Protective Life Insurance 8-K/A Other Events

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

On May 1, 2018, The Lincoln National Life Insurance Company (“Lincoln Life”) completed its previously announced acquisition (the “Closing”) of Liberty Mutual Group Inc.’s (“Liberty”) Group Benefits Business (the “Group Business”) and Individual Life and Annuity Business (the “Life Business”) through the acquisition of all of the issued and outstanding capital stock of Liberty Life Assurance Company of Boston (the “Company”).

In connection with the Closing and pursuant to the Master Transaction Agreement, dated January 18, 2018 (the “Master Transaction Agreement”), previously reported in our Current Report on Form 8-K filed on January 23, 2018, Protective Life Insurance Company (“Protective Life”), a wholly owned subsidiary of Protective Life Corporation (“Protective”, “we”), and Protective Life and Annuity Insurance Company (“PLAIC”), a wholly-owned subsidiary of Protective Life, entered into reinsurance agreements (the “Reinsurance Agreements”) and related ancillary documents (including administrative services agreements and transition services agreements) providing for the reinsurance and administration of the Life Business, as defined.  The terms of the Reinsurance Agreement resulted in an acquisition of the Company’s Life Business by Protective Life, in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations.

The following unaudited pro forma condensed combined financial information of Protective Life gives effect to the acquisition as if it had been completed as of January 1, 2017 with respect to the pro forma results of operations data, and as of December 31, 2017 with respect to the balance sheet. We have adjusted the historical consolidated financial information to give effect to pro forma events that are (1) directly attributable to closing the transaction, (2) factually supportable, and (3) with respect to the statements of income, expected to have continuing impact on the combined results.

The unaudited pro forma condensed combined financial information below should be read in conjunction with the notes thereto and (1) our audited consolidated financial statements for the year ended December 31, 2017 included in our Annual Report on Form 10-K, as well as (2) the audited abbreviated financial statements of the Life Business for the year ended December 31, 2017, included herein.

The abbreviated financial statements of the Life Business include the assets acquired and liabilities associated with the Company’s Life Business as well as all revenue and costs directly associated with the revenue producing activities of the Life Business, and exclude costs not directly involved in the revenue producing activity, such as corporate overhead and income taxes.  Accordingly, the abbreviated financial statements do not purport to present the financial position or operating results of the Company that would have resulted from the Life Business operating as a standalone, separate business.

The following unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the acquisition been completed on the dates indicated above. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the resulting company. This information does not give effect to (1) our results of operations or other transactions or developments since December 31, 2017, (2) the impact of possible revenue enhancements, expense efficiencies or synergies expected to result from the acquisition, (3) the future acquisition-related costs estimated to integrate  the Life Business operations into Protective Life’s operations and (4) the effects of transactions or developments that may occur subsequent to the acquisition. The foregoing matters could cause both Protective Life’s historical pro forma financial position and results of operations, and Protective Life’s actual future financial position and results of operations, to differ materially from those presented in the following unaudited pro forma condensed combined financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

(Dollars in Thousands)

