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NYACK, N.Y.--([ BUSINESS WIRE ])--Presidential Life Corporation (aPresidential Lifea or the aCompanya) (NASDAQ: PLFE) today announced results for the fourth quarter and year ended December 31, 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 and health insurance products.

Fourth quarter 2011 net income was $14.8 million or $0.50 per share, compared with net income of $14.6 million or $0.50 per share for the comparable quarter in 2010. Net income for the year ended December 31, 2011 was $38.9 million or $1.32 per share, compared with net income of $21.5 million or $0.73 per share for the year ended December 31, 2010. The increase in net income of $17.4 million for the full year 2011 compared to 2010 is principally due to an increase in realized gains, net of other-than-temporary impairments (aOTTIa), of $8.4 million; an increase in equity in earnings on limited partnerships accounted for under the equity method of $7.7 million; and the favorable effect of a decrease in the effective tax rate from 38.1% in 2010 to 30.3% in 2011.

Total revenues in the fourth quarter of 2011 were $73.6 million, a decrease of 17.1% or $15.2 million from $88.8 million in the fourth quarter 2010. Total revenues for the year ended December 31, 2011 were $267.4 million, a decrease of 10.0% or $29.6 million from $297.0 million for the year ended December 31, 2010. The decrease in revenues was largely attributable to a decline in individual fixed annuity sales given the low interest rate environment, partially offset by the increase in realized gains from our limited partnership portfolio for the full year of 2011 compared to the full year of 2010.

aIn 2011, we made substantial improvements in our financial strength while also commencing the execution of key initiatives to grow the business. From a financial strength standpoint, we significantly improved our Risk-Based Capital ratio¹ to 556% by the end of 2011, which is up from 449% a year ago. In 2011, we began forming the foundation for our national distribution platform and annuity product line expansion. The initial product launch of our much anticipated fixed indexed annuity product is planned for the third quarter of 2012,a said Donald Barnes, Vice Chairman of the Board, CEO and President.

Key Items for the Fourth Quarter and Full Year Results

• Our investment spread margin² totaled 1.69% for the year ended December 31, 2011 compared to 1.16% for the year ended December 31, 2010.
• Total annuity sales³ were $16.3 million in the fourth quarter 2011, a decrease of 39% compared to 2010 levels due to the continued low interest rate environment.
• Deferred annuity surrenders were $31.5 million in the fourth quarter of 2011 compared to $32.5 million for the same period in 2010, a 3.1% decrease, representing average surrender rates for both periods of 1.6%.
• Our capital base significantly strengthened during 2011 with our RBC ratio increasing to 556% at year end 2011 from 449% at year-end 2010.
• As of December 31, 2011, book value per share, excluding other comprehensive income, increased to $20.12 at December 31, 2011, from $19.05 at December 31, 2010.

Discussion of Fourth Quarter 2011 and Full Year Financial and Operating Results

As previously discussed, total revenues were $73.6 million and $88.8 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $15.2 million or 17.1%, and were $267.4 million and $297.0 million for the years ended December 31, 2011 and 2010, respectively, a decrease of $29.6 million or 10.0%. The decreases from the prior periods were largely attributable to a decline in individual fixed annuity sales given the low interest rate environment partially reduced by an increase in realized gains from our limited partnership portfolio.

Total insurance revenues were $9.7 million and $17.2 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $7.5 million or 43.6%, and were $29.2 million and $70.5 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $41.3 million or 58.6%. Immediate annuity considerations with life contingencies were $3.7 million and $10.9 million in the fourth quarter of 2011 and 2010, respectively, a period-over-period decrease of $7.2 million or 66.6%, and were $9.6 million and $51.2 million for the year ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $41.6 million or 81.2%. Life insurance and accident and health premiums were $6.1 million and $6.3 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $0.2 million or 3.7%, and were $19.6 million and $19.3 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $0.3 million or 1.4%.

Sales of deferred annuities and immediate annuities without life contingencies were $12.6 million and $15.9 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $3.3 million or 20.8%, and were $53.5 million and $82.2 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $28.7 million or 34.9%. The decreases were primarily due to the low interest rate environment that continued throughout 2011.

Net investment income was $47.7 million and $50.9 in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $3.2 million or 6.2%, and was $194.3 million and $198.6 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $4.3 million or 2.2%. Excluding the return on the Companyas limited partnership investments and other realized gains, the investment yields for 2011 and 2010 were 5.89% and 6.01%, respectively.

Net realized investment gains, including OTTI, were $14.5 million and $19.0 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period reduction of $4.5 million, and were $35.3 million and $26.9 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $8.4 million. The full year increase in net realized gains was due to $22.4 million of increases in realized gains, including a $17.0 million increase in gains from hedge fund redemptions within our limited partnership portfolio and other increases in realized gains from limited partnerships, bonds and stocks of $5.4 million, partially offset by $14.0 million of increases in realized losses related to an increase in other-than-temporary impairments of $8.9 million and a change in the decrease in the fair value of payor swaptions of $5.1 million. Consistent with the Companyas strategic plan, during 2011 and 2010, the Company has sold its hedge fund investments that had redemption rights.

Interest credited and benefits paid and accrued to policyholders were $46.7 million and $56.0 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $9.3 million or 16.6%, and were $178.5 million and $229.6 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $51.1 million or 22.3%. The decreases are principally due to the effect of the decline in sales of immediate annuities with life contingencies in 2011 compared to 2010 on the change in liabilities for future policy benefits.

Commissions to agents, net were $1.3 million and $1.6 in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $0.3 million or 19.1%, and were $4.3 million and $7.2 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period decrease of $2.9 million or 39.4%. Commission expense declined in 2011 and 2010 due to lower annuity sales compared to the previous year.

General expenses were $4.9 million and $4.7 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period increase of $0.2 million or 4.5%, and were $22.5 million and $20.1 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $2.4 million or 11.7%. The full year increase was primarily due to an increase in general expenses including severance costs, costs associated with the New York State triennial examination and legal and accounting expenses associated with Companyas financial restatements.

The Company recorded income tax expenses of $4.2 million and $9.6 million in the fourth quarters of 2011 and 2010, respectively, a period-over-period decrease of $5.4 million principally due to a reduction in the effective tax rate related to changes in year-end true-ups between 2011 and 2010. Income tax expense was $16.9 million and $13.3 million for the years ended December 31, 2011 and 2010, respectively, a period-over-period increase of $3.6 million. The increase in income tax expense for 2011 relative to 2010 was due to higher pre-tax income, notwithstanding the lower effect tax rate in 2011.

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 ].

¹Risk-Based Capital (aRBCa) 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 (aNAICa).

²Defined 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.

³In accordance with Generally Accepted Accounting Principles (aGAAPa), sales of deferred annuities and immediate annuities without life contingencies ($12.6 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 $3.7 million.