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Protective Reports Second Quarter 2013 Financial Results



  Protective Reports Second Quarter 2013 Financial Results

  * 13% growth in operating earnings per share over 2Q12
  * 40% growth in net income per share over 2Q12
  * Strong sales in all retail segments
  * On track to achieve the Company’s 2013 financial plan

Business Wire

BIRMINGHAM, Ala. -- July 31, 2013

Protective Life Corporation (NYSE: PL) (“PLC” or “the Company”) today reported
results for the second quarter of 2013. Net income available to PLC’s common
shareowners for the second quarter of 2013 was $103.2 million or $1.27 per
average diluted share, compared to $76.2 million or $0.91 per average diluted
share in the second quarter of 2012. After-tax operating income was $77.7
million or $0.96 per average diluted share, compared to $70.9 million or $0.85
per average diluted share in the second quarter of 2012.

Net income available to PLC’s common shareowners for the six months ended June
30, 2013 was $181.5 million or $2.24 per average diluted share, compared to
$175.2 million or $2.10 per average diluted share for the six months ended
June 30, 2012. After-tax operating income was $149.2 or $1.84 per average
diluted share, compared to $170.0 million or $2.04 per average diluted share
for the six months ended June 30, 2012.

“We are pleased to report solid financial results in the second quarter that
exceed our plan for the quarter,” said John D. Johns, Chairman, President and
CEO. “Very strong investment income, strong earnings in the variable annuity
line, favorable mortality in life marketing and better than plan results in
the Asset Protection segment more than offset the adverse impact of several
items and adjustments in the quarter. We are continuing to press ahead on the
MONY acquisition and are making good progress on all fronts toward our
targeted closing date of October 1. We are also pleased to report that in each
of our three major retail business lines (Life Marketing, Annuities and Asset
Protection) our sales in this quarter exceeded last year’s comparable sales.
Overall, we remain on track to achieve or exceed our earnings plan for the
year.”

Business Segment Results

The table below sets forth business segment operating income before income tax
for the periods shown:

                                                                      
  Operating Income Before Income Tax
  ($ in thousands)                                     $               %
                       2Q13            2Q12            Change          Change
  Life Marketing       $ 24,673        $ 30,348        $ (5,675  )     (19 ) %
  Acquisitions           29,435          43,615          (14,180 )     (33 )
  Annuities              36,382          28,553          7,829         27
  Stable Value           22,464          15,958          6,506         41
  Products
  Asset Protection       7,384           6,479           905           14
  Corporate &            (2,483  )       (25,397 )       22,914        90
  Other
                       $ 117,855       $ 99,556        $ 18,299        18
                                                                              

The following table reconciles segment operating income to consolidated net
income available to PLC’s common shareowners:

                                                                     
  ($ in thousands)
                                                        2Q13          2Q12
  Operating income before income tax                    $ 117,855     $ 99,556
  Realized investment gains (losses)                      44,491        12,072
  Less:
     Related amortization of deferred policy
     acquisition costs and value of business              5,333         3,941
     acquired
     Income tax expense                                   53,814        31,532
  Net income available to PLC's common shareowners      $ 103,199     $ 76,155
                                                                         

Sales

The Company uses sales statistics to measure the relative progress of its
marketing efforts. The Company derives these statistics from various sales
tracking and administrative systems and not from its financial reporting
systems or financial statements. These statistics measure only one of many
factors that may affect future profitability of the business segments and
therefore are not intended to be predictive of future profitability.

