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Executives

Eva T. Robertson - VP, Investor Relations

John D. Johns - Chairman, President & CEO

Richard J. Bielen - Vice Chairman & CFO

Carl S. Thigpen - EVP& Chief Investment Officer

Carolyn M. Johnson - EVP & COO

Analysts

Christopher Giovanni - Goldman Sachs

Sean Dargan - Macquarie Securities Group

Steve Schwartz - Raymond James and Associates

Seth Weiss - Bank of America-Merrill Lynch

Dan Bergman - UBS

Eric Berg - RBC Capital Markets

John Hall - Wells Fargo Securities

Protective Life Corporation (PL) Q1 2013 Earnings Call May 7, 2013 10:00 AM ET

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Protective Life Corporation Earnings Conference Call. My name is Katrina and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the presentation. (Operator Instructions). As a reminder this conference is being recorded for replay purposes.

I would now like to turn the presentation over to your host for today's call, Ms. Eva Robertson, Vice President of Investor Relations. Please proceed.

Eva T. Robertson

Thank you, operator and good morning everyone. Welcome to Protective Life Corporation's 2013 first quarter earnings call. Our call today is hosted by John Johns, Protective's President, Chairman and CEO and Rich Bielen, our Vice Chairman and CFO. Here with us also we have Carl Thigpen, our Chief Investment Officer; Carolyn Johnson, our Chief Operating Officer; Mike Temple, our Chief Risk Officer and Steve Walker, our Chief Accounting Officer.

Yesterday, we released our earnings press release as well as the supplemental financial information and both of these documents are posted on our website at protective.com. In addition to that information we released yesterday we are using a slide presentation with our discussion this morning. That slide deck is being webcast from a link on the Investor Relations section of our website at protective.com and the file is available for download there.

And finally today's discussion includes forward-looking statements which express expectations of future events and/or results. Actual events and results may differ materially from these expectations. You can refer to our press release and the risks and uncertainties as well as Risk Factor section of the company's most recent report on Form 10-K and subsequent 10-Q for more information about factors that may affect future results.

Our discussion also includes non-GAAP financial information and reconciliation to the GAAP measures can also be found in the supplemental financial information on our website.

And at this time, I'll turn the call over to John Johns.

John D. Johns

Well thank you Eva and thanks everyone. We appreciate your joining us today for Protective Life's first quarter earnings conference call. We are extremely pleased to report another very solid quarter of earnings, net income for the quarter was $78 million or $0.97 per share, operating earnings came in at $71 million or $0.89 per share and I will emphasize that, that is squarely on our plan for the year. That compares to the plan that we laid out on December 4 at our Investor's Conference call for us to earn $3.80 for the year.

We did benefit from the positive performance in the equity markets through higher VA fees and earnings. That was offset by some negative mortality which we believe was just the normal kind of adverse deviation we see from time to time in any kind of mortality block and Rich Bielen will talk a bit more about that in just a moment. We did experience some expenses that were higher than planned in our corporate and other line, specifically we accrued $4.5 million against a guarantee plan assessment that will come through here later.

We also incurred $1.3 million related to recent activity with respect to our recent announced transaction, the Mutual New York transaction. That was really the highlight of the quarter was the announcement of that transaction. I am pleased to report that we are in full (bloom) transition mode now, implementation mode with respect to that transaction. We had preliminary meetings with regulators. We have met with the MONY employees. We are doing a lot of work around our planning for the transition of the financial infrastructure we made and all in all I think we are right on plan where we'd like to see that transaction at the current time.

I am not going to turn it over to our Chief Financial Officer, Rich Bielen. Rich will give you a bit more detail on the quarter. Thank you.

Richard J. Bielen

Thank you, Johnnie and good morning everyone. If you would turn to slide four, operating EPS for this quarter is $0.89 versus a $1.18 in the first quarter of 2012. And just to remind everyone in the first quarter of 2012 we did have $35 million of gains related to the repurchases and non-recourse funding obligations. During the quarter this year we had $0.08 of realized gains versus zero a year ago, resulting in net income of $0.97 this quarter versus a $1.18 a year ago.

