 142 to have a material effect on Protective Life’s financial position or results of operations.
In July 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 requires that companies record the fair value of a liability for an asset retirement obligation in the period in which the liability is incurred. The Statement is effective for fiscal years beginning after June 15, 2002. Protective Life does not expect the adoption of SFAS No. 143 to have a material effect on Protective Life’s financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. SFAS No. 144 requires that the same accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired, and expands the use of discontinued operations accounting to include more types of transactions. SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. Protective Life does not expect the adoption of SFAS No. 144 to have a material effect on Protective Life’s financial position or results of operations.
Other Developments
On July 10, 2001, PLC announced that it had entered into an agreement to sell substantially all of its Dental Benefits Division to Fortis, Inc. for approximately $300 million. Substantially all of the Dental Benefits Division is owned by Protective Life. Protective Life anticipates that the transaction will close in December 2001, and will be accounted for as discontinued operations. The transaction is subject to regulatory approval and certain customary closing conditions. Protective Life will realize a pretax gain on the sale, but will incur income tax expense and exit costs that will result in a loss after income tax of approximately $23.9 million. Protective Life will also discontinue other health insurance lines that are operated by the Dental Benefits Division, but are currently reported in the Corporate and Other segment. These other health insurance lines reported a loss in the second quarter of 2001 of approximately $16.0 million due to reserve strengthening.
On October 1, 2001, PLC announced that Protective Life had completed the acquisition of the stock of Inter-State Assurance Company and First Variable Life Insurance Company from Ilona Financial Group, Inc., a subsidiary of Irish Life & Permanent plc of Dublin, Ireland. The purchase price was approximately $250 million. The companies’ business primarily consists of universal life insurance products and fixed and variable annuities, representing approximately 170,000 policies, $160 million of annual premiums, and $1.6 billion of reserves.
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 99 - Safe Harbor for Forward-Looking Statements
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 14, 2001 | /s/ Jerry W. Defoor |
| | Jerry W. DeFoor |
| | Vice President and Controller |
| | and Chief Accounting Officer |
| | (Duly authrorized officer) |