The table below sets forth business segment sales for the periods shown:

                                                               
  ($ in millions)                                   $           %
                            2Q13        2Q12        Change      Change
  Life Marketing            $ 44.6      $ 25.8      $ 18.8      73   %
  Annuities                   857.0       829.4       27.6      3
  Stable Value Products       205.3       26.5        178.8     675
  Asset Protection            126.5       119.3       7.2       6
                                                                      

Review of Business Segment Results

Life Marketing

Life Marketing segment pre-tax operating income was $24.7 million in the
second quarter of 2013, representing a decrease of $5.7 million from the three
months ended June 30, 2012. The decrease was primarily due to a $4.2 million
reinsurance accrual established in the quarter, an increase in non-deferred
expenses resulting from higher sales, and while overall mortality for the
segment was better than assumed in the current year financial plan, the
traditional life mortality was less favorable than in 2Q12. Traditional life
mortality was 87% of expected in the second quarter of 2013 compared to 75% of
expected in the second quarter of 2012. These decreases were partially offset
by higher investment income due to higher reserves.

Sales were $44.6 million for the current quarter, up $18.8 million, or 73%,
compared to the second quarter of 2012.

Acquisitions

Acquisitions segment pre-tax operating income was $29.4 million in the second
quarter 2013 compared to $43.6 million in the second quarter of 2012. This
variance is primarily attributable to an $8.5 million unfavorable variance
related to mortality, interest and other benefits, which includes $5.0 million
related to unreported deaths discovered on a block of terminated life policies
during the current quarter. The remainder of the variance was caused by a $1.0
million negative impact due to reinsuring a larger percentage of a runoff
block of business, $0.8 million of higher modified coinsurance interest
expense on realized gains, and the expected runoff of business.

Annuities

Annuities segment pre-tax operating income was $36.4 million in the second
quarter of 2013 compared to $28.6 million in the second quarter of 2012.

Fixed annuity pre-tax operating income was $12.6 million, compared to $20.5
million in the prior year. This decrease was primarily due to an unfavorable
change of $7.2 million in the single premium immediate annuity (“SPIA”)
mortality variance and an unfavorable $3.2 million guaranty fund allocation
transferred to this segment from the Corporate & Other segment, where the
original reserve was set up last quarter.

Variable annuity (“VA”) pre-tax operating income was $23.8 million, compared
to $8.1 million in the second quarter of 2012. The increase included a $15.5
million net increase in revenue driven by higher policy fees and other income
associated with the growth in account balances as compared to the prior year’s
second quarter.

Net cash flows for the segment remained positive during the quarter. Annuity
account balances were $18.9 billion as of June 30, 2013, an increase of 19%
over the past twelve months. Sales in the second quarter of 2013 were $857.0
million compared to $829.4 million in the second quarter of 2012. Variable
annuity sales were $718.9 million compared to $673.3 million in the second
quarter of 2012. Fixed annuity sales were $138.1 million compared to $156.1
million in the prior year’s second quarter.

Stable Value Products

Stable Value Products segment pre-tax operating income was $22.5 million in
the second quarter of 2013 compared to $16.0 million in the second quarter of
2012. Included in the second quarter of 2013 results is $5.5 million of
participating mortgage income compared to $2.4 million in the second quarter
of 2012. In addition, the segment experienced a 69 basis point increase over
the prior year in the adjusted operating spread, which excludes participating
income, for the three months ended June 30, 2013, due to a decline in credited
interest. These favorable items were partially offset by lower average account
balances.

Account balances as of June 30, 2013 totaled $2.6 billion. Sales were $205.3
million for the three months ended June 30, 2013, compared to $26.5 million in
the second quarter of 2012.

Asset Protection

Asset Protection segment pre-tax operating income was $7.4 million in the
second quarter of 2013 compared to $6.5 million in the second quarter of 2012.
The increase was primarily the result of a $0.8 million increase in guaranteed
asset protection (“GAP”) earnings due to lower expenses and higher volume.

Sales increased 6% to $126.5 million for the three months ended June 30, 2013,
compared to $119.3 million in the second quarter of 2012. Service contract
sales were $99.2 million compared to $94.1 million in the second quarter of
2012. Credit insurance sales were $9.9 million compared to $10.1 million in
the second quarter of 2012. Sales of the GAP product were $17.5 million
compared to $15.1 million in the prior year’s second quarter.

