Protective Life's (PL) CEO John Johns on Q1 2014 Results - Earnings Call Transcript

May.14.14 | About: Protective Life (PL)

Protective Life Corp. (NYSE:PL)

Q1 2014 Earnings Conference Call

May 08, 2014 10:00 AM ET

Executives

Eva Robertson - VP, IR

John Johns - President and CEO

Rich Bielen - CFO

John Sawyer - SVP, Life and Annuity Division

Analysts

John Nadel - Sterne, Agee

Jimmy Bhullar- JPMorgan

Christopher Giovanni - Goldman Sachs

Steve Schwartz - Raymond James Associates

Dan Bergman - UBS Securities

Seth Weiss - Bank of America Merrill Lynch

Operator

Good day, ladies and gentlemen and welcome to the Quarter One 2014 Protective Life Corporation’s Earnings Conference Call. My name is Sera, and I’ll be your coordinator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference (Operator Instructions). As a reminder this conference is being recorded for replay purposes.

I would now like to turn the call over to Ms. Eva Robertson, Vice President, Investor Relations. Please proceed.

Eva Robertson

Thank you, operator. Good morning everyone. Welcome to Protective Life Corporation 2014 first quarter earnings call. Our call today is hosted by John Johns, Protective’s Chairman, President and CEO; and Rich Bielen, our Vice Chairman and CFO. Here with us also we have Carl Thigpen, our Chief Investment Officer; Mike Temple, our Chief Risk Officer; and Steve Walker, our Chief Accounting Officer; and John Sawyer, our Executive Life and Annuity Division.

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

Finally, today’s discussion includes forward-looking statements which express expectations of future events and/or results. Actual 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 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 be found in the supplemental financial information report on our website.

At this time, I will turn the call over to John Johns.

John Johns

Thank you, Eva, and thanks to, everyone on the call for joining us this morning as we review our results for the first quarter of this year. I am pleased to say that we are reporting very solid results across all segments in the first quarter.

Our operating earnings per share in the quarter are $1.19. That’s up about 34% over the same quarter last year. Our net income is $1.03 which is up about 6% over the same quarter last year. Operating ROE in the quarter is up to 11.8%. Integration processed for our MONY acquisition is very much on track. I think many of you noted that in the press release we indicated that we did not elect to repurchase shares in the first quarter. Let me give you a bit of color on that.

We did in the quarter see some activity in the M&A pipeline and so we elected to not reactivate our repurchase program to ensure that if an attractive M&A opportunity materialized, we have sufficient capital to execute. I do want to emphasize however that our capital position remains very strong. We estimate that at the end of the quarter our RBC ratio was in the range of between 450% and 460% and that is after we paid a dividend of about $75 million up to our holding company, which we used to retire debt.

So our plans with respect to repurchase and dividend are very much intact. Our strategy is over time to return about 1.5 of our after tax operating earnings to shareholders in the form of dividends and share repurchase. As you can tell from the numbers I just cited, we certainly have the capacity to have a robust repurchase program in the absence of an acquisition and also I’ll confirm that we do believe that using capital to repurchase shares at our current stock price is a reasonable and attractive use of our capital.

So with that, let me turn the call over to Rich Bielen. Rich will walk you through the numbers and give you little bit more color on our performance in the quarter. Rich?

Rich Bielen

Thank you, Johnny and good morning. If you turn to Slide 4, operating income was $1.19 in the first quarter compared to $0.89 in the year ago quarter. Net income was $1.03 versus $0.97. We did have $0.16 of realized investment losses during the quarter resulting in net income of $83.6 million.

If you turn to Slide 5 is a reconciliation of our realized gains and losses. Our net realized gain on securities and our normal trading activity was $0.06 for the quarter. As you recall we also have a Modco related to our Chase transaction. That was a positive $0.05. During the quarter we only had one penny of impairments and those related to some legacy non-agency mortgage backed securities. Each quarter we continue to review those but those are really dwindling down at this point.