Turning to slide five, a reconciliation of our net realized investment gains and losses; the normal rebalancing of our portfolio resulted in $0.10 per share of earnings this quarter. The Modco related to the Chase transaction was a positive $0.01. We did have $0.04 of impairments as you can see that's down from last year and is running relatively low. 1 million of that related to an old paper investment and then approximately $3.5 million related to some non-agency mortgage-backed securities. Our non-agency mortgage backed portfolio has now declined to under a $1 billion at this point.

Our derivatives related to the VA was a positive $0.01 for the quarter. We had a $0.01 mortgage reserve and then $0.01 of other. So our net realized gain was $0.08 for the quarter.

Turning to slide six, our book value at the end of the first quarter was $57.89 versus $59.06 at the end of the year. Our total equity excluding AOCI was $37.50 versus $36.84 at the end of the year, and then as you can see on net unrealized gain continues to be very healthy at approximately $2.9 billion versus $3.1 billion at the end of the year. And as you know interest rates rose during the quarter that accounted for the decline.

Turning to slide four, to slide seven, I am sorry, Life Marketing, we reported $23.7 million of pre-tax operating earnings this quarter versus $30.4 million in the year ago quarter. Sales this quarter more than doubled from a year ago going from $23 million to $47 million. I'd just like to remind everybody that a year ago we had taken some significant actions in raising our prices with respect to our sales level, and our first quarter represented a low point for us in terms of our sales volume. As we went through the year we saw lot of changes in the market place and then we also saw the regulatory effects and the changes that we were going through at the end of the year.

As a result of that we saw our all our volume continued to increase in the second half of last year. We did have a backlog as we ended the year; we have seen our backlog now come through resulting in the $47 million of sales. We would expect during the second quarter we will have at least $40 million of sales but as we look forward and our current (add) count that comes in the door we would expect that our sales in the second half of the year will be consistent with plan which is in the low $30 million to mid $30 million range per quarter.

And then the other item that I just want to point out is with respect the changes in the EITF-9g that occurred last year. Sales volumes do have an impact on GAAP profitability in the period in which the sales occurs under the older rules you can capitalize all of your expenses. Here with the increased volumes even though we had placement rates consist with our history we had more app counts that didn't come through. The result of those increased expenses reduced earnings in this line by $2 to $3 million versus the plan.

So again a very healthy quarter as you can see term mortality was 92% of expected versus 90% a year ago. That is consistent with what we laid out in our investor conference. We do not see any real aberrations there. It was just across the board morality fluctuations.

Moving now to slide eight, we had Annuity earnings of $43 million versus $36 million a year ago. As you all know the equity market performed very well during the quarter so we had strong VA fee income. Our countdowns in this line of business has increased to 18% from the first quarter of 2012 and as you could see though our sales sequentially declined from $864 million to $695 and that $695 million was down from the year ago first quarter of $720 million. I would also point our VA sales as we have been taking different price actions in de-risking declined from $733 million to $580 million. In addition in this line of business in the quarter we did have some unfavorable SPIA mortality. That reduced earnings by $1.3 million or penny per share.

Turning now to slide nine, acquisitions, acquisitions earnings were $34.4 million versus $39.1 million in the first quarter of last year. That is consistent with our expected runoff in the line. One analyst report indicated that investment income was down during the quarter from a year ago, but that decline is consistent with the decline in the account values, we're really not seeing a decline in our yield in that line of business. We have seen some lower spread this quarter, and I just want to take a minute that it relates primarily to our Modco arrangement in the Chase transaction.

The way the accounting works as you recall in the Modco we actually own the assets our reinsurers are actually managing the portfolio as they take gains, those gains comes to us and are recorded below the line in our investment activity, but over time we reimburse that reinsurer counterparty consistent with the statutory IMR for those gains and those items come through our GAAP earnings as increased interest credited therefore resulting in lower spread in the line of business. And last year the Modco arrangements generated $0.37 of gains and so now we are reimbursing at a higher rate of about $2 million a quarter versus our prior expectations, that was less than a $1 million.