Corporate & Other

Corporate & Other segment pre-tax operating loss was $2.5 million in the
second quarter of 2013 compared to an operating loss of $25.4 million in the
second quarter of 2012. The improvement resulted from an increase in net
investment income primarily due to a $4.0 million favorable variance related
to mortgage loan prepayment fee income and $3.8 million related to called
securities. In addition, the increase was driven by a decline in other
operating expenses primarily due to a $7.2 million deferred notes issue cost
write-off recorded during the second quarter of 2012 and a favorable $3.9
million for a guaranty fund allocation transferred to the business segments in
the second quarter of 2013. The segment also experienced $2.1 million of gains
generated on the repurchase of non-recourse funding obligations during the
second quarter of 2013. No gains were generated in the prior year’s quarter.

Share Repurchase Program

During the six months ended June 30, 2013, the Company did not repurchase any
of its common stock. The Company has $170 million of remaining capacity under
its existing share repurchase program, which extends through December 31,
2014.

The Company does not intend to repurchase shares for the remainder of 2013 in
anticipation of the close of the recently announced acquisition of MONY Life
Insurance Company and reinsurance of certain business of the MONY Life
Insurance Company of America.

Investments

  * The net unrealized gain position on investments was $880.8 million, after
    tax and DAC offsets, a decline of $932.7 million compared to December 31,
    2012.
  * Total cash and investments were $36.2 billion as of June 30, 2013. This
    includes $0.4 billion of cash and short-term investments.
  * During the second quarter of 2013, the Company had $4.0 million of pre-tax
    other-than-temporary impairment losses recognized in earnings.
  * Nonperforming mortgage loans equaled $17.6 million as of June 30, 2013,
    representing 0.4% of the commercial mortgage loan portfolio.

                                                       
  Net Realized Investment/Derivative Activity
  ($ per average diluted share)           2Q13          2Q12
                                                           
  Net realized gain on securities         $ 0.17        $ 0.13
  Modco net realized gain                   0.15          0.06
  Impairments                               (0.03 )       (0.11 )
  Derivatives related to VA contracts       0.07          0.08
  Mortgage/real estate losses               (0.04 )       (0.05 )
  All other                                 (0.01 )       (0.05 )
  Total                                   $ 0.31        $ 0.06   
                                                           

Operating income differs from the GAAP measure, net income, in that it
excludes realized gains (losses) on investments and derivatives and related
amortization. The tables below reconcile operating income to net income
available to PLC’s common shareowners:

Second Quarter Consolidated Results

  ($ in thousands; net of income tax)              2Q13            2Q12
               
  After-tax operating income                       $ 77,747        $ 70,869
  Realized investment gains (losses) and
  related amortization
                          Investments                (77,552 )       31,229
                          Derivatives                103,004         (25,943 )
  Net income available to PLC's common             $ 103,199       $ 76,155   
  shareowners
                                                                      
                                                                      
  ($ per average diluted share; net of income        2Q13          2Q12
  tax)
                                                                      
  After-tax operating income                       $ 0.96          $ 0.85
  Realized investment gains (losses) and
  related amortization
                          Investments                (0.96   )       0.37
                          Derivatives                1.27            (0.31   )
  Net income available to PLC's common             $ 1.27          $ 0.91     
  shareowners
                                                                      

For information relating to non-GAAP measures (operating income and PLC’s
shareowners’ equity per share excluding other comprehensive income (loss)) in
this press release, please refer to the disclosure at the end of this press
release and to the Company’s Supplemental Financial Information located on the
Company’s website at www.protective.com. All per share results in this press
release are presented on a diluted basis, unless otherwise noted.

