Protective Life Insurance Company Company Overview

Transcription

1 Protective Life Insurance Company Company Overview November 2015

2 Notice This Presentation has been prepared from information supplied by PLICO and from third-party sources indicated herein. Such third-party information has not been independently verified and PLICO makes no representation or warranty, expressed or implied, as to the accuracy or completeness of such information. The summary descriptions and other information included in this Presentation are intended only for informational purposes and convenient reference. The information contained in this Presentation is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. This Presentation contains forward-looking statements. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond PLICO s control and many of which are subject to change. Such statements include statements regarding the belief or current expectations of the management of PLICO 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, product sales, distribution channels, retention of business, investment yields and spreads, investment portfolio and ability to manage asset-liability cash flows. This Presentation also contains statements of strategic and financial targets ( targets ) of The Dai-ichi Life Insurance Company, Limited ( Dai-ichi Life ). Such targets are for internal strategic purposes only and are not estimates or projections of the future financial condition or results of operations of Dai-ichi Life, PLICO or their affiliates. Such targets are subject to change and are not necessarily indicative of how Dai-ichi Life may conduct its business. Any such forward-looking statements or targets are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements and targets as a result of various factors. Any forward-looking statements reflect PLICO s views and assumptions as of the date of this Presentation and PLICO disclaims any obligation to update forward-looking information. The preparation of PLICO financial statements requires management to make estimates and assumptions that impact the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Financial information provided through this Presentation is prepared in accordance with Generally Accepted Accounting Principles ( GAAP ) unless otherwise specified or noted. Additional information regarding PLICO is available at 1

3 Highlights Solid competitor in the industry Founded in 1907 $764.3 billion of life insurance in force (1) $45.2 billion of invested assets (2) $5.4 billion in GAAP equity (2) PLICO at a glance: Track record of strong financial performance Healthy retail life insurance and annuity franchise Strong historical track record of acquiring, integrating and servicing life insurance and annuity blocks from other insurance companies Experienced and talented management team High-quality investment portfolio Strong corporate parent in The Dai-ichi Life Insurance Company, Limited ( Dai-ichi Life ) 2 (1) As of December 31, (2) As of September 30, 2015; invested assets total excludes separate account assets. Source: PLICO filings

4 Section 1 Company Overview

5 Protective Life Insurance Company Overview Diversified Business Operations Segments Products Life Marketing Acquisitions Annuities Stable Value Products Asset Protection Corporate & Other Traditional Universal Life BOLI Traditional Universal Life Annuities Fixed Annuities Variable Annuities GIC GFA Direct Institutional Credit Insurance Service Contracts GAP Other investment income/expenses Earnings from run-off lines Our Business Mix is an Advantage (Revenues and Pre-Tax Operating Income) Stable Value Products 3% Asset Protection 7% Corporate & Other 2% Life Marketing 32% Stable Value Products 11% Asset Protection 4% Life Marketing 17% Annuities 18% Annuities 30% Acquisitions 38% Acquisitions 38% Total 2014 Revenues $4.5 billion Total 2014 PTOI (1) $575.5 million 4 (1) Corporate & Other segment s pre-tax operating income was ($99.0) million for FY Excluding the Corporate & Other segment, pre-tax operating income was $674.5 million for FY 2014.

6 Experienced and Stable Management Team Years of Experience Name Position(s) Insurance Industry PLICO John D. Johns Chairman of the Board, President, Chief Executive Officer and Director Richard J. Bielen Vice Chairman, Chief Financial Officer and Director Deborah J. Long Executive Vice President, Secretary and General Counsel Michael G. Temple Executive Vice President and Chief Risk Officer 30 3 Carl S. Thigpen Executive Vice President, Chief Investment Officer Lance P. Black Senior Vice President and Treasurer Steven G. Walker Senior Vice President, Chief Accounting Officer and Controller

7 Protective (1) is Stronger With Dai-ichi Life ($ in Billions) $1,200 Top Global Life Insurers by Assets Dai-ichi Life s Strategy for Protective Protective is the U.S. growth platform for Daiichi Life $1,000 $800 Creates a strong platform in Japan and U.S., the 2 largest insurance markets globally $600 Diversifies Dai-ichi Life s business in terms of revenues, profits, and risks $400 $200 Target is for Dai-ichi Life to achieve total return to its shareholders of 40% of its adjusted net income by 2017 $0 PLICO s experienced management team has remained with the company post-acquisition 6 Note: Based on analysis of data from the Fortune Global 500, Life Insurance Industry (Mutual and Stock companies), originally published July 5, All company data is presented as of end of prior fiscal year. (1) PLC