Derivatives related to VA contracts was a loss of $0.20, primarily came from three components. One is, we were impacted somewhat by the lower interest rate environment. Two, the choppiness of the equity market during the quarter caused our delta hedging to incur some additional cost. And then we had some additional non-performance risk as a result of the tightening of spreads.

Just as a reminder to everybody, during calendar year 2013, this outlined item was a positive $0.22. So our hedge program continues to be intact. We just see the volatility from fair value items. On the mortgage side, we had one small impairment for about $850,000. That was one penny. And then the other item of $0.05 relates to our MONY close block. Any gains that we realized in the above lines are allocated to those policyholders in the future. So, as a result we offset that and create a reserve to pay future dividends to those policyholders. All of that resulted in the net loss for the quarter of $0.16.

Moving to Slide 6, total shareholders’ equity ended the quarter at $54.09, up 14% from $47.28 at year-end. Our shareholders’ equity, excluding AOCI was $41.71 and compared to $40.99 at year-end. And as you can see with the low rate environment and the tightening spreads, the unrealized gain on our portfolio improved by $1 billion to $2.1 billion in comparison to $1.1 billion at year-end 2013.

Moving to each of the lines of business, life marketing reported $23.5 million of pretax operating earnings, compared to $23.7 million a year ago. We did see some favorable expense variance through the quarter and similar to many other companies in the industry, we did see some unfavorable mortality versus planned at $3 million. Our sales for the quarter were $28 million. We did see a slowdown in sales in January and February. We saw a move back to plan in the month of March and we would expect that in the second quarter our sales will exceed $30 million as we see some positive momentum in our inventory.

Moving to Slide 8, annuities; we reported $51.6 million compared to $43.4 million a year ago. We continue to have strong variable annuity fee income as a result of last year’s good market performance that have our account balances higher than we originally expected.

We continue to be able to manage our fixed spreads on the business very well and so we had strong fixed spreads during the quarter. On average the account balance is up 10% from a year ago into the first quarter of 2013. We did see some unfavorable mortality here from our life contingent annuities and that was a $3 million negative variance to our expected plan.

With respect to sales, we saw $416 million of sales during the first quarter. We expect that sales will increase in the second quarter but we are very focused on maintaining the balance between our fixed product and our variable product on a going forward basis.

Moving now to the acquisitions area, acquisitions report $61 million versus $34.4 million in the year ago quarter. That is a new record level. MONY has contributed $25.7 million and as John mentioned, our integration efforts are on track. We hit a milestone last week where we were able to unplug the financial systems from OXA and we appreciate all their cooperation in terms of their efforts and that seems to be going well.

We do expect that we will have one further milestone that will occur late in the third quarter where we lift systems out of their data center and bring them to our own facility here in Birmingham. Integration expenses during the quarter, we estimated to be $3.4 million with respect to the remaining acquired block, we saw better than planned persistency in our Liberty block that contributed a positive. But we did also see in these blocks an unfavorable mortality of approximately $3 million, but the better persistency mitigated that. So overall acquisitions are very solid quarter at $61 million.

Moving to Slide 10 and stable value products, spreads continue to be higher than planned, which results in earnings of $17.4 million versus $17.8 million a year ago. Our total spread was 270 basis points. Excluding the $0.5 million of participating income, our adjusted spread is 262 basis points. We would expect to be able to maintain a similar spread in the second quarter and as you can see, our account balances in this line have helped steady at approximately $2.5 billion over the last year.

Moving on to our asset protection division, sales in the first quarter exceeded plan at $106 million versus a $104 million. Similarly the weather, we saw a slower January and February but March came back to allow us to exceed the plan. Earnings were $6.4 million versus $6.1 million a year ago.

In the quarter we did consolidate one of our offices into our Chicago operation. That resulted in approximately $600,000 of severance cost in the quarter and our plan for this division during the first quarter was approximately $7 million. So the increased cost offs was the item that caused to be modestly below plan as a result of the consolidation.