	As of December 31, 2017
	Protective Life Insurance Company		Liberty Life Individual Business		Pro Forma Adjustments				Pro Forma Combined
Assets
Fixed maturities, at fair value	$	40,971,486	$	13,647,301	$		(364,607)	(a)	$	53,831,280
					(422,900)			(d)
Fixed maturities, at amortized cost	2,718,904		-						2,718,904
Equity securities, at fair value	715,498		2,396		(2,396)			(a)	715,498
Mortgage loans	6,817,723		834,606		(376,060)			(a)	7,276,867
					598			(l)
Investment in real estate, net of accumulated depreciation	8,355		-						8,355
Policy loans	1,615,615		131,155						1,746,770
Other long-term investments	940,047		95,789		(158)			(a)	1,035,678
Short-term investments	527,144		-						527,144
Total investments	54,314,772		14,711,247		(1,165,523)				67,860,496
Cash and cash equivalents	178,855		448,105		110,000			(b)
					(341,520)			(c)	395,440
Accrued investment income	489,979		150,180		(2,837)			(a)	637,322
Accounts and premiums receivable	152,086		2,408						154,494
Reinsurance receivables	4,800,891		324,537		(75,858)			(n)	4,980,162
					(69,408)			(o)
Deferred policy acquisition costs and value of new business acquired	2,205,401		452,175		(224,554)			(e)	2,433,022
Goodwill	793,470		-						793,470
Other intangibles, net of accumulated amortization	662,916		-						662,916
Property and equipment, net of accumulated depreciation	109,711		-						109,711
Other assets	337,395		23,878		(23,132)			(a)	338,141
Income tax receivable	76,986		-						76,986
Assets related to separate accounts
Variable annuity	13,956,071		5,840		(5,840)			(a)	13,956,071
Variable universal life	1,035,202		37,077		(37,077)			(a)	1,035,202
Pensions	-		56,416		(56,416)			(a)	-
Total Assets	79,113,735		16,211,863		(1,892,165)				93,433,433
Liabilities
Future policy benefits and claims	30,956,792		5,901,753		685,991			(f)	43,158,665
					5,614,129			(k)
Unearned premiums	751,130		-		52,233			(k)	803,363
Total policy liabilities and accruals	31,707,922		5,901,753		6,352,353				43,962,028
Policyholder account balances	-		7,333,659		(7,333,659)			(k)	-
Other policy claims and benefits payable	-		41,478		(41,478)			(k)	-
Stable value product account balances	4,698,371		-						4,698,371
Annuity account balances	10,921,190		-		1,708,775			(k)	12,629,965
Other policyholders’ funds	1,267,198		95,168						1,362,366
Other liabilities	1,859,254		145,424		6,225			(m)	2,010,903
Deferred income taxes	1,371,989		-						1,371,989
Non-recourse funding obligations	2,952,822		-						2,952,822
Secured financing liabilities	1,017,749		341,520		(341,520)			(c)	1,017,749
Debt	1,682		-		110,000			(b)	111,682
Liabilities related to separate accounts
Variable annuity	13,956,071		5,840		(5,840)			(a)	13,956,071
Variable universal life	1,035,202		37,077		(37,077)			(a)	1,035,202
Pensions	-		56,416		(56,416)			(a)	-
Total liabilities	70,789,450		13,958,335		361,363				85,109,148
Shareowner’s Equity
Preferred stock	2		-						2
Common stock	5,000		-						5,000
Additional paid-in-capital	7,378,496		-						7,378,496
Retained earnings	916,971								916,971
Accumulated other comprehensive income			-
Net unrealized gains (losses) on investments, net of tax	23,091		-						23,091
Net unrealized losses relating to other-than- temporary impaired investments for which a portion has been recognized in earnings, net of income tax	(22)		-						(22)
Accumulated loss - derivatives, net of income tax	747		-						747
Net assets and liabilities	-		2,253,528						-
					(769,190)			(a)
					(422,900)			(d)
					(224,554)			(e)
					(685,991)			(f)
					598			(l)
					(6,225)			(m)
					(75,858)			(n)
					(69,408)			(o)
Total shareowner’s equity	8,324,285		2,253,528		(2,253,528)				8,324,285
Total liabilities and shareowner’s equity	$	79,113,735	$	16,211,863	$	(1,892,165)			$	93,433,433

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

(Dollars in Thousands)

	Year Ended December 31, 2017
	Protective Life Insurance Company		Liberty Life Individual Business		Pro Forma Adjustments			Pro Forma Combined
Revenues
Premiums and policy fees	$	3,456,362	$	485,794				$	3,942,156
Reinsurance ceded	(1,367,096)		(93,561)					(1,460,657)
Net of reinsurance ceded	2,089,266		392,233		-			2,481,499
Net investment income	1,923,056		624,217		$	(49,009)	(g)	2,498,264
Universal life and investment type product policy fees	-		104,506					104,506
Cost of insurance	-		80,690					80,690
Realized investment gains (losses):
Derivative financial instruments	(137,041)		-					(137,041)
All other investments	121,087		51,435					172,522
Other-than-temporary impairment losses	(1,332)		(563)					(1,895)
Portion recognized in other comprehensive income (before taxes)	(7,780)		-					(7,780)
Net impairment losses recognized in earnings	(9,112)		(563)		-			(9,675)
Other income	325,411		31,956					357,367
Total revenues	4,312,667		1,284,474		(49,009)			5,548,132
Benefits and expenses
Benefits and settlement expenses, net of reinsurance ceded	2,955,005		698,609		(22,817)		(p)	3,630,797
Interest credited to policyholder account balances	-		236,628					236,628
Amortization of deferred policy acquisition costs and value of new business acquired	79,443		77,431		(62,864)		(h)	94,010
Policyholder dividends	-		5,030					5,030
Other operating expenses, net of reinsurance ceded	814,211		100,684		3,608		(i)	918,503
Total benefits and expenses	3,848,659		1,118,382		(82,073)			4,884,968
Income before income tax	464,008		166,092		33,064			663,164
Income tax (benefit) expense	(718,409)		-		11,903		(j)	(706,506)
Net Income	$	1,182,417	$	166,092	$	21,161		$	1,369,670

NOTES TO THE UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL INFORMATION

Note 1 – Basis of Pro Forma Presentation

The unaudited pro forma condensed combined balance sheet was prepared to reflect the transaction as of December 31, 2017. The unaudited pro forma condensed combined statement of income combines the results of operations of Protective Life and the Life Business for the year ended December 31, 2017 as if the transaction had occurred on January 1, 2017.