8 Dai-ichi Life s Global Footprint "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 strong leadership team, vibrant and growing retail franchise and long track record of profitable growth organically and through the acquisition and integration of attractive businesses, Protective is the ideal platform for expansion - Koichiro Watanabe, President, Dai-ichi Life June 3,

9 Dai-ichi Life Corporate Structure Dai-ichi Life Insurance Company, Limited (1) Domicile: Japan FSR: A1 / A+ / A / A+ Regional Headquarters (North America) Dai-ichi Life Information Systems Regional Headquarters (APAC) Dai-ichi Frontier Life (Japan) Neo First Life (Japan) Janus (United States) DIAM Protective Life Corporation HQ: Birmingham, AL Senior Notes Rating: Baa1 / A- / BBB+ / A- TAL (Australia) Protective Life Insurance Company State of Domicile: TN FSR: A2 / AA- / A / A+ Lyndon Property Insurance Company State of Domicile: MO FSR: -- / -- / -- / A- MONY Life Insurance Company State of Domicile: NY FSR: A2 / A+ / A / A+ Protective Life and Annuity Insurance Company State of Domicile: AL FSR: -- / AA- / A / A+ Panin Dai-ichi Life (Indonesia) Star Union Dai-ichi Life (India) Ocean Life (Thailand) West Coast Life Insurance Company State of Domicile: NE FSR: A2 / AA- / A / A+ Dai-ichi Life Vietnam (Vietnam) Asset management companies 8 Note: Ratings are listed in the following order: Moody s / S&P / Fitch / A.M. Best. The insurer financial strength ratings reflect each rating agency s opinion of PLICO s financial strength, operating performance and ability to meet its obligations to policyholders and are not evaluations directed toward the protection of investors. Therefore, such ratings may be subject to review, revision, suspension, reduction or withdrawal at any time by the assigning rating agency. (1) In 2015, Dai-ichi Life s board of directors adopted a reorganization plan to shift to a holding company structure in October Under the proposed structure, PLC will be a wholly owned subsidiary of the Dai-ichi Life holding company.

10 PLICO s Financial Position Strong Financial Foundation and Performance Gross Premiums and Policy Fees Pre-tax Operating Income (1) ($ in Billions) ($ in Millions) $3.3 $3.0 $2.8 $2.8 $2.6 $2.1 $407 $346 $461 $528 $675 $312 (2) ($ in Billions) ($ in Billions) $57.3 $59.6 $58.6 $47.1 $4.9 $42.1 $13.6 $14.0 $13.4 $37.0 $4.1 $10.2 $7.2 $5.7 Total Equity Invested Assets $5.7 $4.7 $5.8 $5.4 $31.3 $34.9 $36.9 $43.7 $45.6 $ Q Q 2015 General Accounts Separate Accounts 9 Note: GAAP financial information for PLICO; 2015 YTD data is for successor company (2/1/2015 9/30/2015) and includes purchase accounting effects from Dai-ichi Life transaction. (1) Excludes corporate and other segment. (2) Includes separate account assets. Source: PLICO filings

11 Statutory Financial Overview Statutory Capital and Surplus Risk-Based Capital (RBC) Ratio ($ in Millions) 562% $3,499 $3, % $2,984 $2, % 433% 447% $2,622 $2, Q Note: Statutory financial information for PLICO. Source: PLICO filings

12 Financial Strength As of September 30, 2015 PLICO believes it has a strong balance sheet Total shareowner s equity of $5.4 billion Total capital & surplus of $3.5 billion PLICO believes it has a high quality investment portfolio 93% of fixed maturities are investment grade PLICO believes it has excess capital (defined as total adjusted capital above target RBC ratio of 400%) of $1,111.2 million as of December 31, 2014 PLICO has an unsecured revolving credit facility up to an aggregate principal amount of $1 billion Maturity date of February 2, 2020 PLICO has a stable ratings profile Financial strength ratings of A2 (Moody s), AA- (S&P), A (Fitch), A+ (A.M. Best) (1) 11 (1) The insurer financial strength ratings reflect each rating agency s opinion of PLICO s financial strength, operating performance and ability to meet its obligations to policyholders and are not evaluations directed toward the protection of investors. Therefore, such ratings may be subject to review, revision, suspension, reduction or withdrawal at any time by the assigning rating agency. Source: PLICO filings