In the quarter also we did see some unfavorable mortality related to plan. There was approximately $4 million less than planned; the largest item there was a $3 million variance in our Liberty Life block. We have gone back and reviewed that block since inception which was the end of the April of 2011 and on a cumulative basis our mortality there versus our plan is $7 million favorable. We examined all of the blocks of business and just see it as a seasonal fluctuation.

As you know there were some other carriers in the space -- in the U.S. that saw some fluctuation in mortality in the first quarter. We did not see anything unusual there, our actual to expected in Liberty is 96% on a cumulative basis and also for information we've gone back and looked at our United Investors block. That also has an actual to expected mortality of 96% and as Johnnie mentioned the acquisition group is very focused on closing out the MONY transaction later this year.

Moving now to slide 10, Stable Value Products, we report $17.8 million versus $12.6 million a year ago. We had very strong spreads in the quarter, including participating income of $1.7 million resulting in a spread of 281 basis points. Excluding the participating income our adjusted spread was 255 basis points. We would expect that, that spread will be relatively stable here in the second quarter or little better than we originally planned for. Our account balance at the end of the quarter was $2.5 billion very consistent with the year-end balance of $2.5 billion, and we saw sales of approximately $112 million in the quarter.

Turning now to slide 11, the Asset Protection Division, the real highlight here is earnings were very much in line with expectations. Earnings were $6.1 million versus $5 million a year ago, that is consistent with our plan. We did see sales decline modestly to $104 million versus $110 million a year ago. There were some comments in the call notes that we saw about the decline in sales. We have been undergoing an effort in that line of business, to examine all of our programs, we have made some price increases in some of those programs resulting in some lower sales. We've also seen some newer competition in the GAP sector where people are coming with a little more aggressive pricing scheme, and you have seen little bit of decline there. But all-in-all earnings were very much on our plan in this line of business.

And then I will just comment again on corporate and other Johnnie mentioned that during the quarter we did receive notification of a guarantee fund assessment and it was the first time we truly qualified the assessment. That cost us $4.5 million and then the increased acquisitions activities and the expense related to that was an additional $1.3 million resulting in approximately a $0.05 reduction in our earnings during the quarter. The other thing I think as people look through their estimates, we did suspend our share repurchase during the quarter. So I think if people were trying to quantify that effect that probably also contributed about a penny in terms of a higher than planned share account as we run through the year.

And with that I will turn it back over to Johnnie for some closing comments.

John D. Johns

Yeah, my comments will be brief. Again, we think this was a very solid on-plan quarter for Protective. We think the increase in the life sales was healthy and positive and perhaps even showed a little bit of rationalization in the market. We have been planning for variable annuity sales to moderate as they did on a sequential basis in the quarter. Again we view that as very much in line with our plan. We had a strong statutory quarter, we estimate that our (VA space) capital ratio at the end of the quarter will be in the range of 515% to 520%, up slightly from our year end numbers, which indicated we have suspended the share repurchase this year due to the pending acquisition as we previously announced.

Again I will emphasize this what we're all about here at Protective is laying out a plan and achieving that plan as best we can and to the extent we're above it or below it. We try to explain as best we can to you what caused the deviation from planned. But that's what we're about. We're working towards $3.80 ex the MONY transaction. As we indicated in our call we're around that transaction our best estimate is little bit soft at this point it should be about another $0.15 a share added to that in the fourth quarter if we are able to close the transaction at the end of third quarter. So things are going well right now as projected. And we're happy now to turn it over to you for your questions. Thank you.

Question-and-Answer Session

Operator Thank you. (Operator Instructions) Your first question comes from the line of Chris Giovanni representing Goldman Sachs. Please proceed.

Christopher Giovanni - Goldman Sachs

Thanks so much. Good morning. I guess first question just in terms of thinking about the VA exposure and post the acquisition obviously sales have been coming down here as you guys have targeted. Would you expect to see a ramp up in sales to kind of increase your leverage to the VA product line once the deal closes? Or would you expect to keep a similar level of sales?

