






Presidential Life Announces First Quarter 2010 Results


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NYACK, N.Y.--([ BUSINESS WIRE ])--Presidential Life Corporation (aPresidential Lifea or the aCompanya) (Nasdaq: PLFE) today announced results for the first quarter ended March 31, 2010. Presidential Life, through its wholly owned subsidiary Presidential Life Insurance Company, is engaged in the sale of fixed deferred and immediate annuities, life insurance and accident & health insurance products.
"This improvement in our first quarter results underlines the progress we continue to make against our strategic plan"
Total revenues in the first quarter of 2010 were $66.4 million, an increase of 61.5% or $25.3 million from $41.1 million in the first quarter of 2009. First quarter 2010 net income was $2.2 million or $0.07 per share, compared with a net loss of $8.4 million ($0.29 per share) for the comparable three-month period in 2009.
Key Highlights for the First Quarter Results
- First quarter earnings per share were $0.07 compared to a loss of $0.29 for the first quarter of 2009.
- Investment portfolio improved from a net unrealized gain of $2.4 million at December 31, 2009, to a net unrealized gain of $72.5 million at March 31, 2010.
- The Company reduced its cash-equivalent investments in the first quarter by approximately 22% to $227.7 million. The reinvestment of approximately $65 million during the quarter is expected to increase investment income on an annualized basis by approximately $3.3 million per year.
- Accident & health premiums have increased by $695,000 or 57% in the first quarter as Presidential Life expands into the group dental and limited medical accident product lines.
- Total annuity sales of $34.2 million, a decrease of 44% over 2009 levels1 due to the continued low interest rate environment.
- Annuity surrenders amounted to $28.9 million in the first quarter of 2010 compared to $56.4 million for the same period in 2009, a 49% decrease.
- Risk-based capital (aRBCa) ratio of 392% at March 31, 2010 vs. 388% at December 31, 2009.
- Book value per share as of March 31, 2010, was $20.61.
aThis improvement in our first quarter results underlines the progress we continue to make against our strategic plan,a said Donald Barnes, Presidential Lifea™s Vice Chairman, Chief Executive Officer and President. aOur limited partnership holdings improved considerably and we successfully redeployed a significant portion of our cash holdings into higher yielding fixed-income instruments, all of which are expected to boost our investment income in coming quarters. Furthermore, throughout the quarter, we maintained our disciplined approach to managing deferred annuity product sales in the current low-interest rate environment by focusing on profitable sales.a
aOverall, we continued to execute against our strategy in the first quarter of 2010 and will do so in the remainder of the year. Our plan remains consistent: diversifying our product portfolio by expanding our successful accident & health product lines, prudently managing our investment portfolio and enhancing our balance sheet strength. We firmly believe that adhering to these priorities is the best strategy to generate maximum value for all shareholders,a Barnes added.
Discussion of First Quarter 2010 Financial and Operating Results
Total revenues in the first quarter of 2010 were $66.4 million, an increase of 61.5% or $25.3 million from $41.1 million in the first quarter of 2009. As discussed below, the increase from the prior year was largely attributable to an increase in immediate annuity considerations with life contingencies, an increase in net investment income and a reduction in realized investment losses.
Total annuity considerations with life contingencies, life insurance and accident & health premiums were $15.2 million in the first quarter of 2010 versus $8.6 million in the prior period in 2009. Life insurance and accident & health premiums of $4.6 million in the first quarter of 2010 grew $0.9 million or 23.7% from $3.8 million in the first quarter of 2009. Annuity considerations with life contingencies, which consist solely of immediate annuities, increased $5.9 million to $10.1 million in the first quarter of 2010 from $4.2 million in the same period in 2009.
Sales of deferred annuities and immediate annuities without life contingencies were $24.1 million in the first quarter of 2010, a decrease of $32.7 million or 57% from $56.8 million in the 2009 comparable period. The decrease was primarily due to the low interest rate environment that continued into the first quarter of 2010.