13 Risk Management Risk management is a critical part of PLICO s business and PLICO has adopted risk management processes in multiple aspects of its operations, including: Product development and management Enterprise Risk Management Business acquisitions Underwriting Investment management Asset-liability management Technology development Liquidity Risk Management PLICO s ERM framework is robust and tailored to the nature, scale and complexity of the business Multiple methods are used to assess liquidity risk Contingency plans are in place Bank Line of Credit FHLB available borrowings Operating cash flow Cash, treasuries, short term corporate bonds 12

14 Section 2 Segment Overview

15 Life Marketing Segment Overview and Highlights Markets fixed universal life ( UL ), indexed universal life ( IUL ), variable universal life, bankowned life insurance ( BOLI ) and level-premium term insurance ( traditional ) products on a national basis Distribution is primarily through networks of independent insurance agents and brokers, brokerdealers, financial institutions and independent marketing organizations Life Sales by Distribution (1) Institutional 22% Other 2% Independent agents 76% Universal life sales of $130 million in 2014 Recently completed launch of Costco product offering to increase presence in the Affinity channel Distinct UL product and process unique to Costco and its more that 80 million members (as of July 2015) Process is completely electronic 255,560 quotes and 10,165 completed and submitted applications from December 2014 (inception) through October 2015 Strengthen Existing Models Strengthen Shared Value Enhance Customer Engagement 3 Core Retail Strategies Focused Distributor Relationships BGA Consolidation Opportunities Affinity Marketing Institutional Distribution Online tools Customer service infrastructure Customer analytics 14 Note: GAAP financial information for PLICO. (1) Life sales for FY 2014.

16 Acquisitions Segment Overview and Highlights Transaction History 15 Acquisitions segment focuses on acquiring, integrating and servicing policies originally underwritten by other insurance companies Primary focus is on long-dated life insurance policies and annuity products that were sold to individuals 47 successful transactions (1) PLICO believes it has: Significant institutional experience 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 No. of Capital Average ($mm) Transactions Invested Capital Prior to to to , ,088 1, projected (1) Total 48 3,761 In-Force Life Policies (2) Universal Life 15% Note: GAAP financial information for PLICO; 3Q 2015 data includes purchase accounting effects from Dai-ichi Life transaction. (1) On September 30, 2015, PLICO entered into a master agreement with Genworth Life and Annuity Insurance Company ( GLAIC ) pursuant to which PLICO agreed to enter into a reinsurance agreement to co-insure certain term life business of GLAIC. The transaction is expected to close in 1Q 2016 and will be PLICO s 48 th acquisition. (2) Life insurance in-force as of September 30, Traditional 85%

17 Annuities Segment Overview and Highlights Annuity Sales by Product (1) Markets fixed and variable annuity products primarily through the institutional channel Distributes through broker-dealers, financial institutions and independent agents and brokers Average account value of $20.5bn in 2014 Variable Annuities 53% Fixed Annuities 47% Majority of variable annuity policies written post Average Account Values (2) Interest Spread Fixed Annuities (3) Net investment income yield Interest credited to policyholders % 5.50% 5.44% 3.85% 3.53% 3.33% Variable Annuities 60% Fixed Annuities 40% Interest spread 1.95% 1.97% 2.11% $20.8 Billion 16 Note: GAAP financial information for PLICO. (1) FY 2014 data. (2) Average account values for period from 2/1/2015 9/30/2015. (3) Calculations based on average general account values.

18 Stable Value Products Segment Overview and Highlights Sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments and other institutional investors ($ in Millions) $3,076 $2,770 Ending Account Balances $2,511 $2,560 Markets GICs to 401(k) and other qualified retirement savings plans $1,959 $1,914 Used opportunistically to complement asset / liability management and product cash flows Efficient operation Q Note: GAAP financial information for PLICO; 3Q 2015 data includes purchase accounting effects from Dai-ichi Life transaction.

19 Asset Protection Segment Overview and Highlights Asset Protection Sales by Product (1) Sells extended service contracts and credit life and disability insurance to protect consumers GAP 16% Credit Insurance 6% investments in automobiles and recreational vehicles ( RV ), as well as a guaranteed asset protection ( GAP ) product that covers the difference between loan payoff amount and an asset s actual cash value in the case of total loss Service Contracts 78% Primarily marketed through a national network of approximately 7,150 automobile and RV dealers; a network of direct employee sales representatives and general agents distribute these products to the dealer market A portion of the sales and resulting premiums are reinsured with producer-affiliated reinsurers Loss Ratios (2) 82.6% 56.7% 56.5% 58.7% 61.3% 62.0% 54.6% 58.1% 56.9% 41.3% 33.8% 37.8% 37.7% 36.1% 33.8% 27.7% 28.6% Credit Service Contracts GAP 18 Note: GAAP financial information for PLICO. (1) Reflects segment data for FY (2) 2015 YTD data is for successor company (2/1/2015 9/30/2015) and includes purchase accounting effects from Dai-ichi Life transaction; 2010 data is not meaningful for GAP product.