Moving to Slide 12, just some other highlights. As Johnny mentioned our capital came in stronger than planned. We estimate the RBC of approximately 450% to 460% at the end of the first quarter. That would translate into total adjusted capital of approximately $350 million in excess of 400 RBC. During the quarter we also made the decision to reduce our debt by $75 million. That reduced our debt to capital from 29% to 28% which was consistent with our plan. We also know that as a result of that, we have some flexibility in the future if we do see an acquisition opportunity, because obviously we could redraw on the bank line.

And with that, I’ll turn it back to Johnny for some final comments.

John Johns

Yes, thanks Richie. You can see from Rich’s comments we are off to a very good start in 2014. There is enthusiasm, optimism for the M&A environment. Our acquisition story is very much intact. We continue to believe that we have industry leading capabilities across the board in the acquisitions area. We also continue to be optimistic about our prospects for achieving solid and profitable organic growth in our three retail lines of business. We have some very good plans, strategic plans in each of those lines of business to continue to push forward and grow into the future. So overall we feel like the company is performing very well, consistently across the board and we do remain quite optimistic and confident about our ability to achieve or exceed our financial plans for the year.

So with that we’ll stop here and turn the call over to you for your questions. Thank you.

Question-And-Answer Session

Operator

(Operator Instructions). First question comes from the line of John Nadel with Sterne, Agee. Please proceed.

John Nadel - Sterne, Agee

Really solid results for the quarter, despite what appears to be I guess, if I exclude annuities, it sounds like you had about $9 million of unfavorable mortality, at least relative to your own internal expectations. And so maybe Rich or Johnny, could you sort of give us just your high-level view on, despite that sort of pressure where did the offsets really come from relative to your expectations?

Rich Bielen

John this is Rich. I think the three places that we had the items; first like marketing we saw the $3 million of unfavorable; but we did have favorable expenses. Part of that is a result of the lower sales. We know when we have higher sales we have more expenses just because of the way the accounting works. The non-referable, so I would say overall when we looked underneath the covers, we were about 1 million short of plan. The expenses help to mitigate $2 million of that mortality.

On the acquisition side, really that persistency, there was some A&H business that we had had and some mortgage business in Liberty. Last year if you recall around the second quarter and third quarter we actually saw some elevated lapses. We re-estimated the future and here in the first quarter we saw those lapses recover to the lower range. And so that benefited us in the Liberty block which then mitigated mortality effect that we saw in acquisitions.

And then the third piece was the life contingent annuities. There we had $3 million -- we had no debt. So we had $3 million of unfavorable variants but we benefitted from better than expected spreads in the fixed line. So those two really offset each other. So when we look at fixed annuities in aggregate we came in on plan than the more positive came from the variable annuity and the positive fees. And so we’ll answer the next question which is run rate. We think the reported earnings was a fair reflection of our run rate during the quarter.

John Nadel - Sterne, Agee

The next question for you is just what was the M&A target during the -- I'm kidding. You don't want to say that either. I will ask the question this way. Is that target, or is that potential target anyway still out there? Or was that a transaction that we should view as having already occurred with another buyer?

John Johns

John, you know we do comment when we see activity in pipeline in a general sort of way, but we never comment specifically about any particular acquisition or opportunities. I think we’ll defer on that.

John Nadel - Sterne, Agee

Okay. But the back to your original comment upfront, about sort of not turning back on if you will the buyback program in light of a potential ideal that you at least thought had potential and maybe still think has potential. Is that -- and was that a comment specific to a deal, even if it’s unnamed or is that just a general comment Jonny that you think the M&A pipeline overall still remains pretty active?

John Johns

It’s the later.

Operator

Thank you. Your next question comes from the line of Jimmy Bhullar, JPMorgan. Please proceed.

