Profile: Protective Life Corporation (PL.N)

Protective Life Corporation is a holding company whose subsidiaries provide financial services through the production, distribution, and administration of insurance and investment products. The Company operates in five segments: Life Marketing, Acquisitions, Annuities, Stable Value Products and Asset Protection. At December 31, 2008, the Company had insurance in-force of $775.6 billion, of which approximately $535.6 billion was ceded to reinsurers.

Life Marketing

The Life Marketing segment markets premium term insurance (traditional life), universal life (UL), variable universal life and bank owned life insurance (BOLI) products through a variety of distribution channels. One distribution system comprises brokerage general agencies, which recruit a network of independent life agents. The segment also distributes insurance products through a network of independent personal producing general agents, who are recruited by regional sales managers. Also, the Company markets BOLI through independent marketing organizations that specialize in the BOLI market.

Acquisitions

The Acquisitions segment focuses on acquiring, converting and servicing policies acquired from other companies. The segment's primary focus is on life insurance policies sold to individuals. These acquisitions may be accomplished through acquisitions of companies or through the reinsurance of blocks of policies from other insurers. Forty-four transactions have been closed by the segment since 1970.

Most acquisitions closed by the Acquisitions segment do not include the acquisition of an active sales force, thus policies acquired through the segment are closed blocks of business (no new policies are being marketed). Therefore, the amount of insurance in-force for a particular acquisition is expected to decline with time due to lapses, deaths, and other terminations of coverage. In transactions where some marketing activity was included, the Company generally either ceased future marketing efforts or redirected those efforts to another segment of the Company. However, in the case of the acquisition of West Coast Life Insurance Company (West Coast), which was closed by the Acquisitions segment in 1997, the Company elected to continue marketing new policies and to operate West Coast as a component of its Life Marketing segment.

On July 3, 2006, the Company completed its acquisition of the Chase Insurance Group, which consisted of five insurance companies that manufactured and administered traditional life insurance and annuity products and four related non-insurance companies (which collectively are referred to as the Chase Insurance Group). The Chase Insurance Group primarily offers level premium term and other traditional life products, as well as fixed and variable annuity products.

Annuities

The Annuities segment manufactures, sells and supports fixed and variable annuity products. These products are primarily sold through stockbrokers, but are also sold through financial institutions and independent agents and brokers. The Company's fixed annuities are primarily modified guaranteed annuities, which guarantee an interest rate for a fixed period. As contract values are market-value adjusted, upon surrender prior to maturity, these products afford the Company a measure of protection from the effects of changes in interest rates. The Company's fixed annuities also include book value and equity indexed annuities. The Company's variable annuities offer the policyholder the opportunity to invest in various investment accounts.

Stable Value Products

The Stable Value Products segment sells guaranteed funding agreements (GFAs) to special purpose entities that in turn issue notes or certificates in smaller and transferable denominations. The segment also markets fixed- and floating-rate funding agreements directly to the trustees of municipal bond proceeds, institutional investors, bank trust departments and money market funds. During the year ended December 31, 2003, the Company registered a funding agreement-backed notes program with the Securities & Exchange Commission (SEC). Through this program, the Company is able to offer notes to both institutional and retail investors. The amount available under this program was increased $4 billion through a second registration. In February 2009, the Company updated the second registration in accordance with applicable SEC rules and such updated registration provides for the sale of the unsold portion of notes previously registered under the program. The segment's funding agreement-backed notes complement the Company's overall asset/liability management in that the terms of the funding agreements may be tailored to the needs of Protective Life as the seller of the funding agreements, as opposed to solely meeting the needs of the buyer.

This segment markets guaranteed investment contracts (GICs) to 401(k) and other qualified retirement savings plans. GICs are generally contracts, which specify a return on deposits for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan. The demand for GICs is related to the relative attractiveness of the fixed rate investment option in a 401(k) plan compared to the equity-based investment options available to plan participants.

Asset Protection

The Asset Protection segment primarily markets extended service contracts and credit life and disability insurance to protect consumers' investments in automobiles and watercraft, and recreational vehicles (RV). The segment's products are primarily marketed through a national network of 4,000 automobile and marine dealers and RV dealers.

On July 14, 2006, the Company completed its acquisition of the vehicle extended service contract business of Western General. Western General is a provider of vehicle service contracts nationally, focusing primarily on the west coast market. In addition, Western General provides extended service contract administration for several automobile manufacturers and provides used car service contracts for a publicly-traded national dealership group. During the year ended December 31, 2008, approximately 94.2% of the segment's sales were through the automobile dealer distribution channel, and approximately 68.1% of the segment's sales were extended service contracts. Approximately 44% of the Company's service contract business covers vehicles produced by domestic car makers. A portion of the sales and resulting premium are reinsured with producer-affiliated reinsurers.

Corporate and Other

The Company has an additional segment referred to as Corporate and Other. The Corporate and Other segment primarily consists of net investment income and expenses not attributable to the other business segments, including net investment income on unallocated capital and interest on debt. This segment also includes earnings from several small non-strategic lines of business (primarily cancer insurance, residual value insurance, surety insurance and group annuities), various investment-related transactions and the operations of several small subsidiaries.