protective life insurance company 2016 company update
TRANSCRIPT
Protective Life Insurance Company2016 Company Update
April 11, 2016
IntroductionIn addition to the information contained in this presentation, we have supplemental financial information availableon our website at www.protective.com. The information found on our website is not a part of this presentation.Also, this presentation includes forward-looking statements which express expectations of future events and/orresults. Actual events and results may differ materially from these expectations. For more information about therisks, uncertainties, and other factors that could affect our future results, please refer to Part I, Item 1A, RiskFactors, of the Company’s most recent Annual Report on Form 10-K. Unless context otherwise requires, “we,”“us,” and “our” refer to the consolidated group of the Protective Life Insurance Company (the “Company”) and itssubsidiaries. In this presentation, “PLC” refers to Protective Life Corporation.
Certain information included in this presentation may contain non-GAAP financial measures. For informationrelating to non-GAAP financial measures and the associated reconciliation to GAAP financial measures, pleaserefer to Note 25 to our consolidated financial statements included in our most recent Annual Report on Form 10-K(operating earnings (losses), referenced throughout this presentation, is referred to as segment operating income(loss) in our Annual Report on Form 10-K). The preparation of Company financial statements requiresmanagement to make estimates and assumptions that impact the reported amount of assets and liabilities, thedisclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting periods.
This presentation is not intended as, and should not be construed as, earnings guidance. This presentation isdated April 11, 2016. We assume no obligation to, and do not intend to update the information contained hereinafter such date.
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Company Overview
About Protective Life Insurance Company
Solid competitor in the industry
– Founded in 1907
– $767 billion of life insurance in force*
– Over 7 million contracts and policies*
Track record of strong financial performance
Healthy retail franchise
Distinctive acquisition capabilities
Talented management team in place
Support from and collaboration with Dai-ichi
*as of December 31, 20154
Protective Life Insurance Company OverviewDiversified Business Operations
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• Income frominvested capital
• Interest expenseon debt
• Unallocatedoverhead
• GICs
• FundingAgreements
Segments
Life Marketing Acquisitions AnnuitiesStable Value
Products
• Traditional
• Universal Life
• Annuities
• FixedAnnuities
• VariableAnnuities
AssetProtection
• CreditInsurance
• ServiceContracts
• GAP
Products
Corporate &Other
• Universal Life
• Traditional
• BOLI
LifeMarketing
38%AssetProtection
9%
StableValue
2%
Annuities12%
Acquisitions39%
Asset
Protection
4%
StableValue12%
Business Mix
6
Annuities31%
Pre-taxOperatingEarnings*
$470.6million
2015 results reflect the impact of purchase accounting and include the period from 02/01/15 through 12/31/15.*Excludes the Corporate & Other segment
TotalRevenues*
$3.4billion
Life Marketing12%
Acquisitions41%
Opportunities for Organic Growth in Life and Annuities
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Our MissionTear down the barriers
Core StrategyImprove and simplify the entire Customer Experience
Shared ValueReconfigured value chain
DirectEngage customers directly
Strengthen ExistingOperational excellence
Core ValuesDo the Right Thing. Serve People. Build Trust. Simplify Everything.
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Strong Financial Foundation
$2.0
$2.8 $2.9 $3.0$3.3 $3.2
$3.9$4.1
2008 2009 2010 2011 2012 2013 2014 2015
Total Adjusted Statutory Capital$ in billions
8
Strong Financial Foundation
298%
429%455% 434%
510%
447%
562% 562%
2008 2009 2010 2011 2012 2013 2014 2015
Risk-Based Capital Ratio
9
Highly Rated
As of 04/07/2016.Sources: Rating agency documents10
Protective LifeCorporation
Protective LifeInsurance Company
Senior Debt Financial Strength
Standard &Poors A- AA-
Moody’s Baa1 A2
Fitch BBB+ A
A.M. Best a- A+
Outlook for all ratings is stable
Dai-ichi Life’s Global Footprint
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"We are pleased to be entering the U.S. life insurance market by bringing such an outstanding company as Protective into our portfolio. With a strongleadership team, vibrant and growing retail franchise and long track record of profitable growth organically and through the acquisition and integration ofattractive businesses, Protective is the ideal platform for expansion”
- Koichiro Watanabe, President, Dai-ichi LifeJune 3, 2014
Protective(1) and Dai-ichi
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About the Dai-ichi GroupTop Global Life Insurers by Assets(3)
Founded in 1902, headquarteredin Tokyo
Provides individual and group lifeinsurance and annuity products
Track record of successful globalacquisitions and continued growth
Highly rated
Approximately 60,000 employees
Total assets of $418.1 billion as of09/30/2015(2)
$0
$200
$400
$600
$800
$1,000
$1,200($ in Billions)
(1) PLC(2) Based on 09/30/15 exchange rate of 119.9 yen/dollar.(3) Based on analysis of data from the Fortune Global 500, Life Insurance Industry (Mutual and Stock companies),originally published July 5, 2015. All company data is presented as of end of prior fiscal year.
Protective(1) and Dai-ichi
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Protective is the U.S. growth platform for Dai-ichi Life
Creates a strong platform in Japan and U.S.
