As filed with the Securities and Exchange Commission on April 26, 2016
File No. 333-190294
File No. 811-8108
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 o
PRE-EFFECTIVE AMENDMENT NO. o
POST-EFFECTIVE AMENDMENT NO. 4 x
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
o
Amendment No. 246 x
Protective Variable Annuity
Separate Account
(Exact Name of Registrant)
Protective Life Insurance Company
(Name of Depositor)
2801 Highway 280 South
Birmingham, Alabama 35223
(Address of Depositor's Principal Executive Offices)
(205) 268-1000
(Depositor's Telephone Number, including Area Code)
MAX BERUEFFY, Esquire
Protective Life Insurance Company
2801 Highway 280 South
Birmingham, Alabama, 35223
(Name and Address of Agent for Services)
Copy to:
STEPHEN E. ROTH, Esquire
THOMAS E. BISSET, Esquire
Sutherland Asbill & Brennan LLP
700 Sixth Street, NW, Suite 700
Washington, D.C. 20001-3980
(202) 383-0118
It is proposed that this filing will become effective (check appropriate box):
o Immediately upon filing pursuant to paragraph (b) of Rule 485
x on May 1, 2016 pursuant to paragraph (b) of Rule 485
o 60 days after filing pursuant to paragraph (a)(1) of Rule 485
o on May 1, 2016 pursuant to paragraph (a)(1) of Rule 485
Title of Securities Being Registered: Interests in a separate
account issued through variable annuity contracts.
PART A
INFORMATION REQUIRED TO BE IN THE PROSPECTUS
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Protective Variable Annuity Investors Series
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Protective Life Insurance Company
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This Prospectus describes an individual flexible premium deferred variable and fixed annuity contract offered by Protective Life Insurance Company (the "Contract"). The Contract is designed for investors who desire to accumulate capital on a tax deferred basis for retirement or other long term investment purpose. It may be purchased on a non-qualified basis or for use with certain qualified retirement plans. Certain Contract features and/or certain investment options offered under the Contract may not be available through all broker-dealers. For further details, please contact us at 1-800-456-6330.
You generally may allocate your investment in the Contract among the Guaranteed Account (if it is available when you purchase your Contract) and the Sub-Accounts of the Protective Variable Annuity Separate Account. The Sub-Accounts invest in the following Funds:
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
Invesco V.I. American Value Fund, Series II
Invesco V.I. Balanced Risk Allocation Fund, Series II
Invesco V.I. Comstock Fund, Series II
Invesco V.I. Equity and Income Fund, Series II
Invesco V.I. Global Real Estate Fund, Series II
Invesco V.I. Government Securities Fund, Series II
Invesco V.I. Growth and Income Fund, Series II
Invesco V.I. International Growth Fund, Series II
Invesco V.I. Mid Cap Growth Fund, Series II
Invesco V.I. Small Cap Equity Fund, Series II
Clayton Street Trust
Protective Life Dynamic Allocation Series- Conservative Portfolio
Protective LIfe Dynamic Allocation Series- Growth Portfolio
Protective Life Dynamic Allocation Series- Moderate Portfolio
Fidelity ® Variable Insurance Products
VIP Contrafund ® Portfolio, SC2
VIP Index 500 Portfolio, SC2
VIP Investment Grade Bond Portfolio, SC2
VIP Mid Cap Portfolio, SC2
Franklin Templeton Variable Insurance Products Trust
Franklin Flex Cap Growth VIP Fund, Class 2
Franklin Income VIP Fund, Class 2
Franklin Mutual Shares VIP Fund, Class 2
Franklin Rising Dividends VIP Fund, Class 2
Franklin Small-Mid Cap Growth VIP Fund, Class 2
Franklin Small Cap Value VIP Fund, Class 2
Franklin U.S. Government Securities VIP Fund, Class 2
Templeton Developing Markets VIP Fund, Class 2
Templeton Foreign VIP Fund, Class 2
Templeton Global Bond VIP Fund, Class 2
Templeton Growth VIP Fund, Class 2
Goldman Sachs Variable Insurance Trust
Global Trends Allocation Fund, Service Class
Growth Opportunities Fund, Service Class
Mid Cap Value Fund, Service Class
Strategic Growth Fund, Service Class
Strategic International Equity Fund, Service Class
Guggenheim Variable Fund
Guggenheim Floating Rate Strategies Series, (Series F)
Guggenheim Macro Opportunities Series, (Series M)
Guggenheim Multi-Hedge Strategies Fund
Guggenheim Global Managed Futures Strategy Fund
Guggenheim Long Short Equity Fund
Legg Mason Partners Variable Equity Trust
ClearBridge Variable Mid Cap Portfolio, Class II
ClearBridge Variable Small Cap Growth Portfolio, Class II
QS Dynamic Multi-Strategy VIT Fund, Class II
Lord Abbett Series Fund, Inc.
Fundamental Equity Portfolio, Value Class
Calibrated Dividend Growth Portfolio, Value Class
Bond-Debenture Portfolio, Value Class
Growth Opportunities Portfolio, Value Class
Classic Stock Portfolio, Value Class
Mid-Cap Stock Portfolio, Value Class
MFS ® Variable Insurance Trust (1)
MFS ® Growth Series, SS
MFS ® Investors Trust Series, SS
MFS ® New Discovery Series, SS
MFS ® Research Series, SS
MFS ® Total Return Bond Series, SS
MFS ® Total Return Series, SS
MFS ® Utilities Series, SS
MFS ® Value Series, SS
MFS ® Variable Insurance Trust II (1)
MFS ® Emerging Markets Equity Portfolio, Service Class Shares
MFS ® International Value Portfolio, Service Class Shares
MFS ® Massachusetts Investors Growth Stock Portfolio, Service Class Shares (2)
Oppenheimer Variable Account Funds
Capital Appreciation Fund/VA, SS
Global Fund/VA, SS
Main Street Fund/VA, SS
Government Money Fund/VA (formerly Money Fund/VA)
Global Strategic Income Fund/VA, SS
PIMCO Variable Insurance Trust
All Asset Portfolio, Advisor Class
Global Diversified Allocation Portfolio, Advisor Class
Long-Term US Government Portfolio, Advisor Class
Low Duration Portfolio, Advisor Class
Real Return Portfolio, Advisor Class
Short-Term Portfolio, Advisor Class
Total Return Portfolio, Advisor Class
Royce Capital Fund
Micro-Cap Fund, Service Class
Small-Cap Fund, Service Class
Rydex Variable Trust
Rydex Nova Fund (3)
Rydex Inverse S&P 500 Strategy Fund (3)
Rydex Inverse Government Long Bond Strategy Fund (3)
Rydex Commodities Strategy Fund (3)
(1) Effective February 2, 2015, Sub-Accounts investing in Funds of the MFS Variable Insurance Trust and the MFS Variable Insurance Trust II were closed to new investment. If you did not have Contract Value in, or allocation instructions including such a Sub-Account on that date, you may not allocate Purchase Payments or Contract Value to that Sub-Account. If you had Contract Value in, or allocation instructions that included such a Sub-Account on February 2, 2015, you may continue to allocate Purchase Payments and transfer Contract Value to that Sub-Account, but if you change your allocation instructions to terminate your investment in the Sub-Account, you may not allocate Purchase Payments and transfer Contract Value to the Sub-Account in the future.
(2) MFS Investors Growth Stock Series merged into MFS Massachusetts Investors Growth Stock Portfolio, a series of MFS Variable Insurance Trust II in March, 2015.
(3) The Sub-Account investing in this Rydex fund is no longer offered as an Investment Option under the Contract. Please see "The Funds."
The value of your Contract that is allocated to the Sub-Accounts will vary according to the investment performance of the Funds in which the selected Sub-Accounts are invested. You bear the investment risk on amounts you allocate to the Sub-Accounts.
This Prospectus sets forth basic information about the Contract and the Variable Account that a prospective investor should know before investing. The Statement of Additional Information, which has been filed with the Securities and Exchange Commission, contains additional information about the Contract and the Variable Account. The Statement of Additional Information is dated the same date as this Prospectus and is incorporated herein by reference. The Table of Contents for the Statement of Additional Information is on the last page of this Prospectus. You may obtain a copy of the Statement of Additional Information free of charge by writing or calling Protective Life at the address or telephone number shown above. You may also obtain an electronic copy of the Statement of Additional Information, as well as other material that we file electronically and certain material incorporated by reference, at the SEC web site (http://www.sec.gov).
Please read this prospectus carefully. You should keep a copy for future reference.
The Protective Variable Annuity Investors Series is not a deposit or obligation of, or guaranteed by, any bank or financial institution. It is not insured by the Federal Deposit Insurance Corporation or any other government agency, and it is subject to investment risk, including the possible loss of principal.
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this Prospectus is May 1, 2016
PRO.PVAIS.05.16
TABLE OF CONTENTS
DEFINITIONS
FEES AND EXPENSES
SUMMARY
The Contract
Federal Tax Status
THE COMPANY, VARIABLE ACCOUNT AND FUNDS
Protective Life Insurance Company
Protective Variable Annuity Separate Account
Administration
The Funds
Selection of Funds
Other Information about the Funds
Certain Payments We Receive with Regard to the Funds
Other Investors in the Funds
Addition, Deletion or Substitution of Investments
DESCRIPTION OF THE CONTRACT
The Contract
Parties to the Contract
Issuance of a Contract
Purchase Payments
Right to Cancel
Allocation of Purchase Payments
Variable Account Value
Transfers
Surrenders and Withdrawals
THE GUARANTEED ACCOUNT
DEATH BENEFIT
THE ALLOCATION ADJUSTMENT PROGRAM (PATENT PENDING)
SUSPENSION OR DELAY IN PAYMENTS
SUSPENSION OF CONTRACTS
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
Mortality and Expense Risk Charge
Administration Charge
Death Benefit Fee
Transfer Fee
Contract Maintenance Fee
Fund Expenses
Premium Taxes
Other Taxes
Other Information
ANNUITY PAYMENTS
Annuity Date
Annuity Value
Annuity Income Payments
Annuity Options
Minimum Amounts
Death of Annuitant or Owner After Annuity Date
YIELDS AND TOTAL RETURNS
Yields
Total Returns
Standardized Average Annual Total Returns
Non-Standard Average Annual Total Returns
Performance Comparisons
Other Matters
FEDERAL TAX MATTERS
Introduction
The Company's Tax Status
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral During Accumulation Period
Taxation of Withdrawals and Surrenders
Taxation of Annuity Payments
Taxation of Death Benefit Proceeds
Assignments, Pledges, and Gratuitous Transfers
Penalty Tax on Premature Distributions
Aggregation of Contracts
Exchanges of Annuity Contracts
Medicare Hospital Insurance Tax on Certain Distributions
Loss of Interest Deduction Where Contract Is Held By or For the Benefit of Certain Nonnatural Persons
QUALIFIED RETIREMENT PLANS
Direct Rollovers
FEDERAL INCOME TAX WITHHOLDING
GENERAL MATTERS
Error in Age or Gender
Incontestability
Non-Participation
Assignment or Transfer of a Contract
Notice
Modification
Reports
Settlement
Receipt of Payment
Protection of Proceeds
Minimum Values
Application of Law
No Default
DISTRIBUTION OF THE CONTRACTS
Distribution
Selling Broker-Dealers
Inquiries
CEFLI
LEGAL PROCEEDINGS
BUSINESS DISRUPTIONS AND CYBER-SECURITY RISKS
VOTING RIGHTS
FINANCIAL STATEMENTS
STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A: Return Of Purchase Payment Death Benefit Calculation Examples
APPENDIX B: Example Of Surrender Charge Calculation
APPENDIX C: Explanation Of The Variable Income Payment Calculation
APPENDIX D: Condensed Financial Information
APPENDIX E: Example Of Allocation Adjustment Program
DEFINITIONS
"We", "us", "our", "Protective Life", and "Company": refer to Protective Life Insurance Company. "You", "your" and "Owner" refer to the person(s) who has been issued a Contract.
Accumulation Unit: A unit of measure used to calculate the value of a Sub-Account prior to the Annuity Date.
Administrative Office: Protective Life Insurance Company, P. O. Box 10648, Birmingham, Alabama 35202-0648 (for Written Notice sent by U.S. postal service) or Protective Life Insurance Company, 2801 Highway 280 South, Birmingham, Alabama 35223 (for Written Notice sent by a nationally recognized overnight delivery service).
Annuity Date: The date as of which the Annuity Value is applied to an Annuity Option.
Annuity Option: The payout option under which the Company makes annuity income payments.
Annuity Value: The amount we apply to the Annuity Option you have selected.
Assumed Investment Return: The assumed annual rate of return used to calculate the amount of the variable income payments.
Code: The Internal Revenue Code of 1986, as amended.
Contract: The Protective Variable Annuity Investors Series, a flexible premium, deferred, variable and fixed annuity contract.
Contract Anniversary: The same month and day as the Issue Date in each subsequent year of the Contract.
Contract Value: Before the Annuity Date, the sum of the Variable Account value and the Guaranteed Account value.
Contract Year: Any period of 12 months commencing with the Issue Date or any Contract Anniversary.
DCA: Dollar cost averaging.
DCA Accounts: A part of the Guaranteed Account, but separate from the Fixed Account. The DCA Accounts are designed to transfer amounts to the Sub-Accounts of the Variable Account systematically over a designated period.
Death Benefit: The amount we pay to the beneficiary if an Owner dies before the Annuity Commencement Date.
Fixed Account: A part of the Guaranteed Account, but separate from the DCA Accounts. Amounts allocated or transferred to the Fixed Account earn interest from the date the funds are credited to the account.
Fund: Any investment portfolio in which a corresponding Sub-Account invests.
Good Order ("good order"): A request or transaction generally is considered in "Good Order" if we receive it in our Administrative Office within the time limits, if any, prescribed in this Prospectus for a particular transaction or instruction, it includes all information necessary for us to execute the requested instruction or transaction, and is signed by the individual or individuals authorized to provide the instruction or engage in the transaction. A request or transaction may be rejected or delayed if not in Good Order. Good Order generally means the actual receipt by us of the instructions relating to the request or transaction in writing (or, when permitted, by telephone or Internet as described above) along with all forms, information and supporting legal documentation we require to effect the instruction or transaction. This information and documentation generally includes, to the extent applicable: the completed application or instruction form; your contract number; the transaction amount (in dollars or percentage terms); the names and allocations to and/or from the Investment Options affected by the requested transaction; the signatures of all Owners (exactly as indicated on the Contract), if necessary; Social Security Number or Tax I.D.; and any other information or supporting documentation that we may require, including any spousal or Joint Owner's consents. With respect to Purchase Payments, Good Order also generally includes receipt by us of sufficient funds to effect the purchase. We may, in our sole discretion, determine whether any particular transaction request is in Good Order, and we reserve the right to change or waive any Good Order requirement at any time. If you have any questions, you should contact us or your registered representative before submitting the form or request.
Guaranteed Account:: The Fixed Account, the DCA Accounts and any other Investment Option we may offer with interest rate guarantees.
Investment Option: Any account to which you may allocate Purchase Payments or transfer Contract Value under this Contract. The Investment Options are the Sub-Accounts of the Variable Account and the Guaranteed Account available in this Contract.
Issue Date: The date as of which we credit the initial Purchase Payment to the Contract and the date the Contract takes effect.
Monthly Anniversary Date: The same day each month as the Issue Date, or the last day of any month that does not have the same day as the Issue Date.
Owner: The person or persons who own the Contract and are entitled to exercise all rights and privileges provided in the Contract.
Purchase Payment: The amount(s) paid by the Owner and accepted by the Company as consideration for this Contract.
Qualified Contracts: Contracts issued in connection with retirement plans that receive favorable tax treatment under Sections 401, 408, 408A or 457 of the Code.
Qualified Plans: Retirement plans that receive favorable tax treatment under Sections 401, 408, 408A or 457 of the Code.
Sub-Account: A separate division of the Variable Account.
Valuation Date: Each day on which the New York Stock Exchange is open for business.
Valuation Period: The period which begins at the close of regular trading on the New York Stock Exchange (usually 3:00 p.m. Central Time) on any Valuation Date and ends at the close of regular trading on the next Valuation Date. A Valuation Period ends earlier if the New York Stock Exchange closes early on certain scheduled days (such as the Friday after Thanksgiving or Christmas Eve) or in case of an emergency.
Variable Account: The Protective Variable Annuity Separate Account, a separate investment account of Protective Life.
Written Notice: A notice or request submitted in writing in Good Order that we receive at the Administrative Office via U.S. postal service or nationally recognized overnight delivery service. Please note that we use the term "written notice" in lower case to refer to a notice that we may send to you.
FEES AND EXPENSES
The following tables describe the fees and expenses that you will pay when buying, owning, and surrendering the Contract. The first table describes the fees and charges that you will pay at the time you buy the Contract, take a withdrawal from or surrender the Contract, or transfer amounts among the Sub-Accounts and/or the Guaranteed Account. We may also deduct state premium taxes, if applicable.
OWNER TRANSACTION EXPENSES
| Sales Charge Imposed on Purchase Payments | None |
| Maximum Surrender Charge (as % of amount surrendered) (1) | 7% |
| Transfer Fee (2) | $25 |
| Premium Tax (3) | 3.5% |
(1) The surrender charge is based upon Purchase Payments as of the date each Purchase Payment is applied to the Contract, and decreases over time. The total of surrender charges assessed will not exceed 9% of aggregate Purchase Payments. The surrender charge declines over time. (See "Determining the Surrender Charge.")
(2) Protective Life currently does not charge this Transfer Fee, but reserves the right to do so in the future. We will give written notice thirty (30) days before we impose a transfer fee. (See "CHARGES AND DEDUCTIONS, Transfer Fee.")
(3) Some states impose premium taxes at rates currently ranging up to 3.5%. If premium taxes apply to your Contract, we will deduct them from the Purchase Payment(s) when accepted or from the Contract Value upon a surrender or withdrawal, death or annuitization.
The next table describes the fees and expenses that you will pay periodically during the time that you own the Contract, not including Fund fees and expenses.
PERIODIC FEES AND CHARGES
(other than Fund expenses)
| Annual Contract Maintenance Fee (1) | $35 |
Variable Account Annual Expenses
(as a percentage of average Variable Account value)
| Mortality and Expense Risk Charge | 0.90% |
| Administration Charge | 0.10% |
| Total Variable Account Annual Expenses (without the death benefit fee) | 1.00% |
Optional Benefit Charges
| Return of Purchase Payments Death Benefit Fee (as an annualized percentage of the death benefit value on each Monthly Anniversary Date, beginning on the 1st Monthly Anniversary Date) (2) | 0.20% |
(1) We will waive the annual contract maintenance fee if your Contract Value or aggregate Purchase Payments, reduced by surrenders and surrender charges, is $100,000 or more (See "CHARGES AND DEDUCTIONS.")