Net investment income was $50.5 million in the first quarter of 2010, an increase of $14.6 million or 40.8% from the $35.8 million in the comparable period in 2009. The two principal drivers of the improvement were a strengthening of the limited partnership holdings and a redeployment of cash balances from low-yielding, short-term commercial paper into longer-dated, higher-yielding fixed income instruments. The portfolio benefited from a substantial improvement in the limited partnership holdings, which swung from a loss of $11.7 million in the first quarter of 2009 to a gain of $2.4 million in the first quarter of 2010, an improvement of $14.0 million or 120.2%. The redeployment of roughly $65 million of cash balances during the first quarter at an approximate 500 basis point improvement is expected to increase investment income by $3.3 million on an annualized basis going forward. The Company continues to examine options to prudently deploy additional cash balances at attractive rates.
The Companya™s ratio of net investment income to average cash and invested assets, at amortized cost, for the 2010 first quarter was 5.7% compared with 4.0% in the 2009 comparable period. Excluding the return on the Companya™s limited partnership investments in both periods, the ratio for the 2010 first quarter would have been 5.8% versus 5.7% in the 2009 comparable period. Net realized investment losses were $0.3 million in the first quarter of 2010, an improvement of $3.2 million from the prior yeara™s loss of $3.5 million in the 2009 first quarter.
Interest credited and benefits paid and accrued to policyholders were $51.8 million in the 2010 first quarter, in-line with the $50.2 million in the 2009 first quarter. The growth in annuity considerations with life contingencies resulted in an increase in the liability for future policy benefits of $2.0 million, a $6.0 million change from the prior period in 2009. Net commissions to agents were $1.8 million in the 2010 first quarter, a decrease of $1.3 million or 42.1% from the prior yeara™s $3.1 million, reflecting lower annuity sales. General expenses, commissions to agents, and costs related to the Companya™s consent revocation solicitation and related matters were $8.1 million in the first quarter of 2010 compared to $8.1 million in the 2009 comparable period. Excluding the costs for the consent revocation solicitation and related matters, these expenses would have decreased by $968,000 or 12.8%, compared to the same period in 2009.
The Company recorded an income tax expense of $1.2 million in the first quarter of 2010 compared to an income tax benefit of $4.4 million in the 2009 period. The principal driver of the reduced tax benefit was higher pre-tax income.
Update on Consent Revocation Solicitation
In December 2009, the Companya™s former Chairman, Herbert Kurz, commenced a solicitation of stockholder consents for the purpose of, among other things, removing from office, without cause, all of the current directors (other than Mr. Kurz) and electing in their place a slate of nominees proposed by Mr. Kurz. Mr. Kurz did not obtain the requisite stockholder consents to his proposals within the time frame prescribed by Delaware law. The Company recorded $2.5 million in 2009 and $968,000 in the first quarter of 2010 of corporate and legal expenses related to its consent revocation solicitation and related matters, including the previously reported ongoing internal and New York State Insurance Department investigations of Mr. Kurz and the Kurz Family Foundation, a principal stockholder of the Company.
On February 12, 2010, Mr. Kurz notified the Company of his intention to nominate, for election at the next annual shareholders' meeting, the same slate of nominees that he had proposed in his unsuccessful consent solicitation. Mr. Kurz further indicated that he may initiate a proxy contest in connection with those nominations.
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 leading 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 Corporation was founded in 1969 and, through the Insurance Company, markets its products in 50 states and the District of Columbia. For more information, visit our website [ www.presidentiallife.com ].