John D. Johns

Chris our current thinking is to keep the current level of sales, perhaps even moderating further from where we are now as we look forward.

Christopher Giovanni - Goldman Sachs

Okay. And then just on the UL sales I don't know if Carolyn can comment. Maybe a bit about your growth here is certainly higher than what we've seen from peers. Want to see if you can give some context around the products that you guys are selling well. And then maybe from a distribution standpoint where they are pointing to in terms of your ability to win share from some of your peers?

Carolyn Johnson

Well we certainly have gained in a lot of flex with our competitors and I think we're selling well. And as I talked about in the investor conference little bit more of the transactional sales and the level of premium Universal Life sales. So we're competitively positioned. We are not number one in any category but we're top five, typically in a lot of the categories. And we have maintained distribution we haven't stepped away from any distribution. So we're well positioned with the distribution. We continue to put a strong emphasis on institutional distribution which has grown off course over the last couple of years and that's been a strong player for us particularly if you've seen some other companies move up with our sales.

John D. Johns

Christian just to also repeat what Rich said earlier and that is that we faced up to the reality of the slow interest rate environment a bit earlier we think than many of our competitors. We raised our prices early last year. Many competitors didn't get around to that until later in the year. We also have moved away as Carolyn indicated we are stronger in the level premium space. And we're not very strong or competitive in the single premium space. Again the function of low interest rates you take a lot of premium at one time right now. In this interest rate environment it's kind of hard to match your targets with products. So yes we're still active, the market is just kind of moving our way slowly.

Christopher Giovanni - Goldman Sachs

Okay, fair point. And then just one just quick one for Carl, the mortgage loan exposure that you guys have has kind of steadily been decreasing sort of relative to your asset base and I guess I'm a little surprised because it seems like that scenario a lot of your peers are pointing to try and get some incremental yield. So just curious if you can give us some thought around what you guys are doing in that area?

Carl S. Thigpen

Yeah two things as you know the securities are market valued. So we had a big increase in market value in the securities where the mortgage loans are not market valued, they are book value. So the percentage there it looks a little different than actual book value to book value. But also we took loans and mortgages with Liberty Life with that acquisition fairly good sized plot. That really then fits the profile of what we typically do and we have been managing that lot now. But we have not strayed from our normal product type and what we normally and we are staying there.

Christopher Giovanni - Goldman Sachs

Okay so the $5.3 billion down to kind of the $4.8 that's primarily due to selling off the Liberty Life mortgage book?

Carl S. Thigpen

Yes and we have had a pick-up in participation property sales or participation mortgages getting paid off and so that has picked some, there was a flurry of activity in the fourth quarter, people trying to get ahead of the perceived tax law changes and thinking they may be more draconian than they actually were, so that was a pretty big increase of activity of sales in the fourth quarter.

Christopher Giovanni - Goldman Sachs

Okay, great, thank so much.

Carl S. Thigpen

Thank you, Chris.

Operator

Your next question comes from the line of Sean Dargan representing Macquarie. Please proceed

Sean Dargan - Macquarie Securities Group

Thank you. I think you referenced that the business in the acquisition segment is running off according to schedule but if that's the case wouldn't the quarterly earnings be then closer to planned run rate of above $ 40 million.

Richard J. Bielen

Sean, this is Rich. The plan for the quarter was closer to $40 million, but as I indicated we had $4 million of negative mortality during the quarter as I described primarily related to Liberty and then also our re-insurance reimbursements related to the Modco were about a $1 million higher than what we had originally planned for because of all the past gains that had been taken. So that accounts for about $5 million out of the $6 million and then just other normal fluctuations that we had. But you are correct, we should be closer to that $40 million run rate if morality is in line.

Sean Dargan - Macquarie Securities Group

Okay, great and then in the mortality that you did observe in the first quarter, was there any observable trend around frequency or severity?

Richard J. Bielen

We went back and looked pretty carefully and there are lot of subsets of blocks and we just really saw that across the board there was no discernable trend. There weren't large cases. There wasn't anything that we saw, so it was just what we call normal fluctuation which was why we went back and looked at the two year history to make sure that we did, we hadn't seen any other anomalies there.