Jimmy Bhullar - JPMorgan

I had a couple of questions. The first one just on your sales in many of the businesses or you could seem like you are more positive on the ball on expectation for the second quarter. So just wondering if you think weather had an impact on your sales in the first quarter? And then secondly on acquisitions, how do you think -- your cash balance is obviously building up. Your RBC has improved faster than we would have thought a year ago. So, and at the same time the deal pipeline looks pretty good. How long do you think you’ll wait for a deal and if you don’t find one, at what point do you say that you would be willing to start buying back stock? Is that more value [ph] that your planning later this year or would you wait more till next year in anticipation of the deal?

Rich Bielen

Jimmy I’ll take the first question with respect to weather. We clearly saw a pattern of weather in January and February. As you may recall there were a lot of storms in the Midwest, in the southeast. Unfortunately we had to close our offices and therefore you just slow up the process. You can’t take calls, you can’t process the applications as they’re coming in. Specifically in life insurance we saw March come back to our plan as we’ve got inventory kind of build through and we saw some of it in annuities. We saw it also in asset protection where we saw especially a slow February but a strong March as auto sales recovered. So we would say it was really concentrated in the first two months of the quarter where March was really back on plan.

John Johns

Jim this is Johnny. With respect to how we think about share repurchase and the interplay between that and acquisition opportunities, it’s very much a judgmental call. There’s no hard and fast rules. We see things coming. We sign non-disclosure agreements. We get some materials we can pretty quickly assess whether a transaction is something that sort of fits our profile of what we view as a good use of capital.

So I really can’t give you any hard and fast guidance in terms of what exactly the triggers are or restarting. But I will also say that as you know our plans call for our capital position to continue to build at a pretty nice rate, pretty fairly robust rate. So with $350 million of excess capital sitting in the bank right now, we will have the opportunity to repurchase and perhaps do some acquisitions down the road. So it’s not an either or situation I think and again the capital generation capacity we have is actually going to continue to make our share repurchase look attractive if we don’t see in the near medium term very attractive acquisition opportunity that we want to take a deep dive on.

Jimmy Bhullar - JPMorgan

And then just following up on the MONY transaction, I think you made about $26 million in this quarter. Last quarter was around 25. And it seems like it’s tracking a little bit higher than at least we had built in initially and just wondering how it’s doing versus your initial expectations and what -- if it is doing better what in fact is the driver? Is it just better persistency, better mortality?

Rich Bielen

Jimmy when we look and obviously we’re quarter to quarter on a -- for the first two periods we are ahead on plan on both a GAAP basis and on a stat basis and we really look at this on stat more than on a GAAP basis. So we’re pretty pleased. I think as we mentioned in the quarter we benefit -- in the prior quarter -- we have benefited from higher rates especially on the Melowa [ph] co-insurance that came through that really helped us. The MONY close block is really just the timing issue as we go through time and so that -- we’ve been a little slower to be able to reinvest there.

Operator

Your next question comes from the line of Christopher Giovanni, Goldman Sachs. Please proceed.

Christopher Giovanni - Goldman Sachs

I guess back to M&A, wondering if you could maybe talk about the types of blocks that are out there for you and asking if sort of like is it -- are they standalone blocks similar to the MONY transaction where you were the only one involved or are they more like a Liberty where there are few different pieces and players involved? And then I guess where you guys are looking to play primarily is still in the mortality space versus something that’s asset intensive?

John Johns

Chris, what we’re seeing is this mortgage board, all kinds of stuff is out there but our preference and our focus continues to be targeted strongly toward the mortality kind of reserve. That’s really what we think is our sweet spot. It’s where we think we can add the most value and we like stability and the persistency and the quality of the earnings income from mortality business. So we’re very much, our program is essentially unchanged to what it has been historically.

Christopher Giovanni - Goldman Sachs

And then I guess for Rich, are you far enough along with MONY that if a transaction came up that you’d be able to look at doing some type of reserve financing for MONY to get some additional capital out of that?

Rich Bielen

Chris, we would be. We’re far enough along in the modeling and getting their pieces on our system to be able to do that.