                                                                
  Reconciliation of PLC's Shareowners' Equity, Excluding Accumulated Other
  Comprehensive Income
                                                                        
  ($ in millions)                                 June 30,        December 31,
                                                  2013            2012
  PLC's shareowners' equity                       $  3,838        $    4,615
  Less: Accumulated other comprehensive              801               1,737
  income
  PLC's shareowners' equity, excluding            $  3,037        $    2,878
  accumulated other comprehensive income
                                                                        
                                                                        
                                                                        
                                                                        
  Reconciliation of PLC's Shareowners' Equity per share, Excluding Accumulated
  Other Comprehensive Income per share
                                                      
  ($ per common share outstanding)                June 30,        December 31,
                                                  2013            2012
  PLC's shareowners' equity                       $  48.91        $    59.06
  Less: Accumulated other comprehensive              10.21             22.22
  income
  PLC's shareowners' equity excluding             $  38.70        $    36.84
  accumulated other comprehensive income
                                                                        

Conference Call

There will be a conference call for management to discuss the quarterly
results with analysts and professional investors on August 1, 2013 at 9:00
a.m. Eastern. Analysts and professional investors may access this call by
dialing 1-866-318-8615 (international callers 1-617-399-5134) and entering the
conference passcode: 28461663. A recording of the call will be available from
12:00 p.m. Eastern August 1, 2013 until midnight August 15, 2013. The
recording may be accessed by calling 1-888-286-8010 (international callers
1-617-801-6888) and entering the passcode: 82113317.

The public may access a live webcast of the call, along with a call
presentation, in the Investor Relations section of the Company's website at
www.protective.com. The call presentation will be available on the website
beginning approximately 30 minutes prior to the conference call.

Supplemental financial information is available on the Company’s website at
www.protective.com in the Investor Relations section.

Information Relating to Non-GAAP Measures

Throughout this press release, GAAP refers to accounting principles generally
accepted in the United States of America. Segment operating income (loss) is
income before income tax, excluding realized gains and losses on investments
and derivatives net of the related amortization of deferred acquisition costs
(“DAC”) and value of business acquired (“VOBA”). Operating earnings exclude
changes in the guaranteed minimum withdrawal benefits (“GMWB”) embedded
derivatives (excluding the portion attributed to economic cost), realized and
unrealized gains (losses) on derivatives used to hedge the VA product, actual
GMWB incurred claims and net of the related amortization of DAC attributed to
each of these items.

Management believes that consolidated and segment operating income (loss)
provides relevant and useful information to investors, as it represents the
basis on which the performance of the Company’s business is internally
assessed. Although the items excluded from consolidated and segment operating
income (loss) may be significant components in understanding and assessing the
Company’s overall financial performance, management believes that consolidated
and segment operating income (loss) enhances an investor’s understanding of
the Company’s results of operations by highlighting the income (loss)
attributable to the normal, recurring operations of the Company’s business. As
prescribed by GAAP, certain investments are recorded at their fair values with
the resulting unrealized gains (losses) affected by a related adjustment to
DAC and VOBA, net of income tax, reported as a component of total Protective
Life Corporation’s shareowners’ equity. The fair value of fixed maturities
generally increase or decrease as interest rates change. The Company believes
that an insurance company’s shareowners’ equity per share may be difficult to
analyze without disclosing the effects of recording accumulated other
comprehensive income (loss), including unrealized gains (losses) on
investments.

Unlocking

The Company periodically reviews and updates as appropriate key assumptions on
products using the Accounting Standards Codification (“ASC”) Financial
Services-Insurance Topic, including future mortality, expenses, lapses,
premium persistency, investment yields, interest spreads, and equity market
returns. Changes to these assumptions result in adjustments which increase or
decrease DAC amortization and/or benefits and expenses. The periodic review
and updating of assumptions is referred to as “unlocking”. When referring to
DAC amortization or unlocking on products covered under the ASC Financial
Services-Insurance Topic, the reference is to changes in all balance sheet
components amortized over estimated gross profits.

