Presidential Life Corporation (“Presidential Life” or the
“Company”) (NASDAQ: PLFE) today announced results for the third
quarter and nine months ended September 30, 2012. Presidential
Life, through its wholly owned subsidiary, Presidential Life
Insurance Company, is engaged in the sale of individual fixed
deferred and immediate annuities, life insurance and accident and
health insurance products.
Net income for the nine months ended September 30, 2012 was
$12.1 million or $0.41 per share, compared with net income of $24.2
million or $0.82 per share for the nine months ended September 30,
2011. Third quarter 2012 net income was $5.2 million or $0.18 per
share, compared with net income of $2.9 million or $0.10 per share
for the comparable quarter in 2011. Income before income taxes was
$7.9 million and $4.4 million for the third quarters of 2012 and
2011, respectively, a period-over-period increase of $3.5 million.
The growth in income before income taxes of $3.5 million is
principally due to an increase in net realized gains of $2.1
million, a decrease in other-than-temporary-impairment losses
(“OTTI”) of $2.8 million and a net decrease in liability for future
policy benefits of $2.1 million, partially offset by an increase in
general expenses of $2.1 million and a decrease in net investment
spread of $1.4 million. Income taxes were $2.8 million and $1.5
million for the third quarter of 2012 and 2011, respectively, an
increase of $1.3 million.
Total revenues in the third quarter of 2012 were $62.4 million,
an increase of 14.1% or $7.7 million from $54.7 million in the
third quarter 2011. Total revenues for the nine months ended
September 30, 2012 were $179.5 million, a decrease of 7.4% or $14.3
million from $193.8 million for the nine months ended September 30,
2011. The increase in revenues of $7.7 million for the third
quarter was principally attributable to the aforementioned increase
in net realized investment gains of $2.1 million, lower OTTI losses
of $2.8 million and higher annuity considerations.
“The Presidential Life management team remains focused on
providing high quality service to its customers as the sale of the
Company to Athene Holding Ltd. continues to progress,” said Donald
Barnes, Vice Chairman of the Board, CEO and President.
Key Items for the Third Quarter Results
- Our investment spread margin1 totaled
0.69% for the nine months ended September 30, 2012 compared to
0.91% for the nine months ended September 30, 2011. The decline
primarily relates to the effect of lower market reinvestment yields
on the company’s fixed income portfolio, partly offset by lower
OTTI losses in the first nine months of 2012 relative to 2011. Net
realized investment gains and OTTI losses tend to fluctuate from
period-to-period as a result of changing economic conditions.
- Total annuity sales2 were $13.8 million
and $12.9 million in the third quarter 2012 and 2011, respectively,
an increase of $0.9 million or 7.0% compared to 2011 levels as the
low interest rate environment continues to challenge sales of fixed
annuity products.
- Deferred annuity surrenders were $28.4
million in the third quarter of 2012 compared to $24.2 million for
the same period in 2011, a 17.4% increase, representing average
surrender rates of 1.42% and 1.30% for the third quarters of 2012
and 2011, respectively.
- Our statutory capital base remains
strong at September 30, 2012 with our estimated Risk-Based Capital
ratio3 at 571% compared with 556% at December 31, 2011.
Discussion of Third Quarter 2012 and Year-to-Date Financial
and Operating Results
As previously discussed, total revenues were $62.4 million and
$54.7 million in the third quarters of 2012 and 2011, respectively,
a period-over-period increase of $7.7 million or 14.1%, and were
$179.5 million and $193.8 million for the nine months ended
September 30, 2012 and 2011, respectively, a decrease of $14.3
million or 7.4%. The increase in the current quarter was largely
attributable to an increase in net realized investment gains of
$2.1 million, lower OTTI losses of $2.8 million and higher annuity
considerations for the quarter. On a year to date basis, the
decline of $14.3 million in total revenues is primarily the result
of lower net realized capital gains of $15.4 million, largely
driven by a gain from one hedge fund redemption of $10.6 million in
the second quarter of 2011.