(2) There are two death benefits available under the Contract: (1) Contract Value Death Benefit; and (2) the Return of Purchase Payments Death Benefit. There is no death benefit fee for the Contract Value Death Benefit. For more information on these death benefit values and fees, and how they are calculated, please see the "DEATH BENEFIT" and "CHARGES AND DEDUCTIONS, Death Benefit Fee" sections of this prospectus. The Return of Purchase Payments Death Benefit may not be available through your broker-dealer.
The next table shows the minimum and maximum total operating expenses charged by the Funds that you may pay periodically during the time that you own the Contract. More detail concerning each Fund's fees and expenses is contained in the prospectus for each Fund.
The Fund expenses used to prepare the next table were provided to Protective Life by the Funds. The expenses shown are based on expenses incurred for the year ended December 31, 2015. Current or future expenses may be higher or lower than those shown.
RANGE OF EXPENSES FOR THE FUNDS
| Minimum | Maximum | ||
| Total Annual Fund Operating Expenses (*) | 0.35% | - | 1.68% |
| (total of all expenses that are deducted from Fund assets, including management fees, 12b-1 fees, and other expenses) |
(*) The range of Total Annual Fund Operating Expenses shown here does not take into account contractual and voluntary arrangements under which the Funds' advisers currently reimburse Fund expenses or waive fees. Please see the prospectus for each Fund for more information about that Fund's expenses.
Example of Charges
The following example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. The example shows the costs of investing in the Contract, including owner transaction expenses, the annual contract maintenance fee, Variable Account Charges, and both maximum and minimum total Annual Fund Operating Expenses. The example also assumes that the Return of Purchase Payments Death Benefit is in effect, and that all Contract Value is allocated to the Variable Account. The example does not reflect transfer fees or premium taxes, which may range up to 3.5% depending on the jurisdiction.
The example assumes that you invest $10,000 in the Contract for the periods indicated. The example also assumes that your investment has a 5% return each year.
| 1 year | 3 years | 5 years | 10 years | |
| Maximum Fund Expense | $961 | $1,545 | $2,045 | $3,438 |
| Minimum Fund Expense | $841 | $1,181 | $1,427 | $2,154 |
| 1 year | 3 years | 5 years | 10 years | |
| Maximum Fund Expense | $320 | $976 | $1,652 | $3,438 |
| Minimum Fund Expense | $192 | $590 | $1,008 | $2,154 |
(*) You may not annuitize your Contract within 3 years after we accept a Purchase Payment. For more information, see "ANNUITY PAYMENTS, Annuity Date, Changing the Annuity Date." The death benefit fee does not apply after the Annuity Date.
Please remember that the example is an illustration and does not guarantee the amount of future expenses. Your actual expenses may be higher or lower than those shown. Similarly, your rate of return may be more or less than the 5% rate of return assumed in the example.
SUMMARY
The Contract
What is the Protective Variable Annuity Investors Series Contract?
The Protective Variable Annuity Investors Series Contract is an individual flexible premium deferred variable and fixed annuity contract issued by Protective Life. (See "The Contract.")
What are the Company's obligations under the Contract?
The benefits under the Contract are paid by us from our general account assets and/or your Contract Value held in the Variable Account. You assume all of the investment risk for Purchase Payments and Contract Value allocated to the Sub-Accounts of the Variable Account, which is not part of our general account. Our general account assets support our insurance and annuity obligations and are subject to our general liabilities from business operations and to claims by our creditors. Because amounts allocated to the Fixed Account and the DCA Accounts, plus any guarantees under the Contract that exceed your Variable Account value (such as those associated with the Return of Purchase Payments Death Benefit), are paid from our general account, any amounts that we may pay under the Contract in excess of Variable Account value are subject to our financial strength and claims-paying ability.
It is important to note that there is no guarantee that we will always be able to meet our claims-paying obligations, and there are risks to purchasing any insurance product. For this reason, you should consider our financial strength and claims paying ability to meet our obligations under the Contract when purchasing a Contract and making investment decisions under the Contract.
How may I purchase a Contract?
Protective Life sells the Contracts through registered representatives of broker-dealers. We pay commissions and other compensation to the broker-dealers for selling the Contracts. (See "DISTRIBUTION OF THE CONTRACTS.")
Protective Life will issue your Contract when it receives and accepts your complete application information and an initial Purchase Payment through the broker-dealer you have selected. (See "Issuance of a Contract.")
What are the Purchase Payments?
The minimum amount that Protective Life will accept as an initial Purchase Payment is $5,000. Purchase Payments may be made at any time prior to the oldest Owner's or Annuitant's 86th birthday. No Purchase Payment will be accepted within 3 years of the Annuity Date then in effect. The minimum subsequent Purchase Payment we will accept is $100, or $50 if the payment is made by electronic funds transfer. The maximum aggregate Purchase Payment(s) we will accept without prior Administrative Office approval is $1,000,000. We may impose conditions for our acceptance of aggregate Purchase Payments greater than $1,000,000, such as limiting the death benefit options that are available under your Contract. We reserve the right not to accept any Purchase Payment or to limit the amounts, frequency or sources of subsequent Purchase Payments into all or certain classes of Contracts following Written Notice to Contract Owners. (See "Purchase Payments.")
Can I cancel the Contract?
You have the right to return the Contract within a certain number of days (which varies by state and is never less than ten) after you receive it. The returned Contract will be treated as if it were never issued. Protective Life will refund the Contract Value in states where permitted. This amount may be more or less than the Purchase Payments. In states requiring the return of Purchase Payments, we will refund the greater of the Contract Value or the Purchase Payments. (See "Right to Cancel.")
Can I transfer amounts in the Contract?
Before the Annuity Date, you may transfer amounts among the Investment Options. There are, however, limitations on transfers: any transfer must be at least $100; no amounts may be transferred into a DCA Account.
No amounts may be transferred to the Fixed Account within six months after any transfer from the Guaranteed Account to the Variable Account; transfers out of the Fixed Account are limited to the greater of (a) $2,500 or (b) 25% of the value of the Fixed Account in any Contract Year.
After the Annuity Date, if you have selected variable income payments, you may transfer amounts among the Sub- Accounts, but no more frequently than once per month, and you may not transfer within the Guaranteed Account or between a Sub-Account and the Guaranteed Account.
We reserve the right to charge a transfer fee of $25 for each transfer after the 12 th transfer in any Contract Year; we may restrict or refuse to honor transfers when we determine that they may be detrimental to the Funds or Contract Owners, such as frequent transfers and market timing transfers by or on behalf of an Owner or group of Owners. We will give written notice thirty (30) days before we impose a transfer fee or limit the number of transfers. (See "Transfers.")
For more information about transfers, how to request transfers and limitations on transfers, see "Transfers — Limitations on Transfers. "
Can I surrender the Contract?
Upon Written Notice before the Annuity Date, you may surrender the Contract and receive its surrender value. (See "Surrenders and Withdrawals.") Surrenders may have federal and state income tax consequences, as well as a 10% federal penalty tax if the surrender occurs before the Owner reaches age 59-1/2, and surrender charges may apply. (See "CHARGES AND DEDUCTIONS, Surrender Charge" and "Taxation of Withdrawals and Surrenders.")
Can I withdraw my money from the Contract?
Any time before the Annuity Date, you may request by Written Notice a withdrawal from your Contract provided the Contract Value remaining after the withdrawal is at least $5,000. Under certain conditions we may also accept withdrawals requested by facsimile and telephone. You also may elect to participate in our automatic withdrawal plan, which allows you to pre-authorize periodic withdrawals prior to the Annuity Date. (See "Surrenders and Withdrawals.") Withdrawals may be available under certain Annuity Options. (See "Annuity Payments — Annuity Options.") Withdrawals reduce your Contract Value and death benefit. Surrender charges and federal and state income taxes may apply, as well as a 10% federal penalty tax if the withdrawal occurs before the Owner reaches age 59-1/2. (See "Charges and Deductions, Surrender Charge" and "Taxation of Withdrawals and Surrenders.")
Is there a death benefit?
If any Owner dies before the Annuity Date and while this Contract is in force, a death benefit, less any applicable premium tax, will be payable to the Beneficiary. The death benefit is determined as of the end of the Valuation Period during which we receive due proof of the Owner's death at our Administrative Office. (See "DEATH BENEFIT.")
The Contract Value Death Benefit is included with your Contract at no additional charge. You may select the Return of Purchase Payments Death Benefit for an additional fee. You must select your death benefit at the time you apply for your Contract, and your selection may not be changed after the Contract is issued. See "CHARGES AND DEDUCTIONS, Death Benefit Fee."
The Return of Purchase Payments Death Benefit may not be available through your broker-dealer.
What is the Allocation Adjustment Program (patent pending)?
Under the Allocation Adjustment Program, we will monitor the performance of each Sub-Account in which you invest (other than certain unmonitored Sub-Accounts). If, on any Monthly Anniversary Date, the Accumulation Unit value of a Sub-Account is the same as or drops below a specified level, the Sub-Account will be temporarily "restricted" from allocations of Purchase Payments and Contract Value and we will transfer all existing Contract Value in the Sub-Account to the Oppenheimer Money Fund/VA Sub-Account. The Sub-Account will remain restricted until the Sub-Account's Accumulation Unit value is greater than the specified level on a future Monthly Anniversary Date. By participating in this risk-mitigating program, you may be less susceptible to the impact of volatile market fluctuations in the value of Sub-Account Accumulation Units. However, we make no guarantee that this program will protect against loss. Also, this program may limit increases in your Contract Value during periods of growth in the market.
The Allocation Adjustment Program is optional and is available at no additional charge. You must elect whether you will or will not participate in the Allocation Adjustment Program when you purchase the Contract. If you do not indicate your election on your application, we will treat the application as incomplete. If you elect not to enroll in the Allocation Adjustment Program on the Issue Date, you may enroll in the Program at any time prior to the Annuity Date by sending us Written Notice. If you are enrolled in the Allocation Adjustment Program, you may subsequently suspend your participation in the Program. For more information on the Allocation Adjustment Program, please see "THE ALLOCATION ADJUSTMENT PROGRAM."
What charges do I pay under the Contract?
We assess a surrender charge if you withdraw or surrender your Purchase Payments from the Contract, depending on how long those payments were invested in the Contract. We may waive the surrender charge under certain circumstances. We apply a charge to the daily net asset value of the Variable Account that consists of a mortality and expense risk charge and an administration charge. We do not currently impose a transfer fee, but we reserve the right to charge a $25 fee for the 13th and each additional transfer during any Contract Year. We will give written notice thirty (30) days before we impose a transfer fee or limit the number of transfers. We also deduct a contract maintenance fee from your Contract Value on each Contract Anniversary prior to the Annuity Date and on any other day that you surrender your Contract. We may waive the contract maintenance fee under certain circumstances. We also deduct from your Contract Value charges for any optional benefits and riders applicable to your Contract, such as the Return of Purchase Payments Death Benefit.
We will deduct any applicable state premium tax from Purchase Payments or Contract Value if premium taxes apply to your Contract. The Funds' investment management fees and other operating expenses are more fully described in the prospectuses for the Funds.
(See the "FEES AND EXPENSES" tables preceding this Summary and the "CHARGES AND DEDUCTIONS" section later in this prospectus.)
What Annuity Options are available?
Currently, we apply the Annuity Value to an Annuity Option on the Annuity Date, unless you choose to receive that amount in a lump sum. Annuity Options include: payments for a certain period and life income with or without payments for a certain period. Annuity Options are available on either a fixed or variable payment basis. (See "ANNUITY PAYMENTS".)
Is the Contract available for qualified retirement plans?
You may purchase the Contract for use within certain qualified retirement plans or arrangements that receive favorable tax treatment, such as individual retirement accounts and individual retirement annuities (IRAs), and pension and profit sharing plans (including H.R. 10 Plans). Many of these qualified plans, including IRAs, provide the same type of tax deferral as provided by the Contract. The Contract, however, provides a number of benefits and features not provided by such retirement plans or arrangements alone. There are costs and expenses under the Contract related to these benefits and features. You should consult a qualified tax or financial adviser for information specific to your circumstances to determine whether the use of the Contract within a qualified retirement plan is an appropriate investment for you. (See "DESCRIPTION OF THE CONTRACT, The Contract," and "FEDERAL TAX MATTERS, Qualified Retirement Plans.")
Where may I find financial information about the Sub-Accounts?
You may find financial information about the Sub-Accounts in Appendix D to this prospectus and in the Statement of Additional Information.
Other contracts
We offer other types of annuity contracts and insurance policies that also invest in the same Funds in which your Contract invests. These other types of contracts and policies may have different charges that could affect the value of their Sub-Accounts and may offer different benefits than the Contract. To obtain more information about these other contracts and policies, you may contact our Administrative Office in writing or by telephone.
Federal Tax Status
Generally all earnings on the investments underlying the Contract are tax-deferred until withdrawn or until annuity income payments begin. A distribution from a non-Qualified Contract, which includes a surrender or withdrawal or payment of a death benefit, will generally result in taxable income if there has been an increase in the Contract Value. In the case of a Qualified Contract, a distribution generally will result in taxable income even if there has not been an increase in the Contract Value. In certain circumstances, a 10% penalty tax may also apply to distributions from non-Qualified as well as Qualified Contracts. All amounts includable in income with respect to the Contract are taxed as ordinary income; no amounts are taxed at the special lower rates applicable to long term capital gains and corporate dividends. (See "FEDERAL TAX MATTERS.")
THE COMPANY, VARIABLE ACCOUNT AND FUNDS
Protective Life Insurance Company
The Contracts are issued by Protective Life. Protective Life is a Tennessee corporation and was founded in 1907. Protective Life provides life insurance, annuities, and guaranteed investment contracts. Protective Life is currently licensed to transact life insurance business in 49 states and the District of Columbia. As of December 31, 2015, Protective Life had total assets of approximately $68.0 billion. Protective Life is the principal operating subsidiary of Protective Life Corporation ("PLC"), a U.S. insurance holding company and subsidiary of The Dai-ichi Life Insurance Company, Limited ("Dai-ichi"). Dai-ichi's stock is traded on the Tokyo Stock Exchange. As of December 31, 2015, PLC had total assets of approximately $68.5 billion.
The assets of Protective Life's general account support its insurance and annuity obligations and are subject to its general liabilities from business operations and to claims by its creditors. Because amounts allocated to the Fixed Account and the DCA Accounts, plus any guarantees under the Contract that exceed your Variable Account value (such as those associated with the Return of Purchase Payments Death Benefit), are paid from Protective Life's general account, any amounts that Protective Life may pay under the Contract in excess of Variable Account value are subject to its financial strength and claims-paying ability. It is important to note that there is no guarantee that Protective Life will always be able to meet its claims-paying obligations, and that there are risks to purchasing any insurance product. For this reason, you should consider Protective Life's financial strength and claims paying ability to meet its obligations under the Contract when purchasing a Contract and making investment decisions under the Contract.
Protective Variable Annuity Separate Account
The Protective Variable Annuity Separate Account is a separate investment account of Protective Life. The Variable Account was established under Tennessee law by the Board of Directors of Protective Life on October 11, 1993. The Variable Account is registered with the Securities and Exchange Commission (the "SEC") as a unit investment trust under the Investment Company Act of 1940, as amended (the "1940 Act"), and meets the definition of a separate account under federal securities laws.
Protective Life owns the assets of the Variable Account. These assets are held separate from other assets and are not part of Protective Life's general account. You assume all of the investment risk for Purchase Payments and Contract Value allocated to the Sub-Accounts. Your Contract Value in the Sub-Accounts is part of the assets of the Variable Account. The portion of the assets of the Variable Account equal to the reserves and other contract liabilities (which is equal to Contract Value) of the Variable Account will not be charged with liabilities that arise from any other business Protective Life conducts. Protective Life may transfer to its general account any assets which exceed the reserves and other contract liabilities (which is equal to Contract Value) of the Variable Account. Protective Life may accumulate in the Variable Account the charge for mortality and expense risks and investment results applicable to those assets that are in excess of the net assets supporting the contracts. The income, gains and losses, both realized and unrealized, from the assets of the Variable Account are credited to or charged against the Variable Account without regard to any other income, gains or losses of Protective Life. The obligations under the Contracts are obligations of Protective Life.
Administration
Protective Life Insurance Company performs the Contract administration at its Administrative Office at 2801 Highway 280 South, Birmingham, Alabama 35223. Contract administration includes processing applications for the Contracts and subsequent Owner requests; processing Purchase Payments, transfers, surrenders and death benefit claims as well as performing record maintenance and disbursing annuity income payments.
The Funds
The assets of each Sub-Account are invested solely in a corresponding Fund. Each Fund is an investment portfolio of one of the following investment companies: Fidelity ® Variable Insurance Products managed by Fidelity Management & Research Company and subadvised by FMR Co., Inc., Strategic Advisors, Inc., or Fidelity Investments Money Management, Inc.; Clayton Street Trust managed by Janus Capital Management LLC; Oppenheimer Variable Account Funds managed by OppenheimerFunds, Inc.; MFS ® Variable Insurance Trust managed by MFS ® Investment Management; MFS ® Variable Insurance Trust II (the "MFS II Funds") managed by MFS ® Investment Management; Lord Abbett Series Fund, Inc., managed by Lord, Abbett & Co. LLC; Legg Mason Partners Variable Equity Trust advised by Legg Mason Partners Fund Advisor, LLC, and sub-advised by ClearBridge Advisors, LLC; PIMCO Variable Insurance Trust advised by Pacific Investment Management Company, LLC, and sub-advised by Research Affiliates, LLC; Royce Capital Fund advised by Royce & Associates, LLC; Guggenheim Variable Fund and Rydex Variable Trust managed by Guggenheim Investments; and Goldman Sachs Variable Insurance Trust managed by Goldman Sachs Asset Management L.P. or Goldman Sachs Asset Management International. Franklin Advisers, Inc. is the investment adviser for the Franklin Flex Cap Growth VIP Fund, Franklin Income VIP Fund, Franklin Small-Mid Cap Growth VIP Fund, Franklin U.S. Government Securities VIP Fund and the Templeton Global Bond VIP Fund. Franklin Advisory Services, LLC is the investment adviser for Franklin Rising Dividends VIP Fund and the Franklin Small Cap Value VIP Fund. Franklin Mutual Advisers, LLC is the investment adviser for the Franklin Mutual Shares VIP Fund. Templeton Investment Counsel, LLC is investment adviser for Templeton Foreign VIP Fund. Templeton Global Advisors Limited is investment adviser for Templeton Growth VIP Fund. Templeton Asset Management Ltd. is the investment adviser for the Templeton Developing Markets VIP Fund. Invesco Advisers, Inc. is the investment adviser for AIM Variable Insurance Funds (Invesco Variable Insurance Funds). The Invesco V.I. Balanced Risk Allocation Fund is subadvised by Invesco Asset Management Deutschland GmbH. Shares of these funds are offered only to:
Such shares are not offered directly to investors but are available only through the purchase of such contracts or policies or through such plans. See the prospectus for each Fund for details about that Fund.