Christopher Giovanni - Goldman Sachs

And then Johnny another quick one for. You just you have been involved with the ACLI on a number of issues but it seems like the big focus there still is around captives or one of the big focus is around captive. So, just wondering where the dialogs and the conversations are moving to regarding captives?

John Johns

Yes Chris, it’s a very fluid situation. I think NAIC has got a number of proposals out right now coming through different committees of NAIC that would change in some pretty fundamental ways the use of captives, not only for reserve financing purposes, perhaps even more broadly. The industry is doing, we’re doing our best to engage the NAIC in a constructive dialog to make sure they understand well all the intended MONY team, the consequences of any changes that could be made in the captive rules. I think one piece of it where there is a void of understanding is just how beneficial captives are to consumers. Captives, the responsible use of captives right now by the industry is, I believe is saving consumers billions of dollars of cost that will otherwise be required if we couldn’t efficiently finance the required redundant reserves. It’s hard to predict where that’s coming out.

There are some commissioners who are very outspokenly concerned about the use of captives. There are others who are supportive in an outspoken way with captives and then there are a lot that you are not hearing from. So, it’s really hard to gauge kind of the sentiment of the entire NAIC at this point in time but the dialog goes on.

Operator

Thank you. Your next question comes from the line of Steve Schwartz, Raymond James Associates. Please proceed.

Steve Schwartz - Raymond James Associates

On kind of the same topic as Chris, Johnny would you know off the top of your head where we are on PBR and acceptance?

John Johns

I don’t know exactly where we are. I know there is broad-based effort to kind of across the entire country to get legislation moving into various state legislatures that would be required to make the changes in the valuation law that are necessary to make PBR work. The math is pretty straight forward. I think Wayne Stuenkel, I think he made 42 or so states and you need 75% of aggregate premium per state in order to make a change that fundamental. I think it’s a multiyear process. We think now perhaps two to three years required to really get PBR up and running but we’re making progress and we see some clear momentum. And I think the industry remains quite optimistic that we will ultimately achieve the goal of putting reserving standards in this country on sort of the same platform as it exists in most of the rest of the developed world.

Steve Schwartz - Raymond James Associates

Okay. And then just on annuity sales, I guess we’re talking about them going back up. I guess I have two questions. I guess on the fixed side, given where interest rates are, does it really make sense to grow that business? And then on the VA side, whether you think you probably overshot to the downside and what you might be doing to turn that around?

John Johns

Chris, I am going to turn that question to John Sawyer, who is Senior Vice President in our Life and Annuity area.

John Sawyer

Thank you, Chris. On the fixed side, I am sorry Steven. Steven, if you look on the fixed side most of our fixed sales increase is coming from the fixed invest annuity, which seems to be a little bit more appropriate product for this interest rate environment. So we are relatively new to that channel or to that product. That’s been working out very well for us going forward. So that’s probably where we’ll be spending the bulk of our energy in that product type. And on the VA plan, we did undershoot a little bit what the changes we made in the last part of last year. As you know that business is little bit harder to control from a sales standpoint but that has now leveled out and we have got some new distribution, we’re opening up here really effective this week that should get us back to play on the VA sales.

Steve Schwartz - Raymond James Associates

So, it’s a distribution side, not necessarily a change in lifetime benefit right or some things like that?

John Sawyer

Yes, it’s the same product we have got today. We are just reopening some of our old distribution.

Operator

Thank you. Your next question comes from the line of Dan Bergman, UBS Securities. Please proceed.

Dan Bergman - UBS Securities

Hi, good morning. Just a follow-up quickly on the annuity sales commentary. It looked like the fixed index product sales flattened out a little bit in the quarter after a couple of periods of really strong growth. So just hoping to get a little more color on your outlook for sales product. Would you view the current level as kind of a pretty good run rate going forward or do you think there's room for more growth ahead?