Total insurance revenues were $11.1 million and $7.0 million in
the third quarters of 2012 and 2011, respectively, a
period-over-period increase of $4.1 million or 58.6%, and were
$29.6 million and $22.2 million for the nine months ended September
30, 2012 and 2011, respectively, a period-over-period increase of
$7.4 million or 33.3%. Immediate annuity considerations with life
contingencies were $5.7 million and $1.6 million in the third
quarters of 2012 and 2011, respectively, a period-over-period
increase of $4.1 million or 256.3%, and were $14.2 million and $6.0
million for the nine months ended September 30, 2012 and 2011,
respectively, a period-over-period increase of $8.2 million or
136.7%. Life insurance and accident and health premiums were $4.6
million in the third quarters of 2012 and 2011 and were $12.9
million and $13.5 million for the nine months ended September 30,
2012 and 2011, respectively, a period-over-period decrease of $0.6
million or 4.4%.
Sales of deferred annuities and immediate annuities without life
contingencies were $8.2 million and $11.3 million in the third
quarters of 2012 and 2011, respectively, a period-over-period
decrease of $3.1 million or 27.4%, and were $40.5 million and $40.8
million for the nine months ended September 30, 2012 and 2011,
respectively, a period-over-period decline of $0.3 million or
0.7%.
Net investment income was $45.8 million and $48.2 million in the
third quarters of 2012 and 2011, respectively, a period-over-period
decrease of $2.4 million or 5.0%, and was $139.0 million and $146.6
million for the nine months ended September 30, 2012 and 2011,
respectively, a period-over-period decrease of $7.6 million or
5.2%. Excluding the return on the Company’s limited partnership
investments and other realized gains, the investment yields for the
nine months ended September 30, 2012 and 2011 were 5.62% and 5.90%,
respectively.
Net realized investment gains, including OTTI, were $4.0 million
and net realized losses were $0.9 million in the third quarters of
2012 and 2011, respectively, a period-over-period increase of $4.9
million, and were $6.8 million and $20.9 million for the nine
months ended September 30, 2012 and 2011, respectively, a
period-over-period decrease of $14.1 million. The year-to-date
decrease in net realized gains was due to $13.3 million of
decreases in net realized investment gains within our limited
partnership portfolio, primarily due to a gain from one hedge fund
redemption of $10.6 million in the second quarter of 2011, a
decrease in net realized investment gains within our bond and stock
portfolios of $5.7 million, offset by $1.3 million lower realized
losses related to other-than-temporary impairments and a lesser
decline in the fair value of payor swaptions of $3.6 million.
Interest credited and benefits paid and accrued to policyholders
were $45.5 million and $43.8 million in the third quarters of 2012
and 2011, respectively, a period-over-period increase of $1.7
million or 3.9%, and were $135.0 million and $131.8 million for the
nine months ended September 30, 2012 and 2011, respectively, a
period-over-period increase of $3.2 million or 2.4%. The increases
are principally due to the increase in liabilities for immediate
annuities with life contingencies in 2012 compared to 2011 related
to the increase in sales of this product in 2012.
Commissions to agents, net were $1.3 million and $0.7 million in
the third quarters of 2012 and 2011, respectively, a
period-over-period increase of $0.6 million or 85.7%, and were $3.7
million and $3.1 million for the nine months ended September 30,
2012 and 2011, respectively, a period-over-period increase of $0.6
million or 19.4%. Commission expense increased slightly in the
third quarter 2012 relative to 2011 due to higher annuity sales
compared to the previous year. The net expense from changes in the
deferred policy acquisition costs was $1.1 million and $1.3 million
in the third quarters of 2012 and 2011, respectively, a
period-over-period decrease of $0.2 million or 15.4%, and was $2.3
million and $4.5 million for the nine months ended September 30,
2012 and 2011, respectively, a period-over-period decrease of $2.2
million or 48.9%, principally related to lower amortization of DAC
on annuity sales due to lower realized gains. Deferred acquisition
costs were reduced by $0.5 million for the first nine months of
2012 relative to 2011 primarily due to a reduction in deferred
costs resulting from the prospective adoption of a new accounting
principle in 2012 that reduced the scope of deferrable costs to
those directly linked to successful sales efforts.