Certain Funds employ investment strategies designed to manage exposure to volatility in the equity markets. Allocating Purchase Payments and Contract Value to a Sub-Account investing in one of these Funds may have the effect of mitigating declines in your Contract Value in the event of a significant decline in equity market valuations; however, the strategies followed by the Funds, if successful, will also generally result in your Contract Value increasing to a lesser degree than the equity markets, or decreasing, when the values of equity investments are stable or rising. As a result, you may not benefit from some or all of the increases in equity market values under your Contract and could also result in a decrease in your Contract Value. In addition, there is no guarantee that the Funds' strategies will have their intended effect, or that they will work as effectively as is intended.
There is no guarantee that any Fund will meet its investment objectives. Please refer to the prospectus for each of the Funds you are considering for more information. You may obtain a prospectus for any of the Funds by contacting Protective Life or by asking your investment advisor. You should read the Funds' prospectuses carefully before making any decision concerning the allocation of Purchase Payments or transfers among the Sub-Accounts.
AIM Variable Insurance Funds (Invesco Variable Insurance Funds)
Invesco V.I. American Value Fund, Series II Shares
This Fund's investment objective is to provide above-average total return over a market cycle of three to five years by investing in common stocks and other equity securities.
Invesco V.I. Balanced Risk Allocation Fund, Series II Shares
The Fund's investment objective is total return with a low to moderate correlation to traditional financial market indices.
Invesco V.I. Comstock Fund, Series II Shares
This Fund's investment objective is to seek capital growth and income through investments in equity securities, including common stocks, preferred stocks and securities convertible into common and preferred stocks.
Invesco V.I. Equity and Income Fund, Series II Shares
This Fund's investment objectives are both capital appreciation and current income.
Invesco V.I. Growth and Income Fund, Series II Shares
This Fund's investment objective is to seek long-term growth of capital and income.
Invesco V.I. Mid Cap Growth Fund, Series II Shares
This Fund's investment objective is to seek capital growth.
Invesco V.I. Government Securities Fund, Series II Shares
The Fund's investment objective is total return, comprised of current income and capital appreciation.
Invesco V.I. Global Real Estate Fund, Series II Shares
This Fund's investment objective is total return through growth of capital and current income.
Invesco V.I. International Growth Fund, Series II Shares
This Fund's investment objective is long-term growth of capital.
Invesco V.I. Small Cap Equity Fund, Series II Shares
The Fund's investment objective is long-term growth of capital.
Clayton Street Trust
Protective Life Dynamic Allocation Series- Conservative Portfolio
This Fund seeks total return through income and growth of capital, balanced by capital preservation.
Protective LIfe Dynamic Allocation Series- Growth Portfolio
This Fund seeks total return through growth of capital, balanced by capital preservation.
Protective Life Dynamic Allocation Series- Moderate Portfolio
This Fund seeks total return through growth of capital and income, balanced by capital preservation.
Fidelity ® Variable Insurance Products
VIP Contrafund ® Portfolio, Service Class 2
This Fund seeks long-term capital appreciation.
VIP Index 500 Portfolio, Service Class 2
This Fund seeks investment results that correspond to the total return of common stocks publicly traded in the United States, as represented by the S&P 500 ® Index.
VIP Investment Grade Bond Portfolio, Service Class 2
This Fund seeks as high a level of current income as is consistent with the preservation of capital.
VIP Mid Cap Portfolio, Service Class 2
This Fund seeks long-term growth of capital.
Franklin Templeton Variable Insurance Products Trust
Franklin Flex Cap Growth VIP Fund, Class 2
This Fund seeks capital appreciation. Under normal market conditions, the Fund invests predominantly in equity securities of companies that the investment manager believes have the potential for capital appreciation.
Franklin Income VIP Fund, Class 2
This Fund seeks to maximize income while maintaining prospects for capital appreciation. Under normal market conditions, the Fund invests in both equity and debt securities.
Franklin Rising Dividends VIP Fund, Class 2
This Fund seeks long-term capital appreciation, with preservation of capital as an important consideration. Under normal market conditions, the Fund invests at least 80% of its net assets in equity securities of financially sound companies that have paid rising dividends.
Franklin Small Cap Value VIP Fund, Class 2
This Fund seeks long-term total return. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small capitalization companies.
Franklin Small-Mid Cap Growth VIP Fund, Class 2
This Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of small capitalization and mid-capitalization companies.
Franklin U.S. Government Securities VIP Fund, Class 2
This Fund seeks income. Under normal market conditions, the Fund invests at least 80% of its net assets in U.S. government securities.
Franklin Mutual Shares VIP Fund, Class 2
This Fund seeks capital appreciation, with income as a secondary goal. Under normal market conditions, the Fund invests primarily in U.S. and foreign equity securities that the investment manager believes are undervalued.
Templeton Foreign VIP Fund, Class 2
This Fund seeks long-term capital growth. Under normal market conditions, the Fund invests at least 80% of its net assets in investments of issuers located outside the U.S., including those in emerging markets.
Templeton Developing Markets VIP Fund, Class 2
This Fund seeks long-term capital appreciation. Under normal market conditions, the Fund invests at least 80% of its net assets in emerging markets investments.
Templeton Global Bond VIP Fund, Class 2
This Fund seeks high current income, consistent with preservation of capital, with capital appreciation as a secondary consideration. Under normal market conditions, this Fund invests at least 80% of its net assets in bonds, which include debt securities of any maturity, such as bonds, notes, bills and debentures.
Templeton Growth VIP Fund, Class 2
This Fund seeks long-term capital growth. Under normal market conditions, the Fund invests predominantly in equity securities of companies located anywhere in the world, including developing markets.
Goldman Sachs Variable Insurance Trust
Strategic Growth Fund, Service Class
This Fund seeks long-term growth of capital.
Global Trends Allocation Fund, Service Class
This Fund seeks total return while seeking to provide volatility management.
Growth Opportunities Fund, Service Class
This Fund seeks long-term growth of capital.
Mid Cap Value Fund, Service Class
This Fund seeks long-term capital appreciation.
Strategic International Equity Fund, Service Class
This Fund seeks long-term growth of capital.
Guggenheim Variable Fund
Guggenheim Floating Rate Strategies Series, (Series F)
This Fund seeks a high level of current income while maximizing total return.
Guggenheim Macro Opportunities Series, (Series M)
This Fund seeks total return, comprised of current income and capital appreciation.
Guggenheim Multi-Hedge Strategies Fund
This Fund seeks long-term capital appreciation with less risk than traditional equity funds.
Guggenheim Global Managed Futures Strategy Fund
This Fund seeks to generate positive total return over time.
Guggenheim Long Short Equity Fund
This Fund seeks long-term capital appreciation.
Legg Mason Partners Variable Equity Trust
ClearBridge Variable Mid Cap Portfolio, Class II (formerly ClearBridge Variable Mid Cap Core Portfolio)
This Fund seeks long-term growth of capital.
ClearBridge Variable Small Cap Growth Portfolio, Class II
This Fund seeks long-term growth of capital.
QS Dynamic Multi-Strategy VIT Fund, Class II
The fund seeks the highest total return (that is, a combination of income and long-term capital appreciation) over time consistent with its asset mix. The fund will seek to reduce volatility as a secondary objective.
Lord Abbett Series Fund, Inc.
Fundamental Equity Portfolio, Value Class
The Fund's investment objective is long-term growth of capital and income without excessive fluctuations in market value.
Calibrated Dividend Growth Portfolio, Value Class
The Fund's investment objective is to seek current income and capital appreciation.
Bond-Debenture Portfolio, Value Class
The Fund's investment objective is to seek high current income and the opportunity for capital appreciation to produce a high total return.
Growth Opportunities Portfolio, Value Class
The Fund's investment objective is capital appreciation.
Classic Stock Portfolio, Value Class
The Fund's investment objective is growth of capital and growth of income consistent with reasonable risk.
Mid-Cap Stock Portfolio, Value Class
The Fund's investment objective is to seek capital appreciation through investments, primarily in equity securities, which are believed to be undervalued in the marketplace.
MFS ® Variable Insurance Trust (1)
MFS ® Growth Series, Service Class Shares
This Fund's investment objective is to seek capital appreciation.
MFS ® Investors Trust Series, Service Class Shares
This Fund's investment objective is to seek capital appreciation.
MFS ® New Discovery Series, Service Class Shares
This Fund's investment objective is to seek capital appreciation.
MFS ® Research Series, Service Class Shares
This Fund's investment objective is to seek capital appreciation.
MFS ® Total Return Bond Series, Service Class Shares
This Fund seeks total return with an emphasis on current income, but also considering capital appreciation.
MFS ® Total Return Series, Service Class Shares
This Fund's investment objective is to seek total return.
MFS ® Utilities Series, Service Class Shares
This Fund's investment objective is to seek total return.
MFS ® Value Series, Service Class Shares
This Fund's investment objective is to seek capital appreciation.
MFS ® Variable Insurance Trust II (1)
MFS ® Emerging Markets Equity Portfolio, Service Class Shares
This Fund's investment objective is to seek capital appreciation.
MFS ® International Value Portfolio, Service Class Shares
This Fund's investment objective is to seek capital appreciation.
MFS ® Massachusetts Investors Growth Stock Portfolio, Initial Class Shares (2)
This Fund's investment objective is to seek capital appreciation.
Oppenheimer Variable Account Funds
Capital Appreciation Fund/VA, Service Shares
This Fund seeks capital appreciation.
Global Fund/VA, Service Shares
This Fund seeks capital appreciation.
Main Street Fund/VA, Service Shares
This Fund seeks capital appreciation.
Government Money Fund/VA (formerly Money Fund/VA)
This Fund seeks income consistent with stability of principal. You could lose money by investing in the Government Money Fund/VA. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The Fund's sponsor has no legal obligation to provide financial support to the Fund, and you should not expect that the sponsor will provide financial support to the Fund at any time. The yield of this Fund may become very low during periods of low interest rates. After deduction of Variable Account Annual Expenses, the yield in the Sub-Account that invests in this Fund could be negative.
Global Strategic Income Fund/VA, Service Shares
This Fund seeks total return.
PIMCO Variable Insurance Trust
All Asset Portfolio, Advisor Class
This Portfolio seeks maximum real return, consistent with preservation of real capital and prudent investment management.
Global Diversified Allocation Portfolio, Advisor Class
The Portfolio seeks to maximize risk-adjusted total return relative to a blend of 60% MSCI World Index/40% Barclays U.S. Aggregate Index.
Long-Term US Government Portfolio, Advisor Class
This Portfolio seeks maximum total return, consistent with preservation of capital and prudent investment management. The Portfolio invests under normal circumstances at least 80% of its assets in a diversified portfolio of fixed income securities that are issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises, which may be represented by forwards or derivatives such as options, future contracts, or swap agreements.
Low Duration Portfolio, Advisor Class
This Portfolio seeks maximum total return, consistent with preservation of capital and prudent investment management. The average portfolio duration of this Portfolio normally varies from one to three years based on Pacific Investment Management Company LLC's forecast for interest rates. Duration is a measure used to determine the sensitivity of a security's price to changes in interest rates.
Real Return Portfolio, Advisor Class
This Portfolio seeks maximum real return, consistent with preservation of real capital and prudent investment management. The Portfolio invests under normal circumstances at least 80% of its net assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities and corporations, which may be represented by forwards or derivatives such as options, future contracts or swap agreements.
Short-Term Portfolio, Advisor Class
This Portfolio seeks maximum current income, consistent with preservation of capital and daily liquidity. The average portfolio duration of this Portfolio will vary based on Pacific Investment Management Company LLC's ("PIMCO") forecast for interest rates and will normally not exceed one year. Duration is a measure used to determine the sensitivity of a security's price to changes in interest rates. The longer a security's duration, the more sensitive it will be to changes in interest rates.
Total Return Portfolio, Advisor Class
This Portfolio seeks maximum total return, consistent with preservation of capital and prudent investment management. The Portfolio invests under normal circumstances at least 65% of its total assets in a diversified portfolio of fixed income instruments of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements.
Royce Capital Fund
Micro-Cap Fund, Service Class
This Fund seeks long-term growth of capital and invests primarily in equity securities of micro-cap companies, those with market capitalizations of up to $1 billion.
Small-Cap Fund, Service Class
This Fund seeks long-term growth of capital and invests primarily in equity securities of small-cap companies, those with market capitalizations of up to $3 billion.
Rydex Variable Trust
Rydex Nova Fund (3)
This Fund seeks to provide investment results that match the daily performance, before fees and expenses, of the Fund's current benchmark, which is 150% of the performance of the S&P 500 ® Index.
Rydex Inverse S&P 500 Strategy Fund (3)
This Fund seeks to provide investment results that match the daily performance, before fees and expenses, of the Fund's current benchmark, which is the inverse (opposite) of the performance of the S&P 500 ® Index.
Rydex Inverse Government Long Bond Strategy Fund (3)
This Fund seeks to provide investment results that correspond, to the daily performance, before fees and expenses, to the Fund's current benchmark, which is the inverse (opposite) performance of the Long Treasury Bond.
Rydex Commodities Strategy Fund (3)
This Fund seeks to provide investment results that correspond, to the daily performance, before fees and expenses, to the Fund's current benchmark, which is the S&P GSCITM Commodity Index.
(1) Effective February 2, 2015, Sub-Accounts investing in Funds of the MFS Variable Insurance Trust and the MFS Variable Insurance Trust II were closed to new investment. If you did not have Contract Value in, or allocation instructions including such a Sub-Account on that date, you may not allocate Purchase Payments or Contract Value to that Sub-Account. If you had Contract Value in, or allocation instructions that included such a Sub-Account on February 2, 2015, you may continue to allocate Purchase Payments and transfer Contract Value to that Sub-Account, but if you change your allocation instructions to terminate your investment in the Sub-Account, you may not allocate Purchase Payments and transfer Contract Value to the Sub-Account in the future.
(2) MFS Investors Growth Stock Series merged into MFS Massachusetts Investors Growth Stock Portfolio, a series of MFS Variable Insurance Trust II in March, 2015.
(3) Effective May 1, 2014, the Sub-Account investing in this Rydex Fund is only available to Owners invested in that Sub-Account as of that date. Unless you had Contract Value in this Sub-Account as of April 30, 2014, this Sub-Account is no longer available for the allocation of Purchase Payments or transfer of Contract Value. Transfers of Contract Value include transfers made pursuant to the dollar-cost averaging program, but do not include transfers made pursuant to allocation adjustment or portfolio rebalancing programs. If you had Contract Value in this Sub-Account on April 30, 2014, your Contract Value will remain invested in the Sub-Account and you may continue to allocate Purchase Payments and transfer Contract Value to the Sub-Account, but if you submit new allocation instructions to our Administrative Office where your Contract Value will no longer be invested in this Sub-Account, you will no longer be permitted to allocate Purchase Payments and transfer Contract Value to the Sub-Account. If we receive an application for a Contract with an allocation to the Sub-Account investing in this Rydex fund, we will consider the application to be incomplete and we will attempt to contact the applicant to get revised instructions. If the applicant does not provide us with revised instructions within five Valuation Days after the Valuation Date on which we first received the initial Purchase Payment, we will return the application and initial Purchase Payment, unless the applicant consents to us retaining the initial Purchase Payment until further instructions are provided. If we receive a Purchase Payment for an existing Contract with an allocation to the Sub-Account investing in this Rydex fund, (other than from an Owner currently invested in the Sub-Account), we will return the applicable portion of the payment to you. If you are not currently invested in the Sub-Account investing in this Rydex fund and you request a transfer of Contract Value to that Sub-Account, we will consider your request to not be in good order, and we will not process it. In such cases, we will contact you for further instructions.
There is no assurance that the stated objectives and policies of any of the Funds will be achieved. More detailed information concerning the investment objectives, policies and restrictions of the Funds, the expenses of the Funds, the risks attendant to investing in the Funds and other aspects of their operations can be found in the current prospectuses for the Funds and the current Statement of Additional Information for each of the Funds. You may obtain a prospectus or a Statement of Additional Information for any of the Funds by contacting Protective Life or by asking your investment advisor. You should read the Funds' prospectuses carefully before making any decision concerning the allocation of Purchase Payments or transfers among the Sub-Accounts.
Certain Funds may have investment objectives and policies similar to other mutual funds (sometimes having similar names) that are managed by the same investment adviser or manager. The investment results of the Funds, however, may be more or less favorable than the results of such other mutual funds. Protective Life does not guarantee or make any representation that the investment results of any Fund is, or will be, comparable to any other mutual fund, even one with the same investment adviser or manager.
Volatility Management Strategies. Certain Funds utilize volatility management strategies as part of their investment objectives and/or principal investment strategies. Volatility management strategies are designed to reduce the overall volatility and provide risk-adjusted returns over time. During rising markets, the volatility management strategy, however, could result in your Contract Value rising less than would have been the case had you been invested in a Fund that does not utilize a volatility management strategy. Conversely, investing in a Fund that features a volatility management strategy may be helpful in a declining market when high market volatility triggers a reduction in the Fund’s equity exposure, because during these periods of high volatility, the risk of losses from investing in equity securities may increase. In these instances, your Contract Value may decline less than would have been the case had you not been invested in a Fund that features a volatility management strategy. Please see the Funds’ prospectuses for information about volatility management strategies.