20 Section 3 Investment Portfolio

21 Our Investment Strategy High quality investment grade assets Disciplined approach to ratings and diversification Only 5% of bonds below investment grade as of September 30, 2015 Maintaining commercial mortgage loan portfolio quality ALM discipline 20

22 Diversified, High-Quality Investment Portfolio As of September 30, 2015 Invested Assets Fixed Maturities ~ 80% Fixed Maturities ~ 93% investment grade Mortgage Loans States, 13% Munis, & Other 6% Policy Loans 4% Not rated Other 2% 4% AAA BB or less 14% 5% AA 7% Govts/ Agencies 4% ABS 2% Corporate bonds 60% BBB 40% CMBS 3% RMBS 4% A 32% $45.2 Billion $36.2 Billion 21 Note: GAAP financial information for PLICO; 3Q 2015 data includes purchase accounting effects from Dai-ichi Life transaction.

23 Commercial Mortgage Portfolio Overview Mortgage Loans by Type (1) Specializes in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments No single tenant represents more than 2.2% of mortgage loans (1) Concentrates on a limited number of commercial real estate asset types associated with necessities of life (e.g. retail, senior living, professional office, etc) Underwriting procedures based on conservative and disciplined approach Apartments 10% Warehouses 8% Misc 7% Targeted loan-to-value of 75% or less As of September 30, 2015, ~$7.3 million or 0.02% of invested assets consisted of nonperforming mortgage loans, restructured mortgage loans and/or mortgage loans that were foreclosed and were converted into real estate properties Office Buildings 13% Retail 62% Average size of mortgage loan: $2.8 million (1) Weighted-average interest rate: 5.72% (1) $5.1 Billion Largest single mortgage loan: $50.0 million (1) 22 Note: GAAP financial information for PLICO. (1) As of December 31, 2014.

24 Summary It is Essentially Business as Usual at PLICO Company leadership remains in place Continued complementary retail and acquisition strategy to achieve growth Continued disciplined approach to pricing using current interest rate assumptions Stable value contracts are based on real-time pricing Annuity products are priced weekly Life products are reviewed every 9-12 months Disciplined investment strategy Focused on efficient capital allocation PLICO views the outlook as positive 23

25 Appendix 1 Additional Financial Information

26 Financial Summary Year ended December 31, ($ in Millions) Selected Income Statement Data Premiums and Policy Fees $2,609 $2,784 $2,799 $2,967 $3,283 Reinsurance Ceded (1,381) (1,364) (1,310) (1,387) (1,396) Net Of Reinsurance Ceded 1,229 1,420 1,489 1,580 1,887 Net Investment Income 1,625 1,753 1,789 1,836 2,098 Total Revenues 2,937 3,409 3,456 3,605 4,464 Total Benefits and Expenses 2,604 2,933 2,996 3,182 3,725 Net Income Selected Balance Sheet Data Total Invested Assets $31,278 $34,858 $36,860 $43,656 $45,584 Total Assets 46,717 52,003 57,158 68,270 69,992 Total Reserves 33,918 36,349 36,715 46,172 45,800 Non-recourse Funding Obligations 1,361 1,249 1,447 1,495 1,528 Total Shareowner's Equity 4,072 4,877 5,687 4,690 5,831 Statutory Data Capital and Surplus $2,622 $2,628 $2,984 $2,918 $3,499 RBC Ratio 455% 433% 510% 447% 562% 25 Note: Financial information for PLICO. Source: PLICO filings

27 Dai-ichi Life Acquisition of Protective Life Corp P-GAAP Impact to PLICO ($ in Millions) Predecessor Company Balance Sheet as of 12/31/2014 Successor Company Opening Balance Sheet as of 2/1/2015 Successor Company (1) as of 9/30/2015 Assets Fixed maturities $37,191 $38,343 $36,181 Equity securities Mortgage loans 5,134 5,580 5,728 Policy loans 1,758 1,752 1,706 Total investments $45,584 $47,350 $45,161 Deferred policy acquisition costs $2,653 $0 $208 Value of business acquired 502 1,278 1,262 Goodwill Other intangibles Total assets $69,992 $70,720 $68,228 Liabilities Future policy and benefit claims $29,944 $30,195 $29,734 Unearned premiums 1, Total policy liabilities and accruals 31,459 30,818 30,400 Stable value product account balances 1,959 1,932 1,914 Annuity account balances 10,951 10,942 10,755 Non-recourse funding obligations 1,528 1,896 1,939 Repurchase program borrowings Liabilities related to separate accounts Variable annuity 13,157 12,971 12,647 Variable universal life Total liabilities $64,161 $64,210 $62,780 Equity (2) $5,831 $6,509 $5, (1) Reflects PLICO s financials at end of 3Q (2) For amounts as of 2/1/2015, represents the fair value of net assets acquired by Dai-ichi Life.