John Sawyer

John Sawyer again. We’ve for room for a little bit more growth. What you’ll see is we reset our rates every two weeks and the rates came down a little bit in the first quarter. So traditionally our rates will move down a little bit quicker than our competitors, but traditionally those will converge and will get to a more competitive place on a relative basis. Then additionally we did add a little benefit to the fixed index annuity in the first quarter, so that’s a feature that’s getting popularity, so that’s just beginning to take hold for the fixed index annuity.

Dan Bergman - UBS Securities

Great. And then I guess just switching gears. It looked like MONY integration costs are little over $3 million this quarter. I just wanted to get a sense did you give any color on how those costs trend for the rest of the year?

Rich Bielen

I think Dan this is Rich. We expect the next two quarters to probably be similar to what we have in the first quarter and the cut over that we’ll be making on the data centers in the third quarter should be end of it but as we know it will probably dribble in the fourth quarter too as you’re doing what we call Day 2 items on any of these conversions. So this represents a reasonable pace of those integration costs for the balance of the year.

Operator

Thank you. Your next question comes from the line of Seth Weiss, Bank of America Merrill Lynch. Please proceed.

Seth Weiss - Bank of America Merrill Lynch

My first question is just simply a semantic question. You mentioned that sales of like marketing annuities will revert to plan as the year progresses. Just so we could baseline, does that mean revert to the plan run rate or actually hit the full-year 140 number for life marketing and $2.5 billion for annuities?

Rich Bielen

On both regards for life and annuity, it refers to hitting the plan for the year.

Seth Weiss - Bank of America Merrill Lynch

And just a general question on seasonality. I guess I was a little bit surprised at the $1.12 plan for the first quarter. Obviously, if we think back to the 470 plan ex-buyback indicates higher earnings going forward. Just trying to get a sense of what seasonal impacts we want to think about or timing of expenses we want to think about as we track quarter to quarter.

Rich Bielen

Seth this is Rich. The first quarter in life marketing is seasonally low. We’ve seen that traditionally over time and it relates to the recognition of reinsurance allowances. And from what I call kind of core rate that delta is usually about $3 million. I think that’s the major seasonal effect. We also know that on MONY, kind of the question about what’s the integration cost, we had front loaded most of the integration cost into our plan that reflected the 1.12, believing that by the time we get to the fourth quarter we shouldn’t have much in the way of MONY integration costs. So those are the two items that we would have built into our 470 and $1.12.

Seth Weiss - Bank of America Merrill Lynch

Okay. That's helpful. And if I could just finish with one follow-up, up on the M&A environment. Just broadly speaking, are there any market triggers that you're seeing that's leading to better M&A, if it's changing interest rate environment, which seemed to be maybe in the wrong direction lately. Just trying to think through this, on mortality business I would think there would be less types of market triggers or are you just seeing simply more sellers coming to market?

John Johns

Seth, there are a lot of factors that are converging to give us optimism that the M&A environment will continue to be active. Among them are as you saw with our MONY transaction the decision by global players who had capital invested in U.S. business to extract that capital and invest it what they perceive to be and I think they are quite right -- our sort of higher growth or perhaps higher margin emerging markets around the world. You also have this -- the fact that I think recent activity where people have brought product to market, they’ve been rewarded for making a decision to sell. There’s has been a lot of interest in a lot of -- there has been a lot of capital available. As you know there are so many new players out there that see this as an attractive way to invest capital particularly in players with fixed annuity focus. I think those who have done it and done a good job of it are being rewarded and the perception is that those efforts have been successful.

I think interest rates if you think about the market trigger I think rising interest rates is a positive if they come. You don’t see that right now, obviously in the marketplace but I think properties generally become more valuable in a rising interest rate environment where the expectation of interest rates in the future are higher. So I think that’s probably as important as the level of interest rate is what the expectation, but I think we’ll probably see some players that are holding on to some things now that they would like to monetize, get more active in their thinking if we saw interest rates start to tick up and then you actually have this longer term phenomenon, this is still a very fragmented industry, very capital intense, fragmented industry with a lot of commoditization of products and companies are struggling to achieve cost of capital, I think and in many product lines in different levels of scale. So I think there’s a lot of impetus from that too. It’s just a hard business and sometimes it’s better to retrieve your capital than to continue to invest in ways that don’t create a lot of value.