Selection of Funds
We select the Funds offered through the Contracts based on several criteria, including the following:
Another factor we consider during the selection process is whether the Fund, its adviser, its sub-adviser, or an affiliate will make payments to us or our affiliates. For a discussion of these arrangements, see "Certain Payments We Receive with Regard to the Funds." We also consider whether the Fund, its adviser, sub-adviser, or distributor (or an affiliate) can provide marketing and distribution support for sale of the Contracts. We review each Fund periodically after it is selected. Upon review, we may remove a Fund or restrict allocation of additional Purchase Payments and/or transfers of Contract Value to a Fund if we determine the Fund no longer meets one or more of the criteria and/or if the Fund has not attracted significant contract owner assets. We do not recommend or endorse any particular Fund, and we do not provide investment advice.
Asset Allocation Model Portfolios. Four asset allocation models ("Model Portfolios") are available at no additional charge as Investment Options under your Contract.
Each Model Portfolio invests different percentages of Contract Value in some or all of the Sub-Accounts under your Contract, and these Model Portfolios range from conservative to aggressive. The Model Portfolios are intended to provide a diversified investment portfolio by combining different asset classes to help you reach your investment goal. Also, while diversification may help reduce overall risk, it does not eliminate the risk of losses and it does not protect against losses in a declining market. There can be no assurance that any of the Model Portfolios will achieve their investment objective.
Pursuant to an agreement with Protective Life, Milliman, Inc., a diversified financial services firm and registered investment adviser under the Investment Advisers Act of 1940, as amended, determines the composition of the Model Portfolios and is compensated by Protective for doing so. There is no investment advisory relationship between Milliman and Owners. In the future, Protective may modify or discontinue its arrangement with Milliman, in which case Protective may contract with another firm to provide similar asset allocation models, provide its own asset allocation models, or cease offering asset allocation models.
The selection of Investment Options in the Model Portfolios involves balancing a number of factors including, but not limited to, the investment objectives, policies and expenses of the Funds in each Model Portfolio, and the overall historical performance and volatility of the Funds. In addition, Protective Life considers the marketability of individual Funds and Fund families, as well as marketing support provided to Protective Life and the broker-dealers who sell the Contracts and administrative services and marketing support payments made by the Fund or its manager to Protective Life or Investment Distributors, Inc. ("IDI"). The receipt of greater administrative services or marketing support payments from certain Funds may present a conflict of interest for Protective Life.
The available Model Portfolios may change from time to time. In addition, the target asset allocations of these Model Portfolios may vary from time to time in response to market conditions and changes in the portfolio holdings of the Funds in the underlying Sub-Accounts. We will not change your existing Contract Value or Purchase Payment allocation or percentages in response to these changes, however. If you desire to change your Contract Value or Purchase Payment allocation or percentages to reflect a revised or different Model Portfolio, you must submit new allocation instructions to our Administrative Office in writing.
The following is a brief description of the four Model Portfolios currently available. They are more fully described in a separate brochure. Your sales representative can provide additional information about the Model Portfolios and help you select which Model Portfolio, if any, may be suitable for you. Please talk to him or her if you have additional questions about these Model Portfolios.
Other Information about the Funds
Each Fund sells its shares to the Variable Account in accordance with the terms of a participation agreement between the appropriate investment company and Protective Life. The termination provisions of these agreements vary. If a participation agreement relating to a Fund terminates, the Variable Account may not be able to purchase additional shares of that Fund. In that event, Owners may no longer be able to allocate Variable Account value or Purchase Payments to Sub-Accounts investing in that Fund. In certain circumstances, it is also possible that a Fund may refuse to sell its shares to the Variable Account despite the fact that the participation agreement relating to that Fund has not been terminated. Should a Fund decide to discontinue selling its shares to the Variable Account, Protective Life would not be able to honor requests from Owners to allocate Purchase Payments or transfer Contract Value to the Sub-Account investing in shares of that Fund.
Certain Payments We Receive with Regard to the Funds
We (and our affiliates) may receive payments from the Funds, their advisers, sub-advisers, and their distributors, or affiliates thereof. These payments are negotiated and thus differ by Fund (sometimes substantially), and the amounts we (or our affiliates) receive may be significant. These payments are made for various purposes, including payment for services provided and expenses incurred by us (and our affiliates) in promoting, marketing, distributing, and administering the Contracts, and, in our role as intermediary, the Funds. We (and our affiliates) may profit from these payments.
12b-1 Fees. We and our affiliate, Investment Distributors, Inc. ("IDI"), the principal underwriter for the Contracts, receive 12b-1 fees from the Funds, their advisers, sub-advisers, and their distributors, or affiliates thereof that are based on a percentage of the average daily net assets of the particular Fund attributable to the Contracts and to certain other variable insurance contracts issued or administered by us (or our affiliate). IDI may pay some or all of the 12b-1 fees it receives to us. Rule 12b-1 fees are paid out of Fund assets as part of the Fund's total annual operating expenses. Payments made out of Fund assets will reduce the amount of assets that you otherwise would have available for investment, and will reduce the return on your investment. The chart below shows the maximum 12b-1 fees we and IDI anticipate we will receive from the Funds on an annual basis:
Incoming 12b-1 Fees
| Fund | Maximum 12b-1 fee |
| Paid to IDI: | |
| Fidelity Variable Insurance Products | 0.25% |
| Paid to us: | |
| Clayton Street Trust | 0.25% |
| Franklin Templeton Variable Insurance Protucts Trust | 0.25% |
| Goldman Sachs Variable Insurance Trust | 0.25% |
| Royce Capital Fund | 0.25% |
| Legg Mason Partners Variable Equity Trust | 0.25% |
| MFS ® Variable Insurance Trust | 0.25% |
| MFS ® Variable Insurance Trust II | 0.25% |
| PIMCO Variable Insurance Trust | 0.25% |
| AIM Variable Insurance Funds (Invesco Variable Insurance Funds) | 0.25% |
| Oppenheimer Variable Account Funds | 0.25% |
| Guggenheim Variable Fund | 0.25% |
Payments From Advisers and/or Distributors. As of the date of this prospectus, we (or our affiliates) also receive payments from the investment advisers, sub-advisers, or distributors (or affiliates thereof) of all of the Funds other than 12b-1 fees. These payments are not paid out of fund assets. These payments may be derived, in whole or in part, from the investment advisory fee deducted from Fund assets other than 12b-1 fees. These payments are not paid out of Fund assets. Owners, through their indirect investment in the Funds, bear the costs of these investment advisory fees (see the Funds' prospectuses for more information). The amount of the payments we receive is based on a percentage of the average daily net assets of the particular Fund attributable to the Contracts and to certain other variable insurance contracts issued or administered by us (or our affiliate). The payments we receive from the investment advisers, sub-advisers or distributors of the Funds currently range from 0.10% to 0.50% of Fund assets attributable to our variable insurance contracts.
Other Payments. A Fund's adviser, sub-adviser, or distributor or its affiliates may provide us (or our affiliates) and/or broker-dealers that sell the Contracts ("selling firms") with marketing support, may pay us (or our affiliates) and/or selling firms amounts to participate in national and regional sales conferences and meetings with the sales desks, and may occasionally provide us (or our affiliates) and/or selling firms with items of relatively small value, such as promotional gifts, meals, tickets, or other similar items in the normal course of business.
For details about the compensation payments we make in connection with the sale of the Contracts, see "DISTRIBUTION OF THE CONTRACTS."
Other Investors in the Funds
Shares of Clayton Street Trust, Fidelity ® Variable Insurance Products, AIM Variable Insurance Funds (Invesco Variable Insurance Funds), the MFS ® Variable Insurance Trust, MFS ® Variable Insurance Trust II, Oppenheimer Variable Account Funds, Lord Abbett Series Fund, Inc., Franklin Templeton Variable Insurance Products Trust, Royce Capital Fund, Legg Mason Partners Variable Equity Trust, PIMCO Variable Insurance Trust, Guggenheim Variable Fund, Rydex Variable Trust and Goldman Sachs Variable Insurance Trust, are sold to separate accounts of insurance companies, which may or may not be affiliated with Protective Life or each other, a practice known as "shared funding." They may also be sold to separate accounts to serve as the underlying investment for both variable annuity contracts and variable life insurance policies, a practice known as "mixed funding." As a result, there is a possibility that a material conflict may arise between the interests of Owners of Protective Life's Contracts, whose Contract Values are allocated to the Variable Account, and of owners of other contracts whose contract values are allocated to one or more other separate accounts investing in any one of the Funds. Shares of some of these Funds may also be sold to certain qualified pension and retirement plans. As a result, there is a possibility that a material conflict may arise between the interests of Contract Owners generally or certain classes of Contract Owners, and such retirement plans or participants in such retirement plans. In the event of any such material conflicts, Protective Life will consider what action may be appropriate, including removing the Fund from the Variable Account or replacing the Fund with another fund. The boards of directors (or trustees) of Fidelity ® Variable Insurance Products, AIM Variable Insurance Funds (Invesco Variable Insurance Funds), the MFS ® Variable Insurance Trust, MFS ® Variable Insurance Trust II, Oppenheimer Variable Account Funds, Lord Abbett Series Fund, Inc., Franklin Templeton Variable Insurance Products Trust, Royce Capital Fund, Legg Mason Partners Variable Equity Trust, PIMCO Variable Insurance Trust, Guggenheim Variable Fund, Rydex Variable Trust and Goldman Sachs Variable Insurance Trust, monitor events related to their Funds to identify possible material irreconcilable conflicts among and between the interests of the Fund's various investors. There are certain risks associated with mixed and shared funding and with the sale of shares to qualified pension and retirement plans, as disclosed in each Fund's prospectus.
Addition, Deletion or Substitution of Investments
Protective Life reserves the right, subject to applicable law, to make additions to, deletions from, or substitutions for the shares that are held in the Variable Account or that the Variable Account may purchase. If the shares of a Fund are no longer available for investment or if in Protective Life's judgment further investment in any Fund should become inappropriate in view of the purposes of the Variable Account, Protective Life may redeem the shares, if any, of that Fund and substitute shares of another registered open-end management company or unit investment trust. The new Funds may have higher fees and charges than the ones they replaced. Protective Life will not substitute any shares attributable to a Contract's interest in the Variable Account without notice and any necessary approval of the Securities and Exchange Commission and state insurance authorities. Because the plan fiduciary retains the right to select the investments in an employee benefit plan, when the fiduciary receives notice of an addition, deletion, or substitution of an investment (for example, either through this prospectus or a supplement to the prospectus), a plan fiduciary should consider whether the Contract will remain a prudent investment for the plan. If a plan fiduciary wishes to reject the change after receiving notice, it can do so by surrendering the Contract.
Protective Life also reserves the right to establish additional Sub-Accounts of the Variable Account, each of which would invest in shares of a new Fund. Subject to applicable law and any required SEC approval, Protective Life may, in its sole discretion, establish new Sub-Accounts or eliminate one or more Sub-Accounts if marketing needs, tax considerations or investment conditions warrant. We may make any new Sub-Accounts available to existing Owner(s) on a basis we determine. All Sub-Accounts and Funds may not be available to all classes of contracts.
If we make any of these substitutions or changes, Protective Life may by appropriate endorsement change the Contract to reflect the substitution or other change. If Protective Life deems it to be in the best interest of Owners and Annuitants, and subject to any approvals that applicable law may require, we may operate the Variable Account as a management company under the 1940 Act, we may de-register it under that Act if registration is no longer required, or we may combine it with other Protective Life separate accounts. Protective Life reserves the right to make any changes to the Variable Account that the 1940 Act or other applicable law or regulation requires or permits.
DESCRIPTION OF THE CONTRACT
The following sections describe the Contracts currently being offered.
The Contract
The Protective Variable Annuity Investors Series Contract is an individual flexible premium deferred variable and fixed annuity contract issued by Protective Life.
Use of the Contract in Qualified Plans
You may purchase the Contract on a non-qualified basis. You may also purchase it for use within certain qualified retirement plans or in connection with other employee benefit plans or arrangements that receive favorable tax treatment. Such qualified plans include individual retirement accounts and individual retirement annuities (IRAs), and pension and profit sharing plans (including H.R. 10 Plans). Many of these qualified plans, including IRAs, provide the same type of tax deferral as provided by the Contract. The Contract, however, provides a number of benefits and features not provided by such retirement plans and employee benefit plans or arrangements alone. There are costs and expenses under the Contract related to these benefits and features. You should consult a qualified tax and/or financial adviser regarding the use of the Contract within a Qualified Plan or in connection with other employee benefit plans or arrangements. You should carefully consider the benefits and features provided by the Contract in relation to their costs as they apply to your particular situation.
Parties to the Contract
Owner
The Owner is the person or persons who own the Contract and is entitled to exercise all rights and privileges provided in the Contract. Two persons may own the Contract together. In the case of two Owners, provisions relating to action by the Owner means both Owners acting together. However, Protective Life may accept instructions from one Owner on behalf of both Owners. Protective Life will only issue a Contract prior to each Owner's 86th birthday. Individuals as well as nonnatural persons, such as corporations or trusts, may be Owners. In the case of Owners who are nonnatural persons, age restrictions apply to the Annuitant.
The Owner of this Contract may be changed by Written Notice provided:
For a period of 1 year after any change of ownership involving a natural person, the death benefit will equal the Contract Value. Naming a nonnatural person as an Owner or changing the Owner may result in a tax liability. (See "TAXATION OF ANNUITIES IN GENERAL.")
Beneficiary
The Beneficiary is the person or persons who may receive the benefits of this Contract upon the death of any Owner.
Primary — The Primary Beneficiary is the surviving Owner, if any. If there is no surviving Owner, the Primary Beneficiary is the person or persons designated by the Owner and named in our records.
Contingent — The Contingent Beneficiary is the person or persons designated by the Owner and named in our records to be Beneficiary if the Primary Beneficiary is not living at the time of the Owner's death.
If no Beneficiary designation is in effect or if no Beneficiary is living at the time of an Owner's death, the Beneficiary will be the estate of the deceased Owner. If any Owner dies on or after the Annuity Date, the Beneficiary will become the new Owner.
Unless designated irrevocably, the Owner may change the Beneficiary by Written Notice prior to the death of any Owner. An irrevocable Beneficiary is one whose written consent is needed before the Owner can change the Beneficiary designation or exercise certain other rights. In the case of certain Qualified Contracts, Treasury Department regulations prescribe certain limitations on the designation of a Beneficiary.
Annuitant
The Annuitant is the person or persons on whose life annuity income payments may be based. The first Owner shown on the application for the Contract is the Annuitant unless the Owner designates another person as the Annuitant. The Contract must be issued prior to the Annuitant's 86th birthday. If the Annuitant is not an Owner and dies prior to the Annuity Date, the Owner will become the new Annuitant unless the Owner designates otherwise. However, if the Owner is a nonnatural person, the death of the Annuitant will be treated as the death of the Owner.
The Owner may change the Annuitant by Written Notice prior to the Annuity Date. However, if any Owner is not a natural person, then the Annuitant may not be changed. The new Annuitant's 95th birthday must be on or after the Annuity Date in effect when the change of Annuitant is requested.
Payee
The Payee is the person or persons designated by the Owner to receive the annuity income payments under the Contract. The Annuitant is the Payee unless the Owner designates another party as the Payee. The Owner may change the Payee at any time.
Issuance of a Contract
To purchase a Contract, you must submit certain application information and an initial Purchase Payment to Protective Life through a licensed representative of Protective Life. Any such licensed representative must also be a registered representative of a broker/dealer having a distribution agreement with Investment Distributors, Inc. Protective Life reserves the right to accept or decline a request to issue a Contract for any reason permitted or required by law. Contracts may be sold to or in connection with retirement plans which do not qualify for special tax treatment as well as retirement plans that qualify for special tax treatment under the Code.
If the necessary application information for a Contract accompanies the initial Purchase Payment, we will allocate the initial Purchase Payment (less any applicable premium tax) to the Investment Options as you direct on the appropriate form within two business days of receiving such Purchase Payment at the Administrative Office at the Accumulation Unit Value next determined for the portion of the Purchase Payment allocated to the Sub-Account. If we do not receive the necessary application information, Protective Life will retain the Purchase Payment for up to five business days while it attempts to complete the information. If the necessary application information is not complete after five business days, Protective Life will inform the applicant of the reason for the delay and return the initial Purchase Payment immediately unless the applicant specifically consents to Protective Life retaining it until the information is complete. Once the information is complete, we will allocate the initial Purchase Payment to the appropriate Investment Options within two business days. You may transmit information necessary to complete an application to Protective Life by telephone, facsimile, or electronic media.
Purchase Payments
We will only accept Purchase Payments before the earlier of the oldest Owner's and Annuitant's 86th birthday. No Purchase Payment will be accepted within 3 years of the Annuity Date then in effect. The minimum initial Purchase Payment is $5,000. The minimum subsequent Purchase Payment is $100, or $50 if made by electronic funds transfer. We may amend this minimum subsequent Purchase Payment amount at any time. Under certain circumstances, we may be required by law to reject a Purchase Payment.
We reserve the right to limit, suspend, or reject any Purchase Payment at any time in our sole discretion, and/or limit the Investment Options to which Contract Owners may direct Purchase Payments, following Written Notice to Contract Owners. We may do so for all Contracts or only certain classes of Contracts. If we exercise our right to suspend, reject, and/or place limitations on the acceptance and/or allocation of subsequent Purchase Payments, you may be unable to, or limited in your ability to, increase your Contract Value through subsequent Purchase Payments. These restrictions could prevent you from making future contributions to a Qualified Contract, including periodic contributions to an employer sponsored retirement plan or an IRA. Accordingly, you should consider whether the Contract is appropriate for you. (See "QUALIFIED RETIREMENT PLANS.") Before you purchase this Contract and determine the amount of your initial Purchase Payment, you should consider the fact that we may suspend, reject, or limit subsequent Purchase Payments at some point in the future. You should consult with your sales representative prior to purchase.
Purchase Payments are payable at our Administrative Office. You may make them by check payable to Protective Life Insurance Company or by any other method we deem acceptable. We will process Purchase Payments as of the end of the Valuation Period during which we receive your payment and a completed transaction service form at our Administrative Office at the Accumulation Unit Value next determined for the portion of the Purchase Payment allocated to the Sub-Account. Valuation Periods end at the close of regular trading on the New York Stock Exchange, which is generally at 3:00 p.m. Central Time. We will process any Purchase Payment received at our Administrative Office after the end of the Valuation Period on the next Valuation Date.
The maximum aggregate Purchase Payment(s) that can be made without prior Administrative Office approval is $1,000,000.