Sean Dargan - Macquarie Securities Group

Great, thank you.

Richard J. Bielen

Thank you

Operator

Your next question comes from the line of Steven Schwartz representing Raymond James and Associates. Please proceed

Steve Schwartz - Raymond James and Associates

Hey, good morning everybody. Just to follow up here on the acquisitions thing and the Modco, so Rich the deal here is that the gains that were taken going into IMR and then IMR for the re-insurers would obviously add to their capital as they amortize into earnings you have to make good on that deferred assets.

Richard J. Bielen

That's correct but we've taken the gain as you described it goes into our IMR and our reimbursement to them is as we earn the IMR through our statutory income and with the gains in this market environment those are much higher than we originally planned for, they are running about $2 million a quarter, and we thought they would be little less than a million.

Steve Schwartz - Raymond James and Associates

Okay and shifting to VA, on the VA side you noted positive capital market helping the fees, does it help anything else, you have through up experience or anything like that in the deck or in the reserves

Richard J. Bielen

Steve, you have two things coming on, we do see a reduction in our debt benefit as a result of the higher items so that helped us about $2 million there in terms of our earnings and then the fee the higher fees really kind of will contribute to retrospective (DAC) unlocking, we have about $4 million related to that in the fee income.

Steve Schwartz - Raymond James and Associates

(DAC) unlocking runs through the fee income not through (DAC) amount.

John D. Johns

It would run through the DAC and relation line.

Steve Schwartz - Raymond James and Associates

Okay, good and then one other thing I think during the quarter you kind of announced an effort to may be re-enter the indexed business, may be you could touch on that Johnnie.

John D. Johns

I will let Carolyn…

Carolyn M. Johnson

Yeah, we did re-enter the indexed annuity business, at just the very end of the first quarter, so really we had no meaningful reportable sales during the first quarter but we are off to a decent start but it's a process just to re-enter and get firm signed up for the new product and so we're going through that process now but we do expect that to be a good addition to our overall annuity portfolio.

John D. Johns

And Steve as we have talked to we're actually focusing on institutional distributors with respect to that product. So this was a more of a ramp-up period as you go out and kind of educate them on how the product works and where it fits in their portfolios.

Steve Schwartz - Raymond James and Associates

Okay. Thank you, guys.

John D. Johns

Thank you.

Operator

Your next question comes from the line of Seth Weiss representing Bank of America-Merrill Lynch. Please proceed.

Seth Weiss - Bank of America-Merrill Lynch

Hi, good morning. Question on the stable value. Rich I believe you mentioned that base price will probably stay elevated at around 255 basis points in the second quarter. I think thus far we have seen price at about 100 spread level. So maybe if you could help us think about how the normalization of that business will occur and it will be steady or lumpy nature?

Richard J. Bielen

Seth what we're seeing there is we're longer in duration on the asset side and the liabilities. So we've been benefiting significantly from the fact that our liability costs have come down. I would point you to looking at our liability cost in our first quarter of 2012 versus the first quarter of 2013. And so as a result of that even though we're putting on business that we're pricing at lower spreads, the bonds were sitting on the books and were able to hold yield a bit better while our costs are coming down.

In our Investor Conference we had projected over the next couple of years that would drift down in to the low 200s. We've been able to defer that a little bit which is why we're 255 during the first quarter here. But we do expect over the next couple of years that will start to drift down to the low 200 range. But it will depend on the environment and the actual level of sales that we see over the next few quarters.

Seth Weiss - Bank of America-Merrill Lynch

Okay, great. So that will depend a little bit more in sales and not any kind of lumpy kind of redemption on the asset side is that right?

Richard J. Bielen

That's correct. It really will be on the sales and the balance levels.