Operator

Your next question comes from the line Christopher Giovanni, Goldman Sachs. Please proceed.

Christopher Giovanni - Goldman Sachs

Just two follow-ups. One, Johnny when you guys did the MONY transaction, one of the things you mentioned -- you really liked about the block was that it was very seasoned, written really before 2004 where maybe underwriting features were a bit tighter and I say that as a backdrop because it’s hard not to notice really how poor mortality has been this quarter really across the industry. I think everyone’s really saying it’s typical lumpiness and I think that’s probably fair, but wondering and this may be a bit of a reach but wondering if you think -- we could be seeing some early signs of those looser underwriting standards starting to come into play.

John Johns

I really don’t know, Chris. I know for a number of years, you’ve seen our sales not grow much. In fact they’re lower now in life sales, than they were seven or eight years ago and we have seen what we thought was too aggressive underwriting practices out there in the industry and that’s never been part of our strategy. We’ve never tried to compete on aggressive underwriting. We just think it’s too hard to manage that, to really assess what’s going to happen in the future when you start doing that. So it’s not -- our discipline’s always been to just underwrite in a straight up way. But whether or not -- we observe it too. This was a weak [ph] quarter for mortality across the industry I think. Whether that’s just normal adverse deviation or whether it’s some secular trend, I don’t know. But my guess is it probably is more adverse deviation, be my thought but that’s just pure speculation on my part.

Christopher Giovanni - Goldman Sachs

Okay and then based on your sales comment, I think the answer to this is no but when I saw you -- back at the HCLI conference just a few months back, one of the panelists talked about seeing the premium finance market come back into play given the low interest rate environment. I’m just wondering if that’s something you guys have observed as well.

John Sawyer

We’ve not seen a lot of pickup in the market for us or for the other traditional players that at this point in time, even with the lower interest rate market. We think there is still some credit constraints out there for that part of the business where supply just really isn’t there to finance the transactions.

Operator

Thank you, your next question comes from the line of Steve Schwartz of Raymond James Associates.

Steve Schwartz - Raymond James Associates

I do want to follow up on Chris’s thing, because I thought he was going to go somewhere but didn’t quite get there. MONY, if you could, why do you suppose that you had the adverse development in your own block, you had the adverse developments -- or the not adverse development -- oh I guess adverse, adverse mortality in your own block, adverse mortality in Liberty but not in MONY?

Rich Bielen

Steve, actually we did -- we got all these positives and negatives. We actually did have $2 million of adverse mortality within the MONY block but there were enough positives falling around through there that we didn’t really see it in the earnings at this point. The other comment I will make about mortality is actually in our universal life block, we actually had slightly better than expected mortality for the quarter but because of FAS 97 it doesn’t reflect in the bottom line. So that was an individual block thing but I would say overall we saw mortality a little bit elevated and as you can tell from our acquisition blocks, it’s well diversified. So we do think it was probably more of an industry trend.

John Johns

Steve, I’ll also remind you, I’m sure you remember that we had a very good fourth quarter for mortality. It was one of the better quarters we ever had and we think the right way to look at mortality on an actual to expected basis is sort of on a rolling average basis and if we look at our mortality that way, it continues to outperform expected and it remains very, very positive.

Operator

Thank you for your questions, I’d now like to turn the call over to Mr. Johnny Johns for closing remarks.

Johnny Johns

Again thanks everyone. Again we’re very pleased with the quarter. We’re very excited about what’s going on here at Protective. We thank you so much for your interest in our Company and look forward to continuing to develop our story with you. So thanks a lot and have a good day.

Operator

Thank you for participating in today’s conference. That concludes the presentation. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!