We reserve the right to change the maximum aggregate Purchase Payment(s) that we will accept at any time, and to condition acceptance of Purchase Payments over any established maximum amount upon prior approval by our Administrative Office and to impose conditions upon the acceptance of aggregate Purchase Payments greater than the established maximum, such as limiting the death benefit options that are available under your Contract. We also reserve the right to limit, suspend, or reject any Purchase Payment at any time, and/or limit the Investment Options to which you may direct Purchase Payments. We may do so for all Contracts or only certain classes of Contracts. We will give Written Notice at least five (5) days before any changes to Purchase Payment limitations go into effect. If we exercise our right to suspend, reject, and/or place limitations on the acceptance and/or allocation of subsequent Purchase Payments, you may be unable to, or limited in your ability to, increase your Contract Value through subsequent Purchase Payments. This could also prevent you from making future contributions to a Qualified Contract, including periodic contributions to an employer-sponsored retirement plan. (See “Qualified Retirement Plans.”). Before you purchase this Contract and determine the amount of your initial Purchase Payment, you should consider the fact that we may suspend, reject, or limit subsequent Purchase Payments at some point in the future. You should consult with your sales representative prior to purchase.
Under the current automatic purchase payment plan, you may select a monthly or quarterly payment schedule pursuant to which Purchase Payments will be automatically deducted from a bank account. We currently accept automatic Purchase Payments on the 1st through the 28th day of each month. Each automatic Purchase Payment must be at least $50. You may not allocate payments made through the automatic purchase payment plan to any DCA Account. You may not elect the automatic purchase payment plan and the automatic withdrawal plan simultaneously. (See "Surrenders and Withdrawals".) Upon notification of the death of any Owner the Company will terminate deductions under the automatic purchase payment plan.
We do not always receive your Purchase Payment or your application on the day you send them or give them to your sales representative. In some circumstances, such as when you purchase a Contract in exchange for an existing annuity contract from another company, we may not receive your Purchase Payment from the other company for a substantial period of time after you sign the application and send it to us.
Right to Cancel
You have the right to return the Contract within a certain number of days after you receive it by returning it, along with a written cancellation request, to our Administrative Office or the sales representative who sold it. In the state of Connecticut, non-written requests are also accepted. The number of days, which is at least ten, is determined by state law in the state where the Contract is delivered. Return of the Contract by mail is effective on being post-marked, properly addressed and postage pre-paid. We will treat the returned Contract as if it had never been issued. Where permitted, Protective Life will refund the Contract Value plus any fees deducted from either Purchase Payments or Contract Value. This amount may be more or less than the aggregate amount of your Purchase Payments up to that time. In states requiring the return of Purchase Payments, we will refund the greater of the Contract Value or the Purchase Payment.
For individual retirement annuities and Contracts issued in states where, upon cancellation during the right-to-cancel period, we return at least your Purchase Payments, we reserve the right to allocate all or a portion of your initial Purchase Payment (and any subsequent Purchase Payment made during the right-to-cancel period) that you allocated to the Sub-Accounts to the Oppenheimer Government Money Fund/VA Sub-Account until the expiration of the right-to-cancel period. Thereafter, we will allocate all Purchase Payments according to your allocation instructions then in effect.
Allocation of Purchase Payments
Owners must indicate in the application how their initial and subsequent Purchase Payments are to be allocated among the Investment Options. If your allocation instructions are indicated by percentages, whole percentages must be used.
Owners may change allocation instructions by Written Notice at any time. Owners may also change instructions by telephone, facsimile, automated telephone system or via the Internet at www.protective.com ("non-written instructions"). For non-written instructions regarding allocations, we may require a form of personal identification prior to acting on instructions and we will record any telephone voice instructions. If we follow these procedures, we will not be liable for any losses due to unauthorized or fraudulent instructions. We reserve the right to limit or eliminate any of these non-written communication methods for any Contract or class of Contracts at any time for any reason.
If you elect to participate in the optional Allocation Adjustment program, you may not allocate Purchase Payments into restricted Sub-Accounts. If we receive instructions from you requesting an allocation to a restricted Sub-Account, we will allocate the requested amount to the restricted Sub-Account, and then immediately transfer the amount to the Oppenheimer Government Money Fund/VA Sub-Account. See "THE ALLOCATION ADJUSTMENT PROGRAM."
Variable Account Value
Sub-Account Value
A Contract's Variable Account value at any time is the sum of the Sub-Account values and therefore reflects the investment experience of the Sub-Accounts to which it is allocated. There is no guaranteed minimum Variable Account value. The Sub-Account value for any Sub-Account as of the Issue Date is equal to the amount of the initial Purchase Payment allocated to that Sub-Account. On subsequent Valuation Dates prior to the Annuity Date, the Sub-Account value is equal to that part of any Purchase Payment allocated to the Sub-Account and any Contract Value transferred to the Sub-Account, adjusted by income, dividends, net capital gains or losses (realized or unrealized), decreased by withdrawals (including any applicable surrender charges and premium tax), Contract Value transferred out of the Sub-Account and fees deducted from the Sub-Account.
The Sub-Account value for a Contract may be determined on any day by multiplying the number of Accumulation Units attributable to the Contract in that Sub-Account by the Accumulation Unit value for the Accumulation Units in that Sub-Account on that day.
Determination of Accumulation Units
Purchase Payments allocated and Contract Value transferred to a Sub-Account are converted into Accumulation Units. An Accumulation Unit is a unit of measure used to calculate the value of a Sub-Account prior to the Annuity Date. We determine the number of Accumulation Units to be credited to a Contract by dividing the dollar amount directed to the Sub-Account by the Accumulation Unit value of the appropriate class of Accumulation Units of that Sub-Account for the Valuation Date as of which the allocation or transfer occurs. Purchase Payments allocated or amounts transferred to a Sub-Account under a Contract increase the number of Accumulation Units of that Sub-Account credited to the Contract. We execute such allocations and transfers as of the end of the Valuation Period in which we receive a Purchase Payment or Written Notice or other instruction requesting a transfer.
Certain events reduce the number of Accumulation Units of a Sub-Account credited to a Contract. The following events result in the cancellation of the appropriate number of Accumulation Units of a Sub-Account:
Accumulation Units are canceled as of the end of the Valuation Period in which we receive Written Notice of or other instructions regarding the event. Accumulation Units associated with the monthly death benefit fee and the annual contract maintenance fee are canceled without notice or instruction.
Determination of Accumulation Unit Value
The Accumulation Unit value for each class of Accumulation Units in a Sub-Account at the end of every Valuation Date is the Accumulation Unit value for that class at the end of the previous Valuation Date times the net investment factor.
Net Investment Factor
The net investment factor measures the investment performance of a Sub-Account from one Valuation Period to the next. For each Sub-Account, the net investment factor reflects the investment performance of the Fund in which the Sub-Account invests and the charges assessed against that Sub-Account for a Valuation Period. Each Sub-Account has a net investment factor for each Valuation Period which may be greater or less than one. Therefore, the value of an Accumulation Unit may increase or decrease. The net investment factor for any Sub-Account for any Valuation Period is determined by dividing (1) by (2) and subtracting (3) from the result, where:
Transfers
Before the Annuity Date, you may instruct us to transfer Contract Value between and among the Investment Options. When we receive your transfer instructions on a completed transaction service form at our Administrative Office, we will allocate the Contract Value you transfer at the next price determined for the Investment Options you indicate. Prices for the Investment Options are determined as of the end of each Valuation Period, which is the close of regular trading on the New York Stock Exchange (generally 3:00 p.m. Central Time). Accordingly, transfer requests received in "good order" at our Administrative Office before the close of regular trading on the New York Stock Exchange are processed at the price determined as of the close of regular trading on the day the requests are received; transfer requests received at our Administrative Office after the close of regular trading on the New York Stock Exchange are processed at the price determined as of the close of regular trading on the next day on which the New York Stock Exchange is open for regular trading. A transaction request will be deemed in "good order" if the transaction service form is fully and accurately completed and signed by the Owner(s) and received by us at our Administrative Office. We may defer transfer requests under the same conditions that payment of withdrawals and surrenders may be delayed. (See "SUSPENSION OR DELAY IN PAYMENTS.") There are limitations on transfers, which are described below.
After the Annuity Date, when Variable Income Payments are selected, transfers are allowed between Sub-Accounts, but are limited to one transfer per month. Dollar cost averaging and portfolio rebalancing are not allowed. No transfers are allowed within the Guaranteed Account or from a Sub-Account and Guaranteed Account.
How to Request Transfers
Before or after the Annuity Date, owners may request transfers by Written Notice at any time. Owners also may request transfers by telephone, facsimile, automated telephone system or via the Internet at www.protective.com ("non-written instructions"). From time to time and at our sole discretion, we may introduce additional methods for requesting transfers or discontinue any method for making non-written instructions for such transfers. We will require a form of personal identification prior to acting on non-written instructions and we will record telephone requests. We will send you a confirmation of all transfer requests communicated to us. If we follow these procedures, we will not be liable for any losses due to unauthorized or fraudulent transfer requests.
Reliability of Communications Systems
The Internet and telephone systems may not always be available. Any computer or telephone system, whether it is yours, your service providers', your registered representative's, or ours, can experience unscheduled outages or slowdowns for a variety of reasons. Such outages or delays may delay or prevent our processing of your request. Although we have taken precautions to help our systems handle heavy use, we cannot promise complete reliability under all circumstances. If you experience problems, you can make your transaction by writing to us.
Limitations on Transfers
We reserve the right to modify, limit, suspend or eliminate the transfer privileges (including acceptance of non-written instructions submitted y telephone, automated telephone system, the Internet or facsimile) without prior notice for any Contract or class of Contracts at any time for any reason.
Minimum amounts. You must transfer at least $100 each time you make a transfer. If the entire amount in the Investment Option is less than $100, you must transfer the entire amount. If less than $100 would be left in an Investment Option after a transfer, then we may transfer the entire amount out of that Investment Option instead of the requested amount.
Number of transfers. Currently we do not generally limit the number of transfers that may be made. We reserve the right, however, to limit the number of transfers to no more than 12 per Contract Year and we also reserve the right to charge a transfer fee for each additional transfer over 12 during any Contract Year if Protective Life determines, in its sole discretion, that the number of transfers or the cost of processing such transfers is excessive. We will give written notice thirty (30) days before we impose a transfer fee or limit the number of transfers. The transfer fee will not exceed $25 per transfer. We will deduct any transfer fee from the amount being transferred. (See "CHARGES AND DEDUCTIONS, Transfer Fee.") We will not include transfers made pursuant to the dollar-cost averaging, allocation adjustment or portfolio rebalancing programs when counting frequent transfer activity or assessing a transfer fee.
Limitations on transfers involving the Guaranteed Account. No amounts may be transferred into a DCA Account. No amounts may be transferred to the Fixed Account within six months after any transfer from the Guaranteed Account to the Variable Account. The maximum amount that may be transferred from the Fixed Account during a Contract Year is the greater of (a) $2,500 or (b) 25% of the Contract Value in the Fixed Account. Due to this limitation, if you want to transfer all of your Contract Value from the Guaranteed Account to the Variable Account, it may take several years to do so. The limitation on transfers from the Fixed Account does not apply, however, to dollar cost averaging transfers from the Fixed Account.
Limitations on Transfers under the Optional Allocation Adjustment Program. If you elect to participate in the optional Allocation Adjustment Program, you may transfer Contract Value among the Investment Options only by submitting a new Contract allocation instruction and you may not transfer Contract Value into restricted Sub-Accounts. If we receive instructions from you requesting a transfer of Contract Value to a restricted Sub-Account, we will transfer the requested amount to the restricted Sub-Account, and then immediately transfer the amount to the Oppenheimer Government Money Fund/VA Sub-Account. See "THE ALLOCATION ADJUSTMENT PROGRAM."
Limitations on frequent transfers, including "market timing" transfers. Frequent transfers may involve an effort to take advantage of the possibility of a lag between a change in the value of a Fund's portfolio securities and the reflection of that change in the Fund's share price. This strategy, sometimes referred to as "market timing," involves an attempt to buy shares of a Fund at a price that does not reflect the current market value of the portfolio securities of the Fund, and then to realize a profit when the Fund shares are sold the next Valuation Date or thereafter.
When you request a transfer among the Sub-Accounts, your request triggers the purchase and redemption of Fund shares. Frequent transfers cause frequent purchases and redemptions of Fund shares. Frequent purchases and redemptions of Fund shares can cause adverse effects for a Fund, Fund shareholders, the Variable Account, other Owners, beneficiaries, annuitants, or owners of other variable annuity contracts we issue that invest in the Variable Account. Frequent transfers can result in the following adverse effects:
In order to try to protect our Owners and the Funds from the potential adverse effects of frequent transfer activity, we have implemented certain market timing policies and procedures (the "Market Timing Procedures"). Our Market Timing Procedures are designed to detect and prevent frequent, short-term transfer activity that may adversely affect the Funds, Fund shareholders, the Variable Account, other Owners, beneficiaries, annuitants and owners of other variable annuity contracts we issue that invest in the Variable Account. We discourage frequent transfers of Contract Value between Sub-Accounts.
We monitor transfer activity in the Contracts to identify frequent transfer activity in any Contract. Our current Market Timing Procedures are intended to detect transfer activity in which the transfers exceed a certain dollar amount and a certain number of transfers involving the same Sub-Accounts within a specific time period. We regularly review transaction reports in an attempt to identify transfers that exceed our established parameters. We do not include transfers made pursuant to the allocation adjustment, dollar-cost averaging or portfolio rebalancing programs when monitoring for frequent transfer activity.
When we identify transfer activity exceeding our established parameters in a Contract or group of Contracts that appear to be under common control, we suspend non-written methods of requesting transfers for that Contract or group of Contracts. All transfer requests for the affected Contract or group of Contracts must be made by Written Notice. We notify the affected Owner(s) in writing of these restrictions.
In addition to our Market Timing Procedures, the Funds may have their own market timing policies and restrictions. While we reserve the right to enforce the Funds' policies and procedures, Owners and other persons with interests under the Contracts should be aware that we may not have the contractual authority or the operational capacity to apply the market timing policies and procedures of the Funds, except that, under SEC rules, we are required to: (1) enter into a written agreement with each Fund or its principal underwriter that obligates us to provide to the Fund promptly upon request certain information about the trading activity of individual Owners, and (2) execute instructions from the Fund to restrict or prohibit further purchases or transfers by specific Owners who violate the market timing policies established by the Fund.
Some of the Funds have reserved the right to temporarily or permanently refuse payments or transfer requests from us if, in the judgment of the Fund's investment adviser, the Fund would be unable to invest effectively in accordance with its investment objective or policies, or would otherwise potentially be adversely affected. To the extent permitted by law, we reserve the right to delay or refuse to honor a transfer request, or to reverse a transfer at any time we are unable to purchase or redeem shares of any of the Funds because of the Fund's refusal or restriction on purchases or redemptions. We will notify the Owner(s) of any refusal or restriction on a purchase or redemption by a Fund relating to that Owner's transfer request. Some Funds also may impose redemption fees on short-term trading ( i.e. , redemptions of mutual Fund shares within a certain number of business days after purchase). We reserve the right to implement, administer, and collect any redemption fees imposed by any of the Funds. You should read the prospectus of each Fund for more information about its ability to refuse or restrict purchases or redemptions of its shares, which may be more or less restrictive than our Market Timing Procedures and those of other Funds, and to impose redemption fees.
We apply our Market Timing Procedures consistently to all Owners without special arrangement, waiver or exception. We reserve the right to change our Market Timing Procedures at any time without prior notice as we deem necessary or appropriate to better detect and deter potentially harmful frequent transfer activity, to comply with state or federal regulatory requirements, or both. We may change our parameters to monitor for different dollar amounts, number of transfers, time period of the transfers, or any of these.
Owners seeking to engage in frequent transfer activity may employ a variety of strategies to avoid detection. Our ability to detect and deter such transfer activity is limited by operational systems and technological limitations. Furthermore, the identification of Owners determined to be engaged in transfer activity that may adversely affect others involves judgments that are inherently subjective. Accordingly, despite our best efforts, we cannot guarantee that our Market Timing Procedures will detect or deter every potential market timer. In addition, because other insurance companies, retirement plans, or both may invest in the Funds, we cannot guarantee that the Funds will not suffer harm from frequent transfer activity in contracts or policies issued by other insurance companies or by retirement plan participants.
Dollar Cost Averaging
Before the Annuity Date, you may instruct us by Written Notice to transfer automatically, on a monthly basis, amounts from a DCA Account or the Fixed Account to any Sub-Account of the Variable Account. This is known as the "dollar-cost averaging" ("DCA") method of investment. By transferring equal amounts of Contract Value on a regularly scheduled basis, as opposed to allocating a larger amount at one particular time, an Owner may be less susceptible to the impact of market fluctuations in the value of Sub-Account Accumulation Units. Protective Life, however, makes no guarantee that the dollar cost averaging method will result in a profit or protection against loss.
Dollar cost averaging transfers are made monthly; you may choose to make the transfers on the 1st through the 28th day of each month. Upon the death of any Owner, dollar cost averaging transfers will continue until canceled by the Beneficiary(s).
There is no charge for dollar cost averaging. Automatic transfers made to facilitate dollar cost averaging will not count toward the 12 transfers permitted each Contract Year if we elect to limit transfers, or the designated number of free transfers in any Contract Year if we elect to charge for transfers in excess of that number in any Contract Year. We reserve the right to restrict the Sub-Accounts into which you may make DCA transfers or discontinue dollar cost averaging upon Written Notice to the Owner at any time for any reason.
In states where, upon cancellation during the right-to-cancel period, we are required to return your Purchase Payment, we reserve the right to delay commencement of dollar cost averaging transfers until the expiration of the right-to-cancel period.
Transfers from the DCA Accounts. If you allocate a Purchase Payment to one of the DCA Accounts, you must include instructions regarding the day of the month on which the transfers should be made, the period during which the dollar cost averaging transfers should occur, and the Sub-Accounts into which the transferred funds should be allocated.
Currently, the maximum period for dollar cost averaging from the DCA Account 1 is six months and from the DCA Account 2 is twelve months. From time to time, we may offer different maximum periods for dollar cost averaging amounts from a DCA Account. The periodic amount transferred from a DCA Account will be equal to the Purchase Payment allocated to the DCA Account divided by the number of dollar cost averaging transfers to be made.
The interest rates on the DCA Accounts apply to the declining balance in the account. Therefore the amount of interest actually paid with respect to a Purchase Payment allocated to the DCA Account will be substantially less than the amount that would have been paid if the full Purchase Payment remained in the DCA Account for the full period. Interest credited will be transferred from the DCA Account after the last dollar cost averaging transfer.