Seth Weiss - Bank of America-Merrill Lynch

Okay, great. And then maybe just a bigger picture question on capital distribution. I believe you are effectively capped by rating -- from the rating agencies distributing more than about half of earnings. And on the April call to discuss the Mutual New York acquisition you spoke about the strong free cash flows generated there and illustrated a growing RBC, even with the resumption of share repurchase. So given that sort of high quality problem in generating more free cash flow, have there been any discussions with the regulator to maybe relapse a few on this time the distribution limitation?

John D. Johns

Seth this is John. It is little premature to have those discussions. But I think your observation is correct it is one of the many benefits of this acquisition transaction is that after we get it closed then it will increase the base of earnings upon which that 50% limitation is based. And in fact if you go back and look at one of the models we displayed when we had our conference call and the transaction we showed that if were to resume share repurchase in 2014 just hypothetically category if we were to do that then over the next year or two we would repurchase more shares even after taking into account suspension this year because our earnings base lets us repurchase more shares in the future.

So it is a virtuous cycle but we're going to keep a close eye, we want to be sure that our financial footing is very, very strong notwithstanding doing an acquisition. But we'll take another look at that after we get the deal closed and we're confident what the earnings stream will be.

Seth Weiss - Bank of America-Merrill Lynch

Great thanks a lot.

John D. Johns

Thank you.

Operator

(Operator Instructions) Your next question comes from the line of Dan Bergman representing UBS. Please proceed.

Dan Bergman - UBS

Hi good morning. I believe you guys said that the estimated first quarter RBC was 515 to 520 which is up from 510% at year end. Just wanted to see if you could give a little more color on the statutory results in the first quarter and how you are trending against the targeted 900 million of excess capital above the 400 RBC by 2013?

Richard J. Bielen

Dan I am going to answer the second part of that, with the 515 to 520 is very consistent with our plan, and we are on track to deliver the capital model that we've promised that we won in the market place based on the first quarter result. When you go through the pluses and the minuses in the quarter we have not finalized that we have seen some reduction in our required capital. We saw with the higher sales our statutory earnings were not as strong but the net result of a 515 to 520 RBC ratio is right on our plan. So we are not very concerned about how we are executing or where things are going at this point.

Dan Bergman - UBS

Okay, great, thanks. And I guess just switching gears, it looks like PICC annuity sales have been dropping pretty consistent over the past number of quarters. I think they are down to $115 million this quarter, just wanted to see giving the low interest rate environment if you get some thoughts around where you expect that trend going forward and if kind of the first quarter of level is a reasonable more run rate or we should expect further declines ahead.

Carolyn M. Johnson

Yeah, Dan it's Carolyn Johnson, I think we heard in earlier question about our fixed index annuity product and that would is really in response to the trends that we've seen on the fixed annuities trending lower and that really is an opportunity for us to see some growth on different product chassis. So we don't really expect any meaningful growth off where we are now on the standard fixed annuity product, that has trended lower. We do have some pretty frisky competitors out there they were not matching. And so we've given share way on that. So that's -- so we don't expect a real growth on the fixed index or fixed product but the fixed index product would be more of a growth story for us.

Dan Bergman - UBS

Great, thank you

Operator

Your next question comes from the line of Eric Berg representing RBC Capital Market Please proceed

Eric Berg - RBC Capital Markets

Thanks very much. I have two questions regarding your individual life business. First, one of your largest competitors in Universal Life Met has announced that it is exiting the no warranty business, and last week another larger competitor in this corner of Life Insurance Prudential said that it would exit a part of the business involving large face amount policies. Where do you stand with respect to no loss guarantee universal life? Are you out? Are you in? Are you pulling? Obviously you are pulling back but you remain in the business.

Carolyn M. Johnson

Eric, this is Carolyn, on the no loss guarantee product we are in, but we have really restructured our products so it is highly unattractive for dumping some single premium business, so we remain in as a player for level premium sales and that's really where we are staking out our ground, and we do expect to continue to plan that market where we are pleased with the performance of the product that we have on the street today. So that's where we are going to remain for the foreseeable future.