General expenses and taxes were $6.6 million and $4.5 million in
the third quarters of 2012 and 2011, respectively, a
period-over-period increase of $2.1 million or 46.7%, and were
$20.1 million and $17.6 million for the nine months ended September
30, 2012 and 2011, respectively, a period-over-period increase of
$2.5 million or 14.2%. The third quarter increase was primarily due
to higher transaction costs incurred in connection with the sale of
the Company and increased consulting fees associated with systems
implementation projects.
The Company recorded income tax expenses of $2.8 million and
$1.5 million in the third quarters of 2012 and 2011, respectively,
a period-over-period increase of $1.3 million or 86.7%. Income tax
expense was $6.3 million and $12.7 million for the nine months
ended September 30, 2012 and 2011, respectively, a
period-over-period decrease of $6.4 million or 50.4%. The decrease
in income tax expense for 2012 relative to 2011 results mainly from
lower pre-tax income. The effective tax rate was 34.1% and 34.5%
for the nine months ended September 30, 2012 and 2011,
respectively, a decline of 0.4%.
Cautionary statement regarding forward-looking
statements
This press release contains forward-looking statements within
the meaning of the safe harbor provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These statements include,
but are not limited to, quotations from management, statements
about our future plans and business strategy, and expected or
anticipated future events or performance.
These forward-looking statements involve risks and uncertainties
that are discussed in our filings with the Securities and Exchange
Commission, including economic, competitive, legal and other
factors. Accordingly, there is no assurance that our plans,
strategy and expectations will be realized. Actual future events
and results may differ materially from those expressed or implied
in forward-looking statements.
About Presidential Life
Presidential Life Corporation, through its wholly owned
subsidiary Presidential Life Insurance Company, is a provider of
fixed deferred and immediate annuities, life insurance and accident
& health insurance products to financial service professionals
and their clients. Headquartered in Nyack, New York, the Company
was founded in 1969 and markets its products in 50 states and the
District of Columbia. For more information, visit our website
www.presidentiallife.com.
PRESIDENTIAL LIFE CORPORATION
AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(In thousands) September
30, December 31, 2012 2011
ASSETS: (Unaudited) Investments: Fixed maturities: Available for
sale at market (Amortized cost of $ 3,162,017 and $ 3,206,884
respectively) $ 3,584,243 $ 3,520,755 Common stocks (Cost of $ 748
and $ 748, respectively) 1,468 1,302 Derivative instruments, at
fair value 1,651 3,358 Real estate 415 415 Policy loans 19,565
18,442 Short-term investments 126,723 61,233 Limited Partnerships
171,729 166,923 Total Investments $ 3,905,794 $
3,772,428 Cash and cash equivalents 15,802 47,110 Accrued
investment income 45,489 47,289 Deferred policy acquisition costs
37,732 41,746 Furniture and equipment, net 2,385 1,065 Amounts due
from reinsurers 29,962 19,116 Amounts due from investment
transactions 228 23,880 Federal income taxes recoverable 15,477 -
Other assets 2,321 1,649 TOTAL ASSETS $ 4,055,190 $
3,954,283 LIABILITIES AND SHAREHOLDERS' EQUITY: Liabilities:
Policy Liabilities: Policyholders' account balances $ 2,286,808 $
2,323,364 Annuity 624,608 634,397 Life and accident and health
92,357 83,855 Other policy liabilities 17,528 20,633
Total Policy Liabilities $ 3,021,301 $ 3,062,249 Deposits on
policies to be issued 659 490 General expenses and taxes accrued
4,002 2,521 Federal income taxes payable - 1,411 Deferred federal
income taxes, net 136,036 82,355 Amounts due for investment
transactions 6,173 268 Other liabilities 18,550