28 Appendix 2 Segment Financial Performance

29 Life Marketing Sales by Product Premiums ($ in Millions) ($ in Millions) $1,576 $1,592 $1,575 $1,634 $1,684 $1, Traditional Universal Life BOLI Universal Life Average Account Values Pre-Tax Operating Income $5,563 $6,038 $6,501 $6,965 $7,178 $7,291 ($ in Millions) ($ in Millions) $123 $96 $102 $107 $117 $ Q Note: GAAP financial information for PLICO; 2015 YTD data is for successor company (2/1/2015 9/30/2015) and includes purchase accounting effects from Dai-ichi Life transaction. 3Q 2015 average account values for period from 2/1/2015 9/30/2015.

30 Acquisitions Premiums Average Life Insurance In-Force $677 $834 $847 $929 $1,172 $742 ($ in Millions) ($ in Billions) $213 $219 $27 $31 $210 $30 $195 $28 $223 $35 $209 $32 $186 $188 $180 $167 $188 $ Q 2015 Traditional Universal Life Total Revenues Pre-Tax Operating Income $1,720 ($ in Millions) ($ in Millions) $254 $761 $983 $1,064 $1,187 $975 $111 $157 $171 $154 $ Note: GAAP financial information for PLICO; 2015 YTD data is for successor company (2/1/2015 9/30/2015) and includes purchase accounting effects from Dai-ichi Life transaction. 3Q 2015 average account values for period from 2/1/2015 9/30/2015.

31 Annuities $2,645 Sales by Product $3,381 $3,327 $2,560 ($ in Millions) ($ in Millions) $544 $608 Operating Revenues $648 $644 $662 $1,715 $2,349 $930 $1,032 $2,735 $1,867 $1,784 $953 $592 $693 $831 $1,186 $857 $329 Fixed Variable $347 Pre-Tax Average Operating Account Income Balances ($ in Billions) ($ in Millions) $11.3 $3.4 $13.9 $5.4 $16.1 $7.5 $18.9 $20.5 $20.8 $10.7 $12.3 $12.6 $79 $118 $166 $204 $109 $7.9 $8.5 $8.6 $8.2 $8.2 $8.2 $ Q 2015 Fixed Variable 30 Note: GAAP financial information for PLICO; 2015 YTD data is for successor company (2/1/2015 9/30/2015) and includes purchase accounting effects from Dai-ichi Life transaction. 3Q 2015 average account values for period from 2/1/2015 9/30/2015.

32 Stable Value Products Sales by Product Operating Revenues ($ in Millions) ($ in Millions) $171 $758 $625 $799 $300 $622 $222 $495 $413 $145 $128 $125 $111 $499 $400 $495 $92 $300 $133 $50 $42 $113 GIC GFA Direct Institutional $43 (1) Net Pre-Tax Investment Operating Income Income and Annualized Spread $ % $ % $ % 2.67% 2.71% $124 $ % $43 ($ in Millions) ($ in Millions) $39 $57 $60 $81 $73 $28 Net Investment Income Annualized spread 31 Note: GAAP financial information for PLICO; 2015 YTD data is for successor company (2/1/2015 9/30/2015) and includes purchase accounting effects from Dai-ichi Life transaction. (1) Annualized operating spread excludes participating mortgage loan income and other income.

33 Asset Protection Sales by Product Gross Premiums and Policy Fees $326 $395 $73 $427 $63 $444 $458 $67 $74 $340 ($ in Millions) ($ in Millions) $290 $268 $260 $254 $261 $54 $63 $176 $236 $286 $329 $344 $355 $259 $36 $36 $35 $33 $29 $18 Credit Ins. Service Contracts GAP Pre-TaxNet Operating Income Revenues ($ in Millions) ($ in Millions) $270 $283 $294 $297 $305 $24 $26 $204 $17 $20 $10 $13 32 Note: GAAP financial information for PLICO; 2015 YTD data is for successor company (2/1/2015 9/30/2015) and includes purchase accounting effects from Dai-ichi Life transaction.