Two of the largest insurance markets globally
Diversifies Dai-ichi Life’s business in terms of revenues, profits, and risks
Protective’s experienced management team has remained with the companypost-acquisition
Dai-ichi is willing to provide capital for acquisitions
No explicit credit enhancements provided by Dai-ichi
(1) PLC
Investment Portfolio
Asset Liability ManagementThe in force block cash flows are well-matched.
In Force Life Reserves
15Note: Reflects portfolio over-investment in lines of business.As of 12-31-2015
In Force Life Reserves
Asset Balance
$0
$5
$10
$15
$20
$25
$30
$35
$40
2015 2016 2017 2018
In Force Life Reserves
In Force Stable Value and Annuity Reserves
$ in billions
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Investment Portfolio Overview
80%
13%
4%3%
As of 12/31/2015
$45.0 BillionInvestedAssets
Fixed Maturities Mortgage Loans
Policy Loans
$36.1 Billion of Fixed Maturities
Asset Type %
Corporate Securities 75%
RMBS 6%
CMBS 4%
ABS 3%
Governments / Agencies 5%
States, Munis, & Other 7%
Other
Fixed Maturities Portfolio by Credit Quality
14%
8%
32%
39%
5% 2%
AAA
AA
A
BBB
BB or less
Not Rated
As of 12/31/201517
$36.1 Billion
Commercial Mortgage Portfolio
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Total portfolio of 1,757 loans $ 5.7 bil.
Average Loan Size $ 3.0 mil.
Wtd. Avg. Amortization 21.4 yrs.
Wtd. Avg. Coupon 5.30%
Wtd. Avg. LTV 46.5%
Wtd. Avg. Debt Coverage Ratio 1.59
Mortgage Loans by TypeAs of 12/31/15
As of 12/31/15; amounts include securitized loans.
61%
7%
13%
9%
10%
Retail Apartments
Office Buildings
Miscellaneous
Warehouses
Commercial Mortgage LoanPortfolio Profile
0.60% 0.68%0.80%
0.48%
0.29%
0.48%
0.08%
0.0%
0.5%
1.0%
1.5%
2.0%
2009 2010 2011 2012 2013 2014 2015
Problem Mortgage Loan TrendProblem Loans as Percent of Mortgage Portfolio
Note: Includes restructured / securitized loans19
Our Investment Strategy is Unchanged
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ALM Discipline
High quality investment grade assets
Disciplined approach to ratings and diversification
Not investing in alternative asset classes, such as privateequity and hedge funds
Only 5% of securities below investment grade*
Maintaining commercial mortgage loan portfolio quality
*As of 12/31/2015
Business Segments
IndependentAgents
75%
InstitutionalSales21%
AffinityChannel &
Other4%
Life Marketing
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Markets fixed, indexed, and variableuniversal life
Distribution includes independent agentsand marketing groups, and financialinstitution representatives
In 2015, launched Costco productoffering to increase presence in theaffinity channel
– Product is unique to Costco and itsapproximately 81 millioncardholders
– Focus for future growth
Segment Overview and Highlights 2015 Life Sales by Distribution
Note: Throughout this presentation, 2015 earnings results are for February 1, 2015 – December 31, 2015.
2015 sales results are for January 1, 2015 – December 31, 2015.
Life Marketing
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$102 $107$117
$55
2012 2013 2014 2015
Pre-Tax Operating Earnings$ in millions
$121
$155
$130
$156
2012 2013 2014 2015
Sales$ in millions
PGAAP02-01-2015
Note: Throughout this presentation, 2015 earnings results are for February 1, 2015 – December 31, 2015.
2015 sales results are for January 1, 2015 – December 31, 2015.
Annuities
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$20.7 bil.AverageAccount
Value
Fixed40%
Variable60%
Variable66%
Fixed34%
$1.7 bil.2015 Sales
Segment Overview and Highlights
Markets fixed and variable annuityproducts primarily through theinstitutional channel
Distributes through broker-dealers,financial institutions and independentagents and brokers
Majority of variable annuity policieswritten post-2009
Target is 50/50 sales balance betweenvariable and fixed
Note: 2015 Average Account Value is for the period February 1, 2015 – December 31, 2015.
2015 sales results are for January 1, 2015 – December 31, 2015.
Annuities
25
$118
$166
$204
$147
2012 2013 2014 20152012 2013 2014 2015
Pre-Tax Operating Earnings$ in millions
2012 2013 2014 2015
VA Fixed
Sales$ in millions
$3,327
$2,560
$1,784 $1,750
PGAAP02-01-2015
2015 sales include the period from 01/01/2015 through 12/31/15. 2015 earnings reflect theimpact of purchase accounting and include the period from 02/01/15 through 12/31/15.