17,045 Total Liabilities $ 3,186,721 $ 3,166,339 Commitments
and Contingencies Shareholders’ Equity: Capital stock ($.01
par value; authorized 100,000,000 shares outstanding, 29,591,739
and 29,574,697 shares, respectively) $ 296 $ 296 Additional paid in
capital 7,532 7,408 Accumulated other comprehensive income 266,642
192,815 Retained earnings 593,999 587,425 Total
Shareholders’ Equity 868,469 787,944 TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY $ 4,055,190 $ 3,954,283
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME(In thousands, except share data)
THREE MONTHS ENDED
September 30,
(Unaudited)
NINE MONTHS ENDED
September 30,
(Unaudited)
REVENUES: 2012 2011 2012 2011 Insurance Revenues: Premiums $ 4,615
$ 4,572 $ 12,896 $ 13,533 Annuity considerations 5,661 1,586 14,203
5,983 Universal life and investment type policy fee income 828 849
2,477 2,647 Equity in earnings (losses) on limited partnerships 182
103 1,312 2,067 Net investment income 45,754 48,212 138,981 146,555
Net realized investment gains (losses): Total Other-than-temporary
impairment ("OTTI") losses $ (586) $ (3,971) $ (5,660) $ (10,687)
OTTI losses recognized in other comprehensive income 235 836 235
3,924 Net OTTI losses recognized in earnings $ (351) $ (3,135) $
(5,425) $ (6,763) Net realized capital gains, excluding OTTI losses
4,313 2,215 12,229 27,626 Other income 1,404 257
2,837 2,201 TOTAL REVENUES $ 62,406 $ 54,659 $
179,510 $ 193,849 BENEFITS AND EXPENSES: Death and other
life insurance benefits $ 4,416 $ 4,519 $ 13,113 $ 13,435 Annuity
benefits 19,810 20,426 59,651 62,284 Interest credited to
policyholders' account balances 24,348 25,428 73,514 76,454 Other
interest and other charges 434 243 1,112 950 Decrease in liability
for future policy benefits (3,522) (6,836) (12,380) (21,293)
Commissions to agents, net 1,289 700 3,673 3,064 General expenses
and taxes 6,588 4,460 20,109 17,583 Change in deferred policy
acquisition costs 1,105 1,295 2,336
4,457 TOTAL BENEFITS AND EXPENSES $ 54,468 $ 50,235 $ 161,128 $
156,934 Income before income taxes $ 7,938 $ 4,424 $ 18,382
$ 36,915 Provision (benefit) for income taxes: Current $
(13,273) $ 16,051 $ (7,667) $ 18,341 Deferred 16,023 (14,525)
13,927 (5,605) $ 2,750 $ 1,526 $ 6,260 $ 12,736 NET INCOME $
5,188 $ 2,898 $ 12,122 $ 24,179 OTHER COMPREHENSIVE INCOME
(after tax)
Net unrealized investment gains from
available for sale
securities, net of income tax expense of
$39,753 and $52,613,
respectively.
29,000 63,203 73,827 97,711 TOTAL OTHER COMPREHENSIVE INCOME $
29,000 $ 63,203 $ 73,827 $ 97,711 TOTAL COMPREHENSIVE INCOME $
34,188 $ 66,101 $ 85,949 $ 121,890 Earnings per common
share, basic $ 0.18 $ 0.10 $ 0.41 $ 0.82 Earnings per common share,
diluted $ 0.18 $ 0.10 $ 0.41 $ 0.82
Weighted average number of shares
outstanding during
the period, basic
29,591,739 29,574,697 29,588,007
29,574,697
Weighted average number of shares
outstanding during
the period, diluted
29,609,653 29,574,697 29,597,614
29,574,697
1 Defined as the yield on invested assets over the cost of money
on annuity liabilities. Yield is inclusive of realized capital
gains/(losses), other-than-temporary-impairments and equity in
earnings/(losses) on limited partnerships.2 In accordance with
Generally Accepted Accounting Principles (“GAAP”), current quarter
sales of deferred annuities and immediate annuities without life
contingencies ($8.2 million) are not reported as insurance
revenues, but rather as additions to policyholder account balances.
In addition, sales of immediate annuities with life contingencies,
which are reported as insurance revenues under GAAP, totaled $5.6
million.3 Risk-Based Capital (“RBC”) refers to the ratio of
adjusted statutory surplus divided by Company Action Level capital
that triggers regulatory involvement, as those terms are defined by
the National Association of Insurance Commissioners (“NAIC”).
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