We will process dollar cost averaging transfers until the earlier of the following: (1) the DCA Account Value equals $0, or (2) the Owner instructs us by Written Notice to cancel the automatic transfers. If you terminate transfers from a DCA Account before the amount remaining in that account is $0, we will immediately transfer any amount remaining in that DCA Account according to your instructions. If you do not provide instructions, we will transfer the remaining amount to the Sub-Accounts according to your dollar cost averaging allocation instruction in effect at that time.
Transfers from the Fixed Account. You may also establish dollar-cost averaging transfers from the Fixed Account; the minimum period for dollar cost averaging transfers from the Fixed Account is twelve months. If you wish to establish dollar-cost averaging transfers from the Fixed Account, you must include instructions regarding the day of the month on which the transfers should be made, the amount of the transfers (you must transfer the same amount each time), the period during which the dollar cost averaging transfers should occur, and the Sub-Accounts into which the transferred funds should be allocated.
Dollar Cost Averaging Transfers under the Optional Allocation Adjustment Program. If you elect to participate in the optional Allocation Adjustment Program, any automatic transfers from the DCA Account to the restricted Sub-Account will be redirected to the Oppenheimer Government Money Fund/VA Sub-Account. See "THE ALLOCATION ADJUSTMENT PROGRAM."
Portfolio Rebalancing
Before the Annuity Date, you may instruct Protective Life by Written Notice to periodically transfer your Variable Account value among specified Sub-Accounts to achieve a particular percentage allocation of Variable Account value among such Sub-Accounts ("portfolio rebalancing"). The portfolio rebalancing percentages must be in whole numbers and must allocate amounts only among the Sub-Accounts. Unless you instruct otherwise, portfolio rebalancing is based on your Purchase Payment allocation instructions in effect with respect to the Sub-Accounts at the time of each rebalancing transfer. We deem portfolio rebalancing instructions from you that differ from your current Purchase Payment allocation instructions to be a request to change your Purchase Payment allocation.
You may elect portfolio rebalancing to occur on the 1st through 28th day of a month on either a quarterly, semi-annual or annual basis. If you do not select a day, transfers will occur on the same day of the month as your Contract Anniversary, or on the 28th day of the month if your Contract Anniversary occurs on the 29th, 30th or 31st day of the month. You may change or terminate portfolio rebalancing by Written Notice, or by other non-written communication methods acceptable for transfer requests. Upon the death of any Owner portfolio rebalancing will continue until canceled by the Beneficiary(s).
There is no charge for portfolio rebalancing. Automatic transfers made to facilitate portfolio rebalancing will not count toward the 12 transfers permitted each Contract Year if we elect to limit transfers, or the designated number of free transfers in any Contract Year if we elect to charge for transfers in excess of that number in any Contract Year. We reserve the right to discontinue portfolio rebalancing upon written notice to the Owner at any time for any reason.
Portfolio Rebalancing under the Optional Allocation Adjustment Program. If you elect to participate in the optional Allocation Adjustment Program, we will "re-balance" your Variable Account value according to your most recent allocation instructions, but will include the Oppenheimer Money Fund/VA Sub-Account in place of the restricted Sub-Account. See "The Allocation Adjustment Program."
Surrenders and Withdrawals
At any time before the Annuity Date, you may request a surrender of or withdrawal from your Contract. Federal and state income taxes may apply to surrenders and withdrawals, and a 10% federal penalty tax may apply if the surrender or withdrawal occurs before the Owner reaches age 59-1/2. (See "TAXATION OF ANNUITIES IN GENERAL, Taxation of Withdrawals and Surrenders.") A surrender charge may also apply to surrenders and withdrawals. (See "CHARGES AND DEDUCTIONS".) A surrender value may be available under certain Annuity Options. (See "Annuitization.") In accordance with SEC regulations, surrenders and withdrawals are payable within 7 calendar days of our receiving your request in "good order" at our Administrative Office. (See "SUSPENSION OR DELAY IN PAYMENTS.") A transaction request will be deemed in "good order" if the transaction service form is fully and accurately completed and signed by the Owner(s) and received by us at our Administrative Office.
Surrenders
At any time before the Annuity Date, you may request a surrender of your Contract for its surrender value either by Written Notice or by facsimile. Surrenders requested by facsimile are subject to limitations. Currently, we accept requests by facsimile for surrenders of Contracts that have a Contract Value of $50,000 or less. For Contracts that have a Contract Value greater than $50,000, we will only accept surrender requests by Written Notice. We may eliminate your ability to request a surrender by facsimile or change the requirements for your ability to request a surrender by facsimile for any Contract at any time without prior notice. We will pay you the surrender value in a lump sum.
Withdrawals
At any time before the Annuity Date, you may request a withdrawal of your Contract Value provided the Contract Value remaining after the withdrawal is at least $5,000. If you request a withdrawal that would reduce your Contract Value below $5,000, then we will consider your request to be not in good order and we will notify you that we will not process your request.
You may request a withdrawal by Written Notice or by facsimile. If we have received your completed telephone withdrawal authorization form, you also may request a withdrawal by telephone. Withdrawals requested by telephone or facsimile are subject to limitations. Currently we accept requests for withdrawals by telephone or by facsimile for amounts not exceeding 25% of Contract Value, up to a maximum of $50,000. For withdrawals exceeding 25% of the Contract Value and/or $50,000 we will only accept withdrawal requests by Written Notice. We may eliminate your ability to make withdrawals by telephone or facsimile or change the requirements for your ability to make withdrawals by telephone or facsimile for any Contract or class of Contracts at any time without prior notice.
You may specify the amount of the withdrawal to be made from any Investment Option. If you do not so specify, or if the amount in the designated Investment Option(s) is inadequate to comply with the request, the withdrawal will be made from each Investment Option based on the proportion that the value of each Investment Option bears to the total Contract Value.
Signature Guarantees
Signature guarantees are required for withdrawals or surrenders of $50,000 or more.
Signature guarantees are relied upon as a means of preventing the perpetuation of fraud in financial transactions, including the disbursement of funds or assets from a victim's account with a financial institution or a provider of financial services. They provide protection to investors by, for example, making it more difficult for a person to take another person's money by forging a signature on a written request for the disbursement of funds.
An investor can obtain a signature guarantee from more than 7,000 financial institutions across the United States and Canada that participate in a Medallion signature guarantee program. The best source of a signature guarantee is a bank, savings and loan association, brokerage firm, or credit union with which you do business. Guarantor firms may, but frequently do not, charge a fee for their services.
A notary public cannot provide a signature guarantee. Notarization will not substitute for a signature guarantee.
Surrender Value
The surrender value of any surrender or withdrawal request is equal to the Contract Value surrendered or withdrawn minus any applicable surrender charge, contract maintenance fee and premium tax. We will determine the surrender value as of the end of the Valuation Period during which we receive your request in "good order" at our Administrative Office. A transaction request will be deemed in "good order" if the transaction service form is fully and accurately completed and signed by the Owner(s) and received by us at our Administrative Office. Valuation Periods end at the close of regular trading on the New York Stock Exchange, which is generally at 3:00 p.m. Central Time. We will process any request received at our Administrative Office after the end of the Valuation Period on the next Valuation Date.
The amount we will pay you if you request a withdrawal depends on whether you request a "gross" withdrawal or a "net" withdrawal. For a "gross" withdrawal, this amount is equal to the Contract Value withdrawn minus any applicable surrender charge and premium tax. For a "net" withdrawal, this amount is equal to the Contract Value withdrawn (we will deduct the surrender charge from your remaining Contract Value after we process the withdrawal). (See CHARGES AND DEDUCTIONS — Surrender Charge (Contingent Deferred Sales Charge))
Cancellation of Accumulation Units
Surrenders and withdrawals, including any surrender charges, will result in the cancellation of Accumulation Units from each applicable Sub-Account(s) and/or in a reduction of the Guaranteed Account value.
Surrender and Withdrawal Restrictions
The Owner's right to make surrenders and withdrawals is subject to any restrictions imposed by applicable law or employee benefit plan.
In the case of certain Qualified Plans, federal tax law imposes restrictions on the form and manner in which benefits may be paid. For example, spousal consent may be needed in certain instances before a distribution may be made.
Automatic Withdrawals
Currently, we offer an automatic withdrawal plan. This plan allows you to pre-authorize periodic withdrawals before the Annuity Date. You may elect to participate in this plan at the time of application or at a later date by properly completing an election form. Payments to you under this plan will be made by electronic fund transfer. To participate in the plan you must have:
The automatic withdrawal plan and the automatic purchase payment plan may not be elected simultaneously. (See "Purchase Payments".) There may be federal and state income tax consequences to automatic withdrawals from the Contract, including the possible imposition of a 10% federal penalty tax if the withdrawal occurs before the Owner reaches age 59-1/2. You should consult your tax advisor before participating in any withdrawal program. (See "Taxation of Withdrawals and Surrenders".)
When you elect the automatic withdrawal plan, you will instruct Protective Life to withdraw a level dollar amount from the Contract on a monthly or quarterly basis. Automatic withdrawals may be made on the 1st through the 28th day of each month. The amount requested must be at least $100 per withdrawal. We will process withdrawals for the designated amount until you instruct us otherwise. If, during any Contract Year, the amount of the withdrawals exceeds the "free withdrawal amount" described in the "Surrender Charge" section of this prospectus, we will deduct a surrender charge where applicable. (See "Surrender Charge.") Automatic withdrawals will be taken pro-rata from the Investment Options in proportion to the value each Investment Option bears to the total Contract Value. We will pay you the amount requested each month or quarter as applicable and cancel the applicable Accumulation Units.
If any automatic withdrawal transaction would result in a Contract Value of less than $5,000 after the withdrawal, the transaction will not be completed and the automatic withdrawal plan will terminate. Once automatic withdrawals have terminated due to insufficient Contract Value, they will not be automatically reinstated in the event that your Contract Value should reach $5,000 again. Upon notification of the death of any Owner, we will terminate the automatic withdrawal plan. The automatic withdrawal plan may be discontinued by the Owner by Written Notice at any time for any reason.
There is no charge for the automatic withdrawal plan. We reserve the right to discontinue the automatic withdrawal plan upon Written Notice to you.
THE GUARANTEED ACCOUNT
The Guaranteed Account has not been, and is not required to be, registered with the SEC under the Securities Act of 1933, as amended (the "1933 Act"), and neither these accounts nor the Company's general account have been registered as an investment company under the 1940 Act. Therefore, neither the Guaranteed Account, the Company's general account, nor any interests therein are generally subject to regulation under the 1933 Act or the 1940 Act. The disclosures relating to the Guaranteed Account included in this prospectus are for the Owner's information. However, such disclosures are subject to certain generally applicable provisions of federal securities law relating to the accuracy and completeness of statements made in prospectuses.
The Guaranteed Account consists of the Fixed Account and the DCA Accounts. We may not always offer the Fixed Account or the DCA Accounts in new Contracts. If we are offering the Fixed Account or any of the DCA Accounts in your state at the time you purchase your Contract, however, those accounts will always be available in your Contract. Please ask your sales representative whether the Fixed Account or any DCA Accounts are available in your Contract.
From time to time and subject to regulatory approval, we may offer Fixed Accounts or DCA Accounts with different interest guaranteed periods. We, in our sole discretion, establish the interest rates for each account in the Guaranteed Account. We will not declare a rate that yields values less than those required by the state in which the Contract is delivered. You bear the risk that we will not declare a rate that is higher than the minimum rate. Because these rates vary from time to time, allocations made to the same account within the Guaranteed Account at different times may earn interest at different rates. Current interest rate for each account in the Guaranteed Account is available on our website (www.protective.com) or by calling toll-free 1-800-456-6330.
Our General Account
The Guaranteed Account is part of our general account. Unlike Purchase Payments and Contract Value allocated to the Variable Account, we assume the risk of investment gain or loss on amounts held in the Fixed Account and the DCA Accounts.
The assets of our general account support our insurance and annuity obligations and are subject to our general liabilities from business operations and to claims by our creditors. Because amounts allocated to the Fixed Account and the DCA Accounts, plus any guarantees under the Contract that exceed your Variable Account value (such as those associated with the Return of Purchase Payments Death Benefit), are paid from our general account, any amounts that we may pay under the Contract in excess of Variable Account value are subject to our financial strength and claims-paying ability. It is important to note that there is no guarantee that we will always be able to meet our claims-paying obligations, and that there are risks to purchasing any insurance product. For this reason, you should consider our financial strength and claims-paying ability to meet our obligations under the Contract when purchasing a Contract and making investment decisions under the Contract.
We encourage both existing and prospective contract owners to read and understand our financial statements. We prepare our financial statements on both a statutory basis, as required by state regulators, and according to Generally Accepted Accounting Principles (GAAP).
Our audited GAAP financial statements are included in the Statement of Additional Information (which is available at no charge by calling us at 1-800-456-6330 or writing us at the address shown on the cover page of this prospectus). In addition, the Statement of Additional Information is available on the SEC's website at http://www.sec.gov.
You also will find on our website information on ratings assigned to us by one or more independent rating organizations. These ratings are opinions of our financial capacity to meet the obligations of our insurance and annuity contracts based on our financial strength and/or claims-paying ability.
The Fixed Account
You generally may allocate some or all of your Purchase Payments and may transfer some or all of your Contract Value to the Fixed Account. Amounts allocated or transferred to the Fixed Account earn interest from the date the funds are credited to the account. There are limitations on transfers involving the Fixed Account. Due to this limitation, if you want to transfer all of your Contract Value from the Fixed Account to the Variable Account, it may take several years to do so. You should carefully consider whether the Fixed Account meets your investment needs. (See "Transfers.")
The interest rates we apply to Purchase Payments and transfers into the Fixed Account are guaranteed for one year from the date the Purchase Payment or transfer is credited to the account. When an interest rate guarantee expires, we will set a new interest rate, which may not be the same as the interest rate then in effect for Purchase Payments and transfers allocated to the Fixed Account. The new interest rate is also guaranteed for one year.
The DCA Accounts
DCA Accounts are designed to systematically transfer amounts to the Sub-Accounts of the Variable Account over a designated period. (See "Transfers, Dollar Cost Averaging.") We currently offer two DCA Accounts. The maximum period for dollar cost averaging transfers from DCA Account 1 is six months and from DCA Account 2 is twelve months.
The DCA Accounts are available only for Purchase Payments designated for dollar cost averaging. Purchase Payments may not be allocated into any DCA Account when that DCA Account value is greater than $0, and all funds must be transferred from a DCA Account before allocating a Purchase Payment to that DCA Account. Where we agree, under current administrative procedures, to allocate a Purchase Payment to any DCA Account in installments from more than one source, we will credit each installment with the interest rate applied to the first installment we receive. The interest rate we apply to Purchase Payments allocated to a DCA Account is guaranteed for the period over which dollar cost averaging transfers are allowed from that DCA Account.
Guaranteed Account Value
Any time prior to the Annuity Date, the Guaranteed Account value is equal to the sum of:
For the purposes of interest crediting, amounts deducted, transferred or withdrawn from accounts within the Guaranteed Account will be separately accounted for on a "first-in, first-out" (FIFO) basis.
DEATH BENEFIT
If any Owner dies before the Annuity Date and while the Contract is in force, we will pay a death benefit, less any applicable premium tax, to the Beneficiary. The death benefit terminates on the Annuity Date.
We will determine the death benefit as of the end of the Valuation Period during which we receive at our Administrative Office due proof of death, either by certified death certificate or by judicial order from a court of competent jurisdiction or similar tribunal. Valuation Periods end at the close of regular trading on the New York Stock Exchange, which is generally at 3:00 p.m. Central Time. If we receive due proof of death after the end of the Valuation Period, we will determine the death benefit on the next Valuation Date. Only one death benefit is payable under the Contract, even though the Contract may, in some circumstances, continue beyond the time of an Owner's death. If any Owner is not a natural person, the death of the Annuitant is treated as the death of an Owner. In the case of certain Qualified Contracts, Treasury Department regulations prescribe certain limitations on the designation of a Beneficiary. The following discussion generally applies to Qualified Contracts and non-Qualified Contracts, but there are some differences in the rules that apply to each.
The death benefit provisions of the Contract shall be interpreted to comply with the requirements of Section 72(s) of the Code. We reserve the right to endorse the Contract, as necessary, to conform with regulatory requirements. We will send you a copy of any endorsement containing such Contract modifications.
Please note that any death benefit payment we make in excess of the Variable Account value is subject to our financial strength and claims-paying ability.
Payment of the Death Benefit
The Beneficiary may take the death benefit in one sum immediately, in which event the Contract will terminate. If the death benefit is not taken in one sum immediately, the death benefit will become the new Contract Value as of the end of the Valuation Period during which we receive due proof of death, and the entire interest in the Contract must be distributed under one of the following options:
If no option is elected, we will distribute the entire Contract Value within 5 years of the Owner's death.
If there is more than one Beneficiary, each Beneficiary must submit instructions in Good Order specifying the manner in which the Beneficiary wishes to receive his or her portion of the death benefit, and the value of each Beneficiary's portion of the claim is established as of date we receive that Beneficiary's claim. Until the death benefit is fully distributed, however, the undistributed portion of the death benefit will remain invested in accordance with the Owner's allocation instructions. Accordingly, if we do not receive instructions in Good Order from the Beneficiary (or Beneficiaries) to make an immediate distribution or transfer all or part of the Beneficiary's portion of the death benefit to the Fixed Account, the value of the portion of the death benefit that remains invested in the Sub-Accounts will be subject the investment performance of the underlying Funds, and may increase or decrease in value.
Continuation of the Contract by a Surviving Spouse
In the case of non-Qualified Contracts and Contracts that are individual retirement annuities within the meaning of Code Section 408(b), if the Beneficiary is the deceased Owner's spouse, the surviving spouse may elect, in lieu of receiving a death benefit, to continue the Contract and become the new Owner. This election is only available, however, if the deceased Owner's spouse's 86th birthday is after the Issue Date and 95th birthday is on or after the Annuity Date then in effect. The Contract will continue with the value of the death benefit having become the new Contract Value as of the end of the Valuation Period during which we received due proof of death. The death benefit is not terminated by a surviving spouse's continuation of the contract. The surviving spouse may select a new Beneficiary. Upon this spouse's death, the death benefit may be taken in one sum immediately and the Contract will terminate. If the death benefit is not taken in one sum immediately, the death benefit will become the new Contract Value as of the end of the Valuation Period during which we receive due proof of death and must be distributed to the new Beneficiary according to option (1) or (2), above.
A Contract may be continued by a surviving spouse only once. This benefit will not be available to any subsequent surviving spouse under the continued Contract.