Eric Berg - RBC Capital Markets

Thank you. My second question is actually specifically to Rich. I am just trying to understand, to check my understanding of the new accounting rules from last year for the (DAC). Would it be right to say that if you have slightly higher sales which you did in the quarter, if your completion ratio which I guess means your success at converting application into policies, if your sales go up and your replacement and replacement ratio remains the same as it was the year ago, all else the same you are going to post lower GAP earnings, is that how the arithmetic works.

Richard J. Bielen

That is correct because we just deal with the policies that are not placed, as if your volumes still up so you have done more EPS' more effort around that had more people working on that. Those cost that are not successfully placed policies fall straight to the bottom line, where under the old accounting you would have capitalized those cost and addition, so the increased volume that are hurting our GAP earnings during this quarter immediately.

John D. Johns

Eric, I guess it also should be added though this cost were capitalizing less (DAC) amount than we were in the past over time there is been benefit to this and if your earnings are higher, in the future this trend kind of reverses our sales level out we have less (DAC) amortizing in future.

Dan Bergman - UBS

And this is all captured, the inability to capitalize unsuccessful marketing costs would be captured in your line items (relative to) other operating expenses?

Richard J. Bielens

Yes.

Dan Bergman - UBS

Okay. Thank you very much.

John D. Johns

Thank you.

Operator

Your next question comes from the line of John Hall representing Wells Fargo Securities. Please proceed.

John Hall - Wells Fargo Securities

Thank you and good morning. I have a couple of clean up questions I was just wondering what states do the assessment come from?

John D. Johns

(Inaudible).

John Hall - Wells Fargo Securities

Okay. And are the acquisitions related expenses, is there some sort of run rate levels on a go forward basis that you'd be thinking about?

John D. Johns

I think the expenses we saw in the first quarter were really more labor type expenses that will probably subside over the next couple of quarters. If we close the deal in early fourth quarter we may have some one-time expenses there that would relate to the numbers we baked in our estimate of the impacted money, primary labor fees, they were very transaction intensive specific to that period of time as you would expect.

John Hall - Wells Fargo Securities

Got it, not much going forward. And then just finally not too much on the acquisition but just to sort of get an understanding how long did the I guess the MONY deal keep you out of the M&A market?

John D. Johns

We can't really say for sure right now I think we did we showed you some figures (Inaudible) with respect to our RBC ratios and our capital positions assuming the close of transaction in the third quarter. And that we showed you one scenario where we did not repurchase shares at all and other where we resumed repurchase at that 50% level albeit on our higher earnings number in 2014. In either scenario you'd see that the RBC ratio quickly builds back well above the kind of the 400% RBC floor that we've kind of pegged for purposes of this transaction. And then that share repurchases go back to our 500% RBC ratio in 2015 under that model and if we resume share repurchase in 2014 we're back to 465% in 2015.

So we'd like to think that in either scenario we have some money we're going to start thinking about more acquisitions but we really don't -- we are out of the market now for sure. And we really are very focused on getting this transaction closed and establishing the earnings patterns that we expect from it before we kind of go back to M&A drawing board.

John Hall - Wells Fargo Securities

Got you but those RBC numbers point to you kind of like taking the -- I'd put the eye shades back on in 2014 though.

John D. Johns

I think we're certainly yeah might be just be looking at taking the eye shades off and looking around on for a next year or so but I think we'd be monitoring the environment. I think we expect to have -- done the capital again in 2014. So I think it'll be a reasonable for us to start surveying the landscape in that, that time.

John Hall - Wells Fargo Securities

Great. Thanks very much.

John D. Johns

Thank you.

Operator

With no further questions at this time I would now like to turn the call back to Mr. John Johns for closing remarks.

John D. Johns

Well again I think we have pretty well everything we need to say. We do have a positive outlook for the rest of the year. We believe that our -- the company's performance is on the plan on track with what we laid out as our goals our internal goals for 2013. And again we feel very good about where we're positioned right now. It's just where we want to be.

So again thank you all for joining us on the call. And again if there are any details we need to fill in I'm sure we will be glad to talk offline to fill in any gaps, small gaps we have left in the presentation. So thank you very much. Have a good day.

Operator

Thank you. And ladies and gentlemen thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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