Forward-Looking Statements

This release 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 the Company cannot give assurance that
such statements will prove to be correct. The factors which could affect the
Company’s future results include, but are not limited to, general economic
conditions and the following known risks and uncertainties:  (1) we are
exposed to the risks of natural and man-made catastrophes, pandemics,
malicious acts, terrorist acts, and climate change; (2) our strategies for
mitigating risks arising from our day-to-day operations may prove ineffective;
(3) we operate in a mature, highly competitive industry, which could limit our
ability to gain or maintain our position in the industry and negatively affect
profitability; (4) we operate as a holding company and depend on the ability
of our subsidiaries to transfer funds to us to meet our obligations and pay
dividends; (5) the policy claims of our insurance subsidiaries may fluctuate
from period to period resulting in earnings volatility; (6) we may be
adversely affected by a ratings downgrade or other negative action by a
ratings organization; (7) our results may be negatively affected should actual
experience differ from management’s assumptions and estimates, which by their
nature are imprecise and subject to changes and revisions over time; (8) our
financial condition and results of operations could be adversely affected if
our assumptions regarding the fair value and future performance of our
investments differ from actual experience; (9) our use of reinsurance
introduces variability in our statements of income; (10) we could be forced to
sell investments at a loss to cover policyholder withdrawals; (11) interest
rate fluctuations and sustained periods of low interest rates could negatively
affect our interest earnings and spread income, or otherwise impact our
business; (12) equity market volatility could negatively impact our business;
(13) our use of derivative financial instruments within our risk management
strategy may not be effective or sufficient; (14) we are highly regulated and
subject to numerous legal restrictions; (15) changes in tax law or
interpretations of existing tax law could adversely affect us; (16) we may be
required to establish a valuation allowance against our deferred tax assets;
(17) we, like other financial services companies, in the ordinary course of
business, are frequently the targets of litigation, including class action
litigation, which could result in substantial judgments; (18) we, as a
publicly held company generally, and a participant in the financial services
industry in particular, may be the target of law enforcement investigations
and the focus of increased regulatory scrutiny; (19) our ability to maintain
competitive unit costs is dependent upon the level of new sales and
persistency of existing business; (20) our investments are subject to market
and credit risks and these risks could be heightened during periods of extreme
volatility or disruption in financial and credit markets; (21) we may not
realize our anticipated financial results from our acquisition strategy; (22)
we are dependent upon the performance of others; (23) our risk management
policies, practices, and procedures could leave us exposed to unidentified or
unanticipated risks; (24) our reinsurers could fail to meet assumed
obligations, increase rates, or otherwise be subject to adverse developments;
(25) a disruption affecting the electronic systems of the Company or those on
whom the Company relies could adversely affect our business, financial
condition and results of operations; (26) exposure to the risks of natural and
man-made catastrophes, pandemics, malicious acts, terrorist acts and climate
change, could adversely affect our operations and results; (27) our ability to
grow depends in large part upon the continued availability of capital; (28)
new accounting rules or changes to existing accounting rules could impact our
reported earnings; (29) credit market volatility or disruption could adversely
impact us; (30) disruption of the capital and credit markets could negatively
affect the Company’s ability to meet its liquidity and financing needs; (31)
difficult general economic conditions could materially adversely affect our
business and results of operations; (32) we may not be able to protect our
intellectual property and may be subject to infringement claims; (33) we could
be adversely affected by an inability to access our credit facility; and (34)
the amount of statutory capital we have and must hold to maintain our
financial strength and credit ratings and meet other requirements can vary
significantly and is sensitive to a number of factors beyond our control.
Please refer to Risk Factors and Cautionary Factors that may Affect Future
Results, which can be found in Part I, Item 1A of the Company’s most recent
report on Form 10-K and Part II, Item 1A of the Company’s most recent report
on Form 10-Q for more information about these factors.

Contact:

Protective Life Corporation
Richard J. Bielen, 205-268-3617
Vice Chairman and Chief Financial Officer
or
Eva T. Robertson, 205-268-3912
Vice President, Investor Relations
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