The abbreviated financial statements of the Life Business include the assets and liabilities associated with the Company’s Life Business as well as all revenue and costs directly associated with the revenue producing activities of the Life Business, and exclude costs not directly involved in the revenue producing activity, such as corporate overhead and income taxes. Accordingly, the pro forma condensed combined income statement is not indicative of the acquired business’s operations going forward because of the changes in the business and the omission of various operating expenses.

The transaction was accounted for under the acquisition method of accounting. Under this method of accounting, the acquired net assets of the Life Business were recorded based upon the estimated fair values of the Life Business assets and liabilities at the date of completion of the acquisition. The transaction did not result in goodwill being recognized. The unaudited pro forma condensed combined financial information includes adjustments, which are based upon preliminary estimates, to reflect the estimated fair value of all identifiable assets and liabilities of the Life Business as of December 31, 2017. The preliminary purchase price consisted of  a ceding commission of $422.9 million paid as of the closing date. Final adjustments of the estimated fair value of all identifiable assets and liabilities are to be made within 150 days after closing. These final adjustments may result in an adjustment to the preliminary purchase price. Certain amounts in the historical financial statements of the Life Business have been reclassified to conform to Protective Life’s historical financial statement presentation.

Estimated fair values and lives have been assigned to the acquired assets and liabilities assumed for the purposes of this unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined financial information reflects Protective Life’s estimates of the fair value of the net assets of the Life Business as of December 31, 2017.

Note 2 – Pro Forma Adjustments

These pro forma adjustments are based on certain estimates and assumptions as of the date of the unaudited pro forma condensed combined financial information. The actual adjustments upon the consummation of the acquisition were based on a number of factors, including changes in the estimated fair value of net assets from December 31, 2017 to the effective date of the acquisition. Therefore, the actual adjustments were different from the adjustments made to prepare the unaudited pro forma condensed combined financial information.

Pro Forma Acquisition Adjustments

For purposes of the unaudited pro forma condensed combined balance sheet, the acquired assets and liabilities have been adjusted to reflect their estimated fair values as of and for the periods presented. Specific adjustments are as follows:

(a)To  reflect assets and liabilities retained by Liberty. Although the accompanying abbreviated financial statements included assets and liabilities associated with the Company’s Life Business, not all of these assets and liabilities were transferred to Protective Life.  For example assets in excess of that needed to support insurance liabilities transferred to Protective Life were retained by Liberty.

(b)To reflect surplus notes issued at closing. These surplus notes are associated with liabilities related to certain structured settlements included in the Life Business.

(c)To eliminate securities lending liability settled prior to closing.

(d)To give effect to the ceding commission paid at closing.

(e)To eliminate historic deferred policy acquisition costs and to establish value of business acquired.

(f)To adjust the policy liabilities of the acquired business to reflect estimated fair value.

(g)To reflect a reduction in investment income related to investments retained by seller. The effective yield assumed for each type of investment retained by seller was:  fixed maturities – 4.0%, equity securities – 2.0%, mortgage loans – 4.5%.  The weighted average was approximately 4.2%

(h)Represents the estimated change in amortization resulting from the adjustment described in (e) above. Amounts related to traditional life and health insurance policies are amortized over the premium-payment period of the related

policies in proportion to the ratio of annual premium income to the present value of the total anticipated premium income. Amounts related to universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization. Estimated amortization for each of the next five years is as follows: 2018: (18,993), 2019: (18,996), 2020: (17,993), 2021: (16,531), 2022: (14,981)

(i)To reflect interest expense on surplus notes described in (b) above assuming an interest rate of 3.28%.

(j)Estimated effective income tax rate for 2017 of 36% (federal 35% plus state 1%).

(k)To reclassify amounts in the financial statements of the Life Business to conform to Protective Life’s historical financial statement presentation.

(l)To adjust mortgage loans acquired by Protective Life to fair value at December 31, 2017.

(m)To record estimated accrued transaction fees. These fees primarily consist of broker, legal, and other professional fees.

(n)To adjust reinsurance receivables to estimated fair value.

(o)To reflect reinsurance recaptured at Closing. At December 31, 2017, the Company had ceded certain insurance reserves to one of its affiliates that was recaptured concurrent with Closing.

(p)Estimation of the impact of the amortization of the difference between the fair value and historical basis of the policy reserves.