Acquisitions segment focuses on acquiring,integrating and servicing policies originallyunderwritten by other insurance companies
• Primary focus is on long-dated life insurancepolicies that were sold to individuals
• Target block size is $500 million - $1 billion
48 successful transactions
• Genworth transaction closed January 15, 2016
Protective believes it has significant institutionalexperience and know-how
• Due diligence
• Valuation
• Negotiation
• Systems consolidation
Ability to execute innovative deal structures
Strong reputation among potential counterparties
• Closing the deal
• Quality of post-closing services and integration
• Relationships with regulators
Acquisitions
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Segment Overview and Highlights
Transaction History
$ in millions
No. ofTransactions
CapitalInvested
AverageCapital
Prior to 1990 28 $ 120 $ 4
1990 to 2000 12 413 34
2001 to 2005 3 335 112
2006 to 2011 3 1,144 381
2013 1 1,088 1,088
2016 (estimated) 1 661 661
Total 48 3,761
Acquisitions
Pre-tax Operating Earnings$ in millions
$171 $154
$254
$195
2012 2013 2014 2015
27Note: Throughout this presentation, 2015 earnings results are for February 1, 2015 – December 31, 2015.In-force amounts are not adjusted for reinsurance ceded.
Insurance In Force on Acquired LifePolicies
Average value from 02/01/2015 – 12/31/2015
Traditional85%
Universal Life15%
PGAAP02-01-2015
Stable Value Products
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Segment Overview and Highlights
Sells fixed and floating rate fundingagreements directly to the trustees ofmunicipal bond proceeds, moneymarket funds, bank trust departmentsand other institutional investors
Markets GICs to 401(k) and otherqualified retirement savings plans
Used opportunistically to complementasset / liability management andproduct cash flows
Efficient operation
Pre-tax Operating Earnings
$ in millions
$60
$81$73
$57
2012 2013 2014 2015
PGAAP02-01-2015
2015 earnings reflects period from 02/01/15 – 12/31/15.
Funding Agreement Backed Notes (FABN) Program
Inaugural $400 million issuance under Protective Life Global Funding (“PLGF”)in November 2015
Between 1999 and 2008, Protective was an active issuer in this market
Established $5 billion PLGF program in 2015
This program further complements our overall asset-liability management efforts
Available to institutional investors in both domestic and international markets.
Note: Protective Life Global Funding is not registered with the United States Securities andExchange Commission.29
$2,511 $2,560
$1,959$2,132
2012 2013 2014 2015
Stable Value Products
Ending Account Balances and Sales
$ in Millions
Sales $622 $495 $92 $814
2.09%
2.67% 2.71%
1.88%
2012 2013 2014 2015
Adjusted Operating Spread*
*Excludes participating mortgage loan income and other income.
Sales include period from 02/01/15 through 12/31/15.30
02/01through12/31
PGAAP02-01-2015
Asset Protection
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Sells extended service contracts and credit life and disability insuranceon automobiles and recreational vehicles (“RV”), as well as aguaranteed asset protection (“GAP”) product
Marketed through a national network of approximately 7,550 automobileand RV dealers
Protective is one of the top providers in the marketplace
Asset Protection does not require a significant amount of capital
$10
$20
$26
$18
2012 2013 2014 20152012 2013 2014 2015
Asset Protection
3232
$ in millionsPre-tax Operating Earnings
Note: 2015 earnings number reflects period from 02/01/15 – 12/31/15.2015 sales number reflects period from 01/01/15 – 12/31/15.
PGAAP02-01-2015
$ in millionsSales
$35 $33 $29 $26
$329 $344 $355 $367
$63 $67 $74 $93
2012 2013 2014 2015
Credit Service Contracts GAP
$427 $444 $458 $486
Summary
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Our current financial position is very strong, and our solvencyand liquidity position is robust
We have a talented management team with a track record ofdelivering on plans
We are delivering stand-alone earnings growth
We have a strong parent that is committed to our future growth,capital management, and continued financial success
Protective Life Insurance Company2016 Company Update
April 11, 201634
Forward-Looking StatementsThis Presentation contains forward-looking statements. Forward-looking statements are necessarily based on estimates andassumptions that are inherently subject to significant business, economic and competitive uncertainties, risks and contingencies, many ofwhich are beyond the Company’s control and many of which are subject to change. Such statements include statements regarding thebelief or current expectations of the management of the Company concerning its future financial condition and results of operations,including its expected operating and non-operating relationships, ability to meet debt service obligations and financing plans, productsales, distribution channels, retention of business, investment yields and spreads, investment portfolio, ability to manage asset-liabilitycash flows and strategic and financial targets. Any such forward-looking statements or targets are not guarantees of future performanceand involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements and targets as aresult of various factors. Any forward-looking statements reflect the Company’s views and assumptions as of the date of this Presentationand the Company disclaims any obligation to update forward-looking information. For additional information concerning risks,uncertainties and other factors that could affect the Company’s future results, please refer to Part I, Item 1A, Risk Factors, of theCompany’s most recent Annual Report on Form 10-K.
This Presentation has been prepared, in part, from information supplied third-party sources, as indicated herein. Such third-partyinformation has not been independently verified and the Company makes no representation or warranty, expressed or implied, as to theaccuracy or completeness of such information. The summary descriptions and other information included in this Presentation areintended only for informational purposes and convenient reference. The information contained in this Presentation is not intended toprovide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations.
Additional information regarding the Company is available at www.protective.com.
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