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||
(in thousands, except share data) | ||||||
Three Months Ended March 31 | ||||||
2010 | 2009 | |||||
REVENUES: | ||||||
Insurance revenues: | ||||||
Premiums | $4,583 | $3,759 | ||||
Annuity considerations | 10,135 | 4,216 | ||||
Universal life and investment type | ||||||
Policy fee income | 525 | 606 | ||||
Net investment income | 50,468 | 35,840 | ||||
Net realized investment losses | (327 | ) | (3,451 | ) | ||
Other income | 990 | 129 | ||||
TOTAL REVENUES | 66,374 | 41,099 | ||||
BENEFITS AND EXPENSES: | ||||||
Death and other life insurance benefits | 4,460 | 3,606 | ||||
Annuity benefits | 20,397 | 19,457 | ||||
Interest credited to policyholdersa™ account balances | 26,590 | 26,901 | ||||
Interest expense on notes payable | - | 753 | ||||
Other interest and other charges | 339 | 264 | ||||
Increase (Decrease) in liability for future policy benefits | 1,982 | (3,964 | ) | |||
Commissions to agents, net | 1,812 | 3,129 | ||||
Costs related to consent revocation solicitation | 968 | - | ||||
General expenses and taxes | 5,271 | 4,995 | ||||
Change in deferred policy acquisition costs | 1,185 | (1,165 | ) | |||
TOTAL BENEFITS AND EXPENSES | 63,004 | 53,976 | ||||
Income (loss) before income taxes | 3,370 | (12,877 | ) | |||
Provision (benefit) for income taxes: | ||||||
Current | 1,788 | (6,164 | ) | |||
Deferred | (625 | ) | 1,721 | |||
1,163 | (4,443 | ) | ||||
NET INCOME | $2,207 | ($8,434 | ) | |||
Earnings per common share, basic | $0.07 | ($0.29 | ) | |||
Earnings per common share, diluted | $0.07 | ($0.29 | ) | |||
Weighted average number of shares outstanding during the period, basic | 29,574,697 | 29,574,315 | ||||
Weighted average number of shares outstanding during the year, diluted | 29,574,697 | 29,574,315 | ||||
PRESIDENTIAL LIFE CORPORATION AND SUBSIDIARIES | |||||
CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||
(in thousands) | |||||
March 31, | December 31, | ||||
2010 | 2009 | ||||
ASSETS: | |||||
Investments: | |||||
Fixed maturities: | |||||
Available for sale at fair value (Amortized cost of $3,111,901 and $3,043,757, respectively) | $3,223,363 | $3,087,021 | |||
Common stocks: | |||||
Available for sale at fair value (Amortized cost of $476 and $475, respectively) | 2,016 | 1,947 | |||
Derivatives, at fair value | - | 390 | |||
Real estate | 415 | 415 | |||
Policy loans | 18,814 | 18,959 | |||
Short-term investments | 227,722 | 293,136 | |||
Other long-term investments | 204,133 | 196,191 | |||
Total investments | 3,676,463 | 3,598,059 | |||
Cash and cash equivalents | 2,472 | 8,763 | |||
Accrued investment income | 42,932 | 41,281 | |||
Federal income tax recoverable | 16,525 | 18,313 | |||
Deferred federal income taxes, net | - | 4,855 | |||
Deferred policy acquisition costs | 65,802 | 76,762 | |||
Furniture and equipment, net | 425 | 447 | |||
Amounts due from reinsurers | 15,575 | 15,056 | |||
Other assets | 1,507 | 1,506 | |||
TOTAL ASSETS | $3,821,701 | $3,765,042 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||
Liabilities: | |||||
Policy Liabilities: | |||||
Policyholders' account balances | $2,440,168 | $2,444,984 | |||
Future policy benefits: | |||||
Annuity | 647,031 | 645,801 | |||
Life and accident and health | 77,562 | 76,457 | |||
Other policy liabilities | 11,563 | 10,592 | |||
Total policy liabilities | 3,176,324 | 3,177,834 | |||
Deposits on policies to be issued | 1,458 | 1,905 | |||
General expenses and taxes accrued | 2,074 | 2,461 | |||
Deferred federal income taxes, net | 14,034 | - | |||
Amounts due from security transactions | 5,995 | - | |||
Other liabilities | 12,242 | 14,462 | |||
Total Liabilities | 3,212,127 | 3,196,662 | |||
Commitments and Contingencies | |||||
Shareholders' Equity: | |||||
Capital stock ($.01 par value; authorized 100,000,000 shares; issued and outstanding 29,574,697 and 29,574,697 shares, respectively) | 296 | 296 | |||
Additional paid in capital | 6,783 | 6,639 | |||
Accumulated other comprehensive loss | 36,243 | (4,448 | ) | ||
Retained earnings | 566,252 | 565,893 | |||
Total Shareholders' Equity | 609,574 | 568,380 | |||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $3,821,701 | $3,765,042 | |||
1 In accordance with Generally Accepted Accounting Principles (aGAAPa), sales of deferred annuities and immediate annuities without life contingencies ($24.1 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 $10.1 million.