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Presidential Life Corporation Announces Third Quarter 2011 Results

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^{Published in Business and Finance on Monday, November 7th 2011 at 19:00 GMT by Market Wire}  

NYACK, N.Y.--([ BUSINESS WIRE ])--Presidential Life Corporation (aPresidential Lifea or the aCompanya) (NASDAQ: PLFE) today announced results for the third quarter ended September 30, 2011. 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 & health insurance products.

Third quarter 2011 net income was $2.9 million or $0.10 per share, compared with net income of $1.7 million or $0.06 per share for the comparable three-month period in 2010. Net income for the first nine months of 2011 was $24.2 million or $0.82 per share, compared with a net income of $6.9 million or $0.23 per share for the comparable nine month period in 2010.

Total revenues in the third quarter of 2011 were $54.7 million, a decrease of 29.7% or $23.1 million from $77.8 million in the third quarter of 2010. Total revenues for the first nine months totaled $193.8 million, a decrease of 6.9% or $14.4 million from $208.2 million for the comparable nine month period in 2010. These decreases were largely attributable to a decline in individual fixed annuity sales given the low interest rate environment, partially offset by an increase in earnings from our limited partnership portfolio in the first nine months of 2011 relative to 2010.

aBottom-line results have improved throughout 2011, along with our book value per share, which is at $19.68 per share (excluding other comprehensive income), as of the end of the third quarter. However, management remains focused on the longer term execution of its core business strategy to expand the individual fixed annuity business. To that end, progress was made in the current quarter by signing agreements with two major software vendors to supply new systems for policy administration and customer communication. Also, in our continuing efforts to broaden annuity product offerings, product development initiatives began during the current quarter to design a new series of indexed annuities.a said Donald Barnes, Vice Chairman of the Board, CEO and President.

Key Items for the Third Quarter Results

• Basis point spread¹ totaled 148 basis points in the first nine months of 2011 compared to 28 basis points for the first nine months of 2010.
• Total annuity sales² of $12.9 million in the third quarter, a decrease of 69% over 2010 levels due to the continued low interest rate environment.
• Deferred annuity surrenders were $24.2 million in the third quarter of 2011 compared to $26.6 million for the same period in 2010 (a 9.0% decrease) representing average surrender rates for these periods of 1.3% and 1.4%, respectively.
• Strong capital base with our NAIC Company Action Level Risk-Based Capital (aRBCa) ratio increasing to 526% at the end of the third quarter 2011 versus 449% at year-end 2010.

Discussion of Third Quarter 2011 and Year-to-Date Financial and Operating Results

As previously discussed, total revenues were $54.7 million and $77.8 million in the third quarter of 2011 and 2010, respectively, a decrease of $23.1 million or 29.7%, and were $193.8 million and $208.2 million for the first nine months of 2011 and 2010, respectively, a decrease of $14.4 million or 6.9%. The decreases from the prior year were largely attributable to a decline in individual fixed annuity sales given the low interest rate environment partially reduced by an increase in earnings from our limited partnership portfolio.

Total insurance revenues were $6.2 million and $25.4 million in the third quarter of 2011 and 2010, respectively, a decrease of $19.2 million or 75.6%, and were $19.5 million and $53.3 million for the first nine months of 2011 and 2010, respectively, a decrease of $33.8 million or 63.4%. Immediate annuity considerations with life contingencies were $1.6 million and $21.1 million in the third quarter of 2011 and 2010, respectively, a decrease of $19.5 million or 92.4%, and were $6.0 million and $40.3 million for the first nine months of 2011 and 2010, respectively, a decrease of $34.3 million or 85.1%. Life insurance and accident & health premiums were $4.6 million and $4.3 million in the third quarter of 2011 and 2010, respectively, an increase of $0.3 million or 7.0%, and were $13.5 million and $13.0 million for the first nine months of 2011 and 2010, respectively, an increase of $0.5 million or 3.8%.

Sales of deferred annuities and immediate annuities without life contingencies were $11.3 million and $20.5 million in the third quarter of 2011 and 2010, respectively, a decrease of $9.2 million or 44.9%, and were $40.8 million and $66.3 million for the first nine months of 2011 and 2010, respectively, a decrease of $25.5 million or 38.5%. The decreases were primarily due to the low interest rate environment that continued throughout the first nine months of 2011.

Net investment income was $48.2 million and $49.8 in the third quarter of 2011 and 2010, respectively, a decrease of $1.6 million or 3.2%, and was $146.6 million and $147.7 million for the first nine months of 2011 and 2010, respectively, a decrease of $1.1 million or 0.7%. Net realized investment gains (losses), including other-than-temporary impairments (aOTTIa), were $(0.9) million and $1.8 million in the third quarter of 2011 and 2010, respectively, a reduction of $2.7 million, and were $20.9 million and $7.9 million in the first nine months of 2011 and 2010, respectively, an increase of $13.0 million. The year-to-date increase was largely due to gains related to distributions from limited partnerships (accounted for under the fair value method). These gains included the liquidation of one hedge fund which was held in the Companyas limited partnership portfolio that resulted in a realized investment gain of approximately $10.6 million. These gains were partially offset by a decrease in the fair value of payor swaptions of $5.0 million due to lower interest rates. The Companyas investment yield for the first nine months of 2011 was 6.47 % versus 5.29% for the same period in 2010.

Interest credited and benefits paid and accrued to policyholders were $43.8 million and $66.7 million in the third quarter of 2011 and 2010, respectively, a decrease of $22.9 million or 34.3%, and were $131.8 million and $173.6 million for the first nine months of 2011 and 2010, respectively, a decrease of $41.8 million or 24.1%. The decrease is principally due to the decline in sales of immediate annuities with life contingencies in 2011 relative to 2010. General expenses and commissions to agents were $5.2 million and $7.4 million in the third quarter of 2011 and 2010, respectively, a decrease of $2.2 million or 29.7%, and were $20.6 million and $19.5 million for the first nine months of 2011 and 2010, respectively, an increase of $1.1 million or 5.6% from the same respective periods in 2010. The third quarter decline is principally due to lower sales and a related decrease in commissions. The year-to-date increase was primarily due to an increase in general expenses including severance costs, the New York State triennial examination and legal/accounting expenses associated with Companyas financial restatements partially offset by lower commissions.

The Company recorded an income tax expense of $1.5 million and $0.9 million in the third quarter of 2011 and 2010, respectively, an increase of $0.6 million. Income tax expense was $12.7 million and $3.7 million for the first nine months of 2011 and 2010, respectively, an increase of $9.0 million. The increase in income tax expense for 2011 relative to 2010 was due to higher pre-tax income.

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, has a proud and distinguished history as a provider of individual 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 ].