The Beneficiary of an annuity contract who is recognized as a spouse of a deceased Owner for federal tax purposes is treated more favorably than a Beneficiary who is not recognized as a spouse for federal tax purposes. Specifically, a Beneficiary who is recognized as a spouse of the deceased Owner for federal tax purposes may continue the Contract and become the new Owner as described above. In contrast, a Beneficiary who is not recognized as a spouse of the deceased Owner for federal tax purposes must surrender the Contract within 5 years of the Owner's death or take distributions from the Contract over the Beneficiary's life or life expectancy beginning within one year of the Owner's death.
The Internal Revenue Service has ruled that for federal tax purposes, the term "spouse" does not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state. As a result, if a Beneficiary of a deceased Owner and the Owner were parties to such a relationship, the Beneficiary will be required by federal tax law to take distributions from the Contract in the manner applicable to non-spouse Beneficiaries and will not be able to continue the Contract.
If you have questions concerning your status as a spouse for federal tax purposes and how that status might affect your rights under the Contract, you should consult your legal adviser.
Selecting a Death Benefit
We offer two different death benefits: (1) the Contract Value Death Benefit and (2) the Return of Purchase Payments Death Benefit. These death benefits are described more completely below. The Return of Purchase Payments Death Benefit may not be available through your broker-dealer.
You must determine the type of death benefit you want when you apply for your Contract. You may not change your death benefit selection after your Contract is issued. The Contract Value Death Benefit is included with your Contract at no additional charge. You may select the optional Return of Purchase Payments Death Benefit for an additional fee.
You should carefully consider each of these death benefits and consult a qualified financial adviser to help you carefully consider the two death benefits offered with the Contract, and if you select the Return of Purchase Payments Death Benefit, the relative costs, benefits and risks of the fee options in your particular situation.
Contract Value Death Benefit
The Contract Value Death Benefit will equal the Contract Value.
Optional Return of Purchase Payments Death Benefit
The Return of Purchase Payments Death Benefit will equal the greater of (1) the Contract Value, or (2) the aggregate Purchase Payments less an adjustment for each withdrawal provided however , that the Return of Purchase Payments Death Benefit will never be more than the Contract Value plus $1,000,000. The adjustment for each withdrawal in item (2) is the amount that reduces the Return of Purchase Payments Death Benefit at the time of the withdrawal in the same proportion that the amount withdrawn, including any associated surrender charges, reduces the Contract Value. If the value of the Return of Purchase Payments Death Benefit is greater than the Contract Value at the time of the withdrawal, the downward adjustment to the death benefit will be larger than the amount withdrawn. See Appendix A for an example of the calculation of the Return of Purchase Payments Death Benefit.
It is possible that, at the time of an Owner's death, the Return of Purchase Payments Death Benefit will be no greater than the Contract Value Death Benefit. You should consult a qualified financial advisor to carefully consider this possibility and the cost of the Return of Purchase Payments Death Benefit before you decide whether the Return of Purchase Payments Death Benefit is right for you.
Suspension of Return of Purchase Payments Death Benefit. For a period of one year after any change of ownership involving a natural person, the death benefit will equal the Contract Value, less any applicable premium tax, regardless of the type of death benefit that was selected. We will, however, continue to assess the death benefit fee during this period. During the one-year suspension period, we will continue to calculate the Return of Purchase Payments Death Benefit; however, if any Owner dies during this period we will only pay the Contract Value less any applicable premium tax as of the end of the Valuation Period during which we receive due proof of death at our Administrative Office. This means if death occurs after the one-year period has ended, we will include Purchase Payments received and withdrawals made during the one-year suspension when calculating the Return of Purchase Payments Death Benefit.
Return of Purchase Payments Death Benefit Fee
We assess a fee for the Return of Purchase Payments Death Benefit. If you select this death benefit, you must pay a fee based on the value of the death benefit on the day the fee is assessed. This fee is assessed on a monthly basis. (See "CHARGES AND DEDUCTIONS, Death Benefit Fee.") It is possible that this fee (or some portion thereof) could be treated for federal tax purposes as a withdrawal from the Contract. (See "FEDERAL TAX MATTERS.")
Escheatment of Death Benefit
Every state has unclaimed property laws which generally declare annuity contracts to be abandoned after a period of inactivity of 3 to 5 years from the contract's annuity commencement date or date the death benefit is due and payable. For example, if the payment of a death benefit has been triggered, but, if after a thorough search, we are still unable to locate the beneficiary of the death benefit, or the beneficiary does not come forward to claim the death benefit in a timely manner, the death benefit will be paid to the abandoned property division or unclaimed property office of the state in which the beneficiary or the Owner last resided, as shown on our books and records, or to our state of domicile. Once the death benefit has been paid or "escheated" to the state, however, your designated beneficiary may submit a claim to the state for payment of those funds. The state is obligated to pay the death benefit (without interest) if your beneficiary steps forward to claim the death benefit with the proper documentation. To prevent such escheatment, it is important that you update your beneficiary designations, including addresses, if and as they change. Such updates should be communicated in writing, by telephone, or other approved electronic means to our Administrative Office.
THE ALLOCATION ADJUSTMENT PROGRAM (PATENT PENDING)
Under the Allocation Adjustment Program, we will monitor the performance of each Sub-Account in which you invest other than the Unmonitored Sub-Accounts identified below. If, on any Monthly Anniversary Date, the Accumulation Unit value of a Sub-Account is the same as or drops below a specified level, the Sub-Account will be temporarily "restricted" from allocations of Purchase Payments and Contract Value and we will transfer all existing Contract Value in the Sub-Account to the Oppenheimer Government Money Fund/VA Sub-Account. The Sub-Account will remain restricted until the Sub-Account's Accumulation Unit value is greater than the specified level on a future Monthly Anniversary Date. By participating in this risk-mitigating program, you may be less susceptible to the impact of volatile market fluctuations in the value of Sub-Account Accumulation Units. However, we make no guarantee that this program will protect against loss. Also, this program may limit increases in your Contract Value during periods of growth in the market.
The Allocation Adjustment Program is optional and is available at no additional charge. You must elect whether you will or will not participate in the Allocation Adjustment Program when you purchase the Contract. If you do not indicate your election on your application, we will treat the application as incomplete. If you are enrolled in the Allocation Adjustment Program, you may subsequently suspend your participation in the Program.
Calculating the Simple Moving Average (SMA)
Under the Allocation Adjustment Program, we calculate a 12-month Simple Moving Average ("SMA") for each Sub-Account on each Monthly Anniversary Date. Each Sub-Account's SMA is the average Accumulation Unit value for that Sub-Account based on its Accumulation Unit value on the Monthly Anniversary Date and each of the last 11 Monthly Anniversary Dates.
If a Sub-Account has not been in existence for 12 months, we will calculate the SMA using the net asset value of the Fund in which the Sub-Account invests, adjusted for Contract charges and expenses, for each month no Accumulation Unit value is available.
If any Monthly Anniversary Date is not a Valuation Date, we will effect the changes described herein as of the next Valuation Date.
Restricting Access to a Sub-Account
Once we calculate a Sub-Account's SMA on a Monthly Anniversary Date, we then compare that SMA to the Sub-Account's Accumulation Unit value on that Monthly Anniversary Date. If the Sub-Account's current Accumulation Unit value is equal to or less than the Sub-Account's SMA on that date, then we will consider the Sub-Account to be temporarily restricted. This means:
You may submit new allocation instructions to allocate additional Purchase Payments, rebalance your Contract Value, and apply automatic DCA transfers to any non-restricted Sub-Accounts.
If you wish to transfer all or part of your Contract Value in the Oppenheimer Government Money Fund/VA Sub-Account to an unrestricted Sub-Account, you must submit new allocation instructions. If we receive a transfer request that does not include allocation instructions, then we will consider the request to not be in good order and we will not process the transfer. When we receive a transfer request in good order, we will effect a one-time reallocation of your Contract Value in accordance with these instructions (in other words, we will allocate your Contract Value among the Investment Options in the percentages you specify). To the extent your new allocation instructions include allocations to a restricted Sub-Account, that portion of your contract value will remain in the Oppenheimer Government Money Fund/VA Sub-Account until the Sub-Account is no longer restricted under the Allocation Adjustment Program. Following this reallocation, we will consider these instructions to be the Contract's allocation instructions, and use them when allocating additional Purchase Payments and rebalancing your Contract Value (if you have elected portfolio rebalancing), unless you submit new allocation instructions.
Restoring Access to a Sub-Account
We will no longer consider a Sub-Account to be restricted when, on a subsequent Monthly Anniversary Date, the Sub-Account's Accumulation Unit value is greater than its 12-month SMA. When that occurs, we will immediately transfer any Contract Value in the Oppenheimer Government Money Fund/VA Sub-Account attributable to the previously restricted Sub-Account back to the previously restricted Sub-Account based on your current allocation percentages. At this time you also may resume allocating Purchase Payments and transferring Contract Value into the previously restricted Sub-Account, and we will resume any automated transactions involving the previously restricted Sub-Account.
Electing the Program
You must elect whether you will or will not participate in the Allocation Adjustment Program when you purchase the Contract. If you do not indicate your election on your application, we will treat the application as incomplete. We will not issue your Contract unless we have this information (see "Issuance of a Contract"). If you elect not to participate in the Allocation Adjustment Program when you purchase your Contract, you may enroll in the Program at any time before the Annuity Date by sending us Written Notice. If you participate in the Allocation Adjustment Program, we will monitor the performance of all Sub-Accounts in which you invest, other than any Unmonitored Sub-Accounts.
Your participation in the program will begin as of the end of the Valuation Period during which we receive your Written Notice to enroll in the program. If that day is a Monthly Anniversary Date, we will compare each Sub-Account's Accumulation Unit value as of that date to its 12-month SMA as of that date. If that day is not a Monthly Anniversary Date, we will compare each Sub-Account's Accumulation Unit value to its 12-month SMA as of the most recent prior Monthly Anniversary Date. If necessary, the 12-month SMA calculation will include months that occur prior to the Issue Date. If after making these comparisons we determine that a Sub-Account in which you are currently invested is restricted, we will take the actions described above, including transferring any Contract Value in that Sub-Account to the Oppenheimer Government Money Fund/VA Sub-Account.
Note: Investing in Sub-Accounts that experience higher volatility, and therefore more volatile Accumulation Unit values, may increase the likelihood of those Sub-Accounts being restricted from investment. Therefore, the Allocation Adjustment Program may not be consistent with an aggressive investment strategy. You should consult with your registered representative to determine if this program is consistent with your investment objectives.
You should not view the Allocation Adjustment Program as a "market timing" or other type of investment program designed to enhance your earnings under the Contract. If we transfer Contract Value from one or more Sub-Accounts to the Oppenheimer Government Money Fund/VA Sub-Account during a market downturn, your Contract Value will not be available to participate in any upside potential if there is a subsequent recovery until the next Monthly Anniversary when the Accumulation Unit Value of the Sub-Account rises above the SMA. Please see Appendix E in this prospectus for an example of the Allocation Adjustment Program.
We will not assess a transfer charge on transfers made pursuant to the Allocation Adjustment Program or count such transfers towards the 12 transfers allowed each Contract Year without charge. We will provide a written confirmation to you of any transfer or other allocation made pursuant to the Allocation Adjustment Program.
We reserve the right to use a different mathematical model for Contracts we issue in the future. We reserve the right to terminate the Allocation Adjustment Program at any time in our sole discretion by prior Written Notice.
Unmonitored Sub-Accounts
We determine in our sole discretion whether we will monitor the performance of a Sub-Account under the Allocation Adjustment Program. We currently do not monitor the following Sub-Accounts:
| Fidelity VIP Investment Grade Bond | PIMCO Long-Term US Government |
| Franklin US Government Securities VIP | PIMCO Low Duration |
| Guggenheim Floating Rate Strategies | PIMCO Real Return |
| Guggenheim Macro Opportunities | PIMCO Short-Term |
| Guggenheim Multi-Hedge Strategies | PIMCO Total Return |
| Guggenheim Global Managed Futures Strategy | PIMCO Global Diversified Allocation |
| Guggenheim US Long Short Equity | Invesco V.I. Balanced Risk Allocation |
| Legg Mason QS Dynamic Multi-Strategy VIT | Invesco V.I. Government Securities |
| Lord Abbett Bond-Debenture | Templeton Global Bond |
| MFS ® Total Return Bond | Rydex Nova |
| Oppenheimer Government Money Fund/VA | Rydex Inverse S&P 500 Strategy |
| Oppenheimer Global Strategic Income | Rydex Inverse Government Long Bond Strategy |
| Goldman Sachs Global Trends Allocation | Rydex Commodities Strategy |
| Clayton Street Protective Life Dynamic Allocation Series- Conservative | Clayton Street Protective Life Dynamic Allocation Series- Growth |
| Clayton Street Protective Life Dynamic Allocation Series- Moderate |
We may change the list of Unmonitored Sub-Accounts at any time, in our sole discretion. We will provide you with Written Notice of any such changes.
Suspending Participation in the Program
You may instruct us by Written Notice to suspend your participation in the Allocation Adjustment Program at any time. We will end your participation in the program and remove any restrictions on Sub-Accounts as of the end of the Valuation Period during which we receive your Written Notice. You must provide Written Notice requesting the transfer of any Contract Value in the Oppenheimer Government Money Fund/VA Sub-Account to another Investment Option. If you do not provide us with such instructions, any Contract Value allocated to the Oppenheimer Government Money Fund/VA Sub-Account on the suspension date will remain there until you instruct us otherwise. You may later elect to begin participating in the Allocation Adjustment Program at any time prior to the Annuity Date if the program is available at that time. We reserve the right to limit the number of times you may begin participating in the Allocation Adjustment Program following suspension.
Termination of the Program
We will terminate your participation in the Allocation Adjustment Program and remove any restrictions on Sub-Accounts upon the earliest of:
Following termination of the Allocation Adjustment Program, you must provide Written Notice requesting the transfer of any Contract Value in the Oppenheimer Government Money Fund/VA Sub-Account to another Investment Option. If you do not provide us with such instructions, any Contract Value allocated to the Oppenheimer Government Money Fund/VA Sub-Account on the termination date will remain there until you instruct us otherwise.
SUSPENSION OR DELAY IN PAYMENTS
Payments of a withdrawal or surrender of the Variable Account value or death benefit are usually made within seven (7) calendar days. However, we may delay such payment of a withdrawal or surrender of the Variable Account value or death benefit for any period in the following circumstances where permitted by state law:
If, pursuant to SEC rules, the Oppenheimer Government Money Fund/VA suspends payment of redemption proceeds in connection with a liquidation of the Fund, we will delay payment of any transfer, withdrawal, surrender, or death benefit from the Oppenheimer Government Money Fund/VA Sub-Account until the Fund is liquidated.
We may delay payment of a withdrawal or surrender from the Guaranteed Account for up to six months where permitted.
SUSPENSION OF CONTRACTS
If mandated under applicable law, we may be required to reject a Purchase Payment. We also may be required to provide additional information about your account to government regulators or law enforcement authorities. In addition, we may be required to block an Owner's account and thereby refuse to pay any request for transfers, withdrawals, surrenders, or death benefits until instructions are received from the appropriate regulator or law enforcement authorities.
CHARGES AND DEDUCTIONS
Surrender Charge (Contingent Deferred Sales Charge)
General
We do not deduct any charge for sales expenses from Purchase Payments at the time you make them. However, within certain time limits described below, we deduct a surrender charge (contingent deferred sales charge) from the Contract Value when you make a surrender or withdrawal before the Annuity Date or when you fully or partially surrender your Contract for a commuted value while variable income payments under Annuity Option A (payments for a certain period) are being made. (See "Annuitization, Annuity Date."). We do not apply the surrender charge to the payment of a death benefit or when we apply your Annuity Value to an Annuity Option.
The surrender charge reimburses us for expenses related to sales and distribution of the Contract, including commissions, marketing materials, and other promotional expenses. In the event surrender charges are not sufficient to cover sales expenses, we will bear the loss; conversely, if the amount of such charges provides more than enough to cover such expenses, we will retain the excess. Protective Life does not currently believe that the surrender charges imposed will cover the expected costs of distributing the Contracts. Any shortfall will be made up from Protective Life's general assets, which may include amounts derived from the mortality and expense risk charge.
Free Withdrawal Amount
Each Contract Year you may withdraw a specified amount, called the "free withdrawal amount", from your Contract without incurring a surrender charge. During the first Contract Year the free withdrawal amount is equal to 10% of your initial Purchase Payment. In any subsequent Contract Year the free withdrawal amount is equal to the greatest of: (1) the earnings in your Contract as of the prior Contract Anniversary; (2) 10% of your cumulative Purchase Payments as of the prior Contract Anniversary; or (3) 10% of the Contract Value as of the prior Contract Anniversary. For the purpose of determining the free withdrawal amount, earnings equal the Contract Value minus the Purchase Payments not previously assessed with a surrender charge, both measured as of the Contract Anniversary for which values are being determined. Withdrawals in excess of the free withdrawal amount in any Contract Year may be subject to surrender charges. Withdrawals, including withdrawals of the free withdrawal amount, may be subject to income taxation and may be subject to a 10% federal penalty tax if taken before the Owner reaches age 59-1/2. (See "TAXATION OF ANNUITIES IN GENERAL, Taxation of Withdrawals and Surrenders.")
Determining the Surrender Charge
We calculate the surrender charge in the following manner:
The surrender charge is the total of each of these allocated amounts multiplied by its applicable surrender charge percentage, as shown below. If, at the time of withdrawal, all Purchase Payments have already been withdrawn from the Contract, then we will apply the surrender charge percentage associated with the most recent Purchase Payment we accepted to the amount withdrawn (in excess of any free withdrawal amount).
|
Number of Full Years Elapsed
Between the Date Purchase Payment was Accepted and the Date of Surrender |
Surrender
Charge Percentage |
| 0 | 7.0% |
| 1 | 6.0% |
| 2 | 6.0% |
| 3 | 5.0% |
| 4 | 4.0% |
| 5 | 3.0% |
| 6 | 2.0% |
| 7+ | 0% |
Refer to Appendix B for an example of how the surrender charge is calculated.
We will monitor the amount of the surrender charge we assess such that the amount of any surrender charge we impose, when added to any surrender charge previously paid on the Contract, will not exceed nine percent (9%) of aggregate Purchase Payments made to date for your Contract.
Deduction of the Surrender Charge on Withdrawals
We will deduct the surrender charge associated with a withdrawal either from the amount withdrawn (a "gross" withdrawal) or from your remaining Contract Value (a "net" withdrawal), based on your instructions.
If you choose to have us withhold for taxes, we will reduce the amount we pay you by the amount we withhold.
If you do not indicate whether you would like a "gross" or a "net" withdrawal when you submit your withdrawal request, then we will process your withdrawal request as a gross withdrawal.
Waiver of Surrender Charges
We will waive any applicable surrender charge if, at any time after the first Contract Year:
The term "terminal illness" means that you are diagnosed as having a non-correctable medical condition that, with a reasonable degree of medical certainty, will result in your death in 12 months or less. A "physician" is a medical doctor licensed by a state's Board of Medical Examiners, or similar authority in the United States, acting within the scope of his or her license. You must submit written proof satisfactory to us of a terminal illness or nursing home confinement. We reserve the right to require an examination by a physician of our choice at our expense.
Once we have granted the waiver of surrender charges under the provision described above, no surrender charges will apply to the Contract in the future and we will accept no additional Purchase Payments. If any Owner is not an individual, the waiver of surrender charge provision described above will apply to the Annuitant. For a period of one year after any change of ownership involving a natural person, we will not waive the surrender charges under the provision described above. If the surrender charge is waived, payments will still be treated as withdrawals for tax purposes. (See "FEDERAL TAX MATTERS.")
We will not apply a surrender charge if you fully surrender your Contract when the Contract Value is 25% or less of the value of the death benefit.
We may decrease or waive surrender charges on Contracts issued to a trustee, employer or similar entity pursuant to a retirement plan or when sales are made in a similar arrangement where offering the Contracts to a group of individuals under such a program results in savings of sales expenses, or where the sponsor of a Qualified Plan determines to surrender a Qualified Contract when there has been a modification to the Investment Options available under the Contract. We will determine the entitlement to such a reduction in surrender charge.
We may also waive surrender charges on withdrawals taken as a minimum distribution required under federal or state tax laws on amounts attributable to Protective Life annuity contracts. (See "QUALIFIED RETIREMENT PLANS".) During any Contract Year, the total amount of such withdrawals will reduce the free withdrawal amount available on any subsequent withdrawal.
We also may waive surrender charges (1) for Contracts issued in connection with fee-only arrangements between the purchaser and the registered representative of the selling broker-dealer and (2) for Contracts issued to employees and registered representatives of any member of the selling group, or to officers, directors, trustees or bona-fide full time employees of Protective Life or the investment advisors of any of the Funds or their affiliated companies (based upon the Owner's status at the time the Contract is purchased). In either case, no marketing expenses or sales commissions are associated with such Contracts.
Mortality and Expense Risk Charge
To compensate Protective Life for assuming mortality and expense risks, we deduct a daily mortality and expense risk charge. We deduct the mortality and expense risk charge only from the Variable Account. The charge is equal, on an annual basis, to 0.90% of the average daily net assets of the Variable Account attributable to your Contract.
The mortality risk Protective Life assumes is that Annuitant(s) may live for a longer period of time than estimated when the guarantees in the Contract were established. Because of these guarantees, each Payee is assured that longevity will not have an adverse effect on the annuity payments received. The expense risk that Protective Life assumes is the risk that the administration charge, contract maintenance fee and transfer fees may be insufficient to cover actual future expenses. We expect to make a reasonable profit with respect to the Contracts. We may make a profit or incur a loss from the mortality and expense risk charge. Any profit, including profit from the mortality and expense risk charge, may be used to finance distribution and other expenses.
Administration Charge
We will deduct an administration charge equal, on an annual basis, to 0.10% of the daily net asset value of the Variable Account attributable to your Contract. We make this deduction to reimburse Protective Life for expenses incurred in the administration of the Contract and the Variable Account. We deduct the administration charge only from the Variable Account value.
Death Benefit Fee
If you select the Return of Purchase Payments Death Benefit, we assess a death benefit fee to compensate us for the cost of providing this death benefit. (There is no fee for the Contract Value Death Benefit.) We calculate the death benefit fee as of each Monthly Anniversary Date on which the fee is assessed, and we deduct it from your Contract Value on the next Valuation Date. We will deduct the death benefit fee pro-rata from the Investment Options ( e.g. , in the same proportion that each Investment Option has to Contract Value). The deduction of the death benefit fee will reduce your Contract Value, but it will not otherwise reduce the value of your Return of Purchase Payments Death Benefit. We deduct this fee whether or not the value of the death benefit is greater than the Contract Value on the Contract Anniversary the fee is deducted. It is possible that this fee (or some portion thereof) could be treated for federal tax purposes as a withdrawal from the Contract. (See "FEDERAL TAX MATTERS.") We do not assess the death benefit fee after the Annuity Date.
The fee is equal, on an annualized basis, to 0.20% of your annualized death benefit value measured on each Monthly Anniversary Date. The value of your Return of Purchase Payments Death Benefit on any Monthly Anniversary Date is the greater of (1) your Contract Value or (2) your adjusted aggregate Purchase Payments, less an adjustment for each withdrawal, provided however, that the Return of Purchase Payments Death Benefit will never be more than the Contract Value plus $1,000,000. ( See "DEATH BENEFIT, Return of Purchase Payments Death Benefit " for a more complete description.) For example, if on a Monthly Anniversary Date your Contract Value equals $125,000 and your adjusted aggregate Purchase Payments equal $100,000, the fee we deduct on that day will be based on your Contract Value of $125,000. Alternatively, if your Contract Value equals only $95,000 and your adjusted aggregate Purchase Payments equal $100,000, the fee we deduct on that day will be based on your adjusted aggregate Purchase Payments of $100,000.
Transfer Fee
Currently, there is no charge for transfers. Protective Life reserves the right, however, to charge $25 for each transfer after the first 12 transfers in any Contract Year if Protective Life determines, in its sole discretion, that the number of transfers or the cost of processing such transfers is excessive. We will give written notice thirty (30) days before we impose a transfer fee or limit the number of transfers. For the purpose of assessing the fee, we would consider each request to be one transfer, regardless of the number of Investment Options affected by the transfer in one day. We would deduct the fee from the amount being transferred.
Contract Maintenance Fee
Prior to the Annuity Date, we deduct a contract maintenance fee of $35 from the Contract Value on each Contract Anniversary, and on any day that you surrender the Contract other than the Contract Anniversary. We will deduct the contract maintenance fee from the Investment Options in the same proportion as their values are to the Contract Value. We will waive the contract maintenance fee in the event the Contract Value or the aggregate Purchase Payments reduced by surrenders and associated surrender charges (if applicable) equals or exceeds $100,000 on the date we are to deduct the contract maintenance fee.
Fund Expenses
The net assets of each Sub-Account of the Variable Account will reflect the investment management fees and other operating expenses the Funds incur. For each Fund, an investment manager receives a daily fee for its services. Some Funds also deduct 12b-1 fees from Fund assets. Over time these fees, which are paid out of a Fund's assets on an ongoing basis, will increase the cost of an investment in Fund shares. (See the prospectuses for the Funds for information about the Funds.)
Premium Taxes
Some states impose premium taxes at rates currently ranging up to 3.5%. If premium taxes apply to your Contract, we will deduct them from the Purchase Payment(s) when accepted or from the Contract Value upon a withdrawal or surrender, death or annuitization.
Other Taxes
Currently, no charge will be made against the Variable Account for federal, state or local taxes other than premium taxes. We reserve the right, however, to deduct a charge for taxes attributable to the operation of the Variable Account.
Other Information
We sell the Contracts through registered representatives of broker-dealers. These registered representatives are also appointed and licensed as insurance agents of Protective Life. We pay commissions and other compensation to the broker-dealers for selling the Contracts. You do not directly pay the commissions and other compensation, we do. We intend to recover commissions and other compensation, marketing, administrative and other expenses and costs of Contract benefits through the fees and charges imposed under the Contracts. See "DISTRIBUTION OF THE CONTRACTS" for more information about payments we make to the broker-dealers.
ANNUITY PAYMENTS
Annuity Date
On the Issue Date, the Annuity Date is the oldest Owner's or Annuitant's 95th birthday. You may elect a different Annuity Date, provided that it is no later than the oldest Owner's or Annuitant's 95th birthday (the "Maximum Annuity Date"). You may not choose an Annuity Date that is less than 3 years after the most recent Purchase Payment. Distributions from Qualified Contracts may be required before the Annuity Date.
Changing the Annuity Date
The Owner may change the Annuity Date by Written Notice. The new Annuity Date must be at least 30 days after the date we receive the written request and no later than the oldest Owner's or Annuitant's 95th birthday. You may not choose a new Annuity Date that is less than 3 years after the most recent Purchase Payment. You also must elect as your Annuity Option either payments for the life of the Annuitant with no certain period or for a certain period of no less than 10 years.
Annuity Value
The Annuity Value is the amount we will apply to the Annuity Option you have selected. Generally the Annuity Value is your Contract Value on the Annuity Date, less any applicable fees, charges and premium tax on that date. In the circumstances described below, however, we may use an Annuity Value that is higher than the Contract Value.
PayStream Plus Annuitization Benefit
(not available in New Hampshire or Utah)
If your Annuity Date is on or after your 10 th Contract Anniversary and you select Annuity Option B (life income with or without a certain period) with a certain period of at least 10 years, your Annuity Value will be your Contract Value on the Annuity Date plus 2% of the Contract Value on that date, less any applicable fees, charges and premium tax.
Annuity Income Payments
On the Annuity Date, we will apply your Annuity Value to the Annuity Option you have selected to determine your annuity income payment. You may elect to receive a fixed income payment, a variable income payment, or a combination of both using the same Annuity Option and certain period.
Fixed Income Payments
Fixed income payments are periodic payments from Protective Life to the designated Payee, the amount of which is fixed and guaranteed by Protective Life. Fixed income payments are not in any way dependent upon the investment experience of the Variable Account. Once fixed income payments have begun, they may not be surrendered.
Variable Income Payments
Variable income payments are periodic payments from Protective Life to the designated Payee, the amount of which varies from one payment to the next as a reflection of the net investment experience of the Sub-Account(s) you select to support the payments. You may fully or partially surrender variable income payments for a commuted value if those payments are being made under Annuity Option A (payments for a certain period). "Commuted value" is the present value of the future variable income payments made over the selected certain period, discounted back at an Assumed Investment Return. Refer to Appendix C for an explanation of the commuted value calculation. You may not surrender variable income payments if those payments are being made under Annuity Option B (life income with or without a certain period).
A surrender charge will apply if you fully or partially surrender variable income payments within 7 years after our receipt of any Purchase Payment. In this case, the surrender charge will be determined as described in the "CHARGES AND DEDUCTIONS, Surrender Charge" section of this prospectus, but without regard to any free withdrawal amount that may have otherwise been available.
Annuity Units
On the Annuity Date, we will apply the Annuity Value you have allocated to variable income payments (less applicable charges and premium taxes) to the variable Annuity Option you have selected. Using an interest assumption of 5%, we will determine the dollar amount that would equal a variable income payment if a payment were made on that date. (No payment is actually made on that date.) We will then allocate that dollar amount among the Sub-Accounts you selected to support your variable income payments, and we will determine the number of Annuity Units in each of those Sub-Accounts that is credited to your Contract. We will make this determination based on the Annuity Unit values established at the close of regular trading on the New York Stock Exchange on the Annuity Date. If the Annuity Date is a day on which the New York Stock Exchange is closed, we will determine the number of Annuity Units on the next day the New York Stock Exchange is open. The number of Annuity Units attributable to each Sub-Account under a Contract generally remains constant unless there is an exchange of Annuity Units between Sub-Accounts.
Determining the Amount of Variable Income Payments
We will determine the amount of your variable income payment no earlier than five Valuation Dates before the date on which a payment is due, using values established at the close of regular trading on the New York Stock Exchange that day.
We determine the dollar amount of each variable income payment attributable to each Sub-Account by multiplying the number of Annuity Units of that Sub-Account credited to your Contract by the Annuity Unit value (described below) for that Sub-Account on the Valuation Period during which the payment is determined. The dollar value of each variable income payment is the sum of the variable income payments attributable to each Sub-Account.
The Annuity Unit value of each Sub-Account for any Valuation Period is equal to (a) multiplied by (b) divided by (c) where:
The AIR is equal to 5%.
If the net investment return of the Sub-Account for a variable income payment period is equal to the AIR during that period, the variable income payment attributable to that Sub-Account for that period will equal the payment for the prior period. To the extent that such net investment return exceeds the AIR for that period, the payment for that period will be greater than the payment for the prior period; to the extent that such net investment return falls short of the AIR for that period, the payment for that period will be less than the payment for the prior period.
Refer to Appendix C for an explanation of the variable income payment calculation.
Exchange of Annuity Units
After the Annuity Date, you may exchange the dollar amount of a designated number of Annuity Units of a particular Sub-Account for an equivalent dollar amount of Annuity Units of another Sub-Account. On the date of the exchange, the dollar amount of a variable income payment generated from the Annuity Units of either Sub-Account would be the same. We allow only one exchange between Sub-Accounts in any calendar month, and allow no exchanges between the Guaranteed Account and the Variable Account.
Annuity Options
You may select an Annuity Option, or change your selection by Written Notice that Protective Life receives no later than 30 days before the Annuity Date. You may not change your selection of an Annuity Option less than 30 days before the Annuity Date. We will send you a notice in advance of your Annuity Date which asks you to select your Annuity Option. If you have not selected an Annuity Option within 30 days of the Annuity Date, we will apply your Annuity Value to Option B — Life Income with Payments for a 10 Year Certain Period, with the Variable Account value used to purchase variable income payments and the Guaranteed Account value used to purchase fixed income payments.
You may select from among the following Annuity Options:
Option A — Payments For a Certain Period:
We will make payments for the period you select. No certain period may be longer than 30 years. Payments under this Annuity Option do not depend on the life of an Annuitant.
Option B — Life Income With Or Without A Certain Period:
Payments are based on the life of the named Annuitant(s). If you elect to include a certain period, we will make payments for the lifetime of the Annuitant(s), with payments guaranteed for the certain period you select. No certain period may be longer than 30 years. Payments stop at the end of the selected certain period or when the Annuitant(s) dies, whichever is later. We reserve the right to demand proof that the Annuitant(s) is living prior to making any payment under Option B. If no certain period is selected, no payments will be made after the death of the Annuitant(s), no matter how few or how many payments have been made. This means the Payee will receive no annuity payments if the Annuitant(s) dies before the first scheduled payment, will receive only one payment if death occurs before the second scheduled payment, and so on.
Additional Option:
You may use the Annuity Value to purchase any annuity contract that we offer on the date you elect this option.
When selecting an Annuity Option, you should bear in mind that the amount of each payment for a certain period compared to the amount of each payment for life (either with or without a certain period) depends on the length of the certain period chosen and the life expectancy of the Annuitant(s). The longer the life expectancy, the lower the payments. Generally, the shorter the certain period chosen, the higher the payments. You also should consider that, assuming Annuitants with the same life expectancy, choosing Option B — Life Income Without a Certain Period will result in larger annuity payments than Option B — Life Income with a Certain Period (although the Payee will receive more payments under Option B — Life Income with a Certain Period if the Annuitant dies before the end of the certain period). You should consult your sales representative to discuss which Annuity Option would be most appropriate for your circumstances.
At this time Protective does not allow a "partial annuitization," i.e. , we do not allow you to apply a portion of your Contract Value to an annuity option while maintaining the remaining Contract Value available for withdrawals or a surrender. However, in the future we may allow a partial annuitization subject to our then applicable rules and procedures.
Minimum Amounts
If your Annuity Value is less than $2,000 on the Annuity Date, we reserve the right to pay the Annuity Value in one lump sum if, in our sole discretion we determine that a single payment is necessary to avoid excessive administration costs. If at any time your annuity income payments are less than the minimum payment amount according to the Company's rules then in effect, we reserve the right to change the frequency to an interval that will result in a payment at least equal to the minimum.
Death of Annuitant or Owner After Annuity Date
In the event of the death of any Owner on or after the Annuity Date, the Beneficiary will become the new Owner. If any Owner or Annuitant dies on or after the Annuity Date and before all benefits under the Annuity Option you selected have been paid, we will pay any remaining portion of such benefits at least as rapidly as under the Annuity Option in effect when the Owner or Annuitant died. After the death of the Annuitant, any remaining payments shall be payable to the Beneficiary unless you specified otherwise before the Annuitant's death.
YIELDS AND TOTAL RETURNS
From time to time, Protective Life may advertise or include in sales literature yields, effective yields, and total returns for the Sub-Accounts. These figures are based on historic results and do not indicate or project future performance.
Yields, effective yields, and total returns for the Sub-Accounts are based on the investment performance of the corresponding Funds. The Funds' performance also reflects the Funds' expenses, including any 12b-1 fees. Certain of the expenses of each Fund may be reimbursed by the investment manager. (See the Prospectuses for the Funds.)
Yields
The yield of the Oppenheimer Government Money Fund/VA Sub-Account refers to the annualized income generated by an investment in the Sub-Account over a specified seven-day period. The yield is calculated by assuming that the income generated for that seven-day period is generated each seven day period over a 52 week period and is shown as a percentage of the investment. The effective yield is calculated similarly but when annualized the income earned by an investment in the Sub-Account is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment.
The yield of a Sub-Account (except the Oppenheimer Government Money Fund/VA Sub-Account) refers to the annualized income generated by an investment in the Sub-Account over a specified 30 day or one-month period. The yield is calculated by assuming that the income generated by the investment during that 30 day or one month period is generated each period over a 12 month period and is shown as a percentage of the investment.
Total Returns
The total return of a Sub-Account refers to return quotations assuming an investment under a Contract has been held in the Sub-Account for various periods of time including a period measured from the date the Sub-Account commenced operations. Average annual total return refers to total return quotations that are based on an average return over various periods of time.
Certain Funds have been in existence prior to the investment by the Sub-Accounts in such Funds. Protective Life may advertise and include in sales literature the performance of the Sub-Accounts that invest in these Funds for these prior periods. The performance information of any period prior to the investments by the Sub-Accounts is calculated as if the Sub-Accounts had invested in those Funds during those periods, using current charges and expenses associated with the Contract.
Standardized Average Annual Total Returns
The average annual total return quotations represent the average annual compounded rates of return that would equate an initial investment of $1,000 under a Contract to the redemption value of that investment as of the last day of each of the periods for which the quotations are provided. Average annual total return information shows the average percentage change in the value of an investment in the Sub-Account from the beginning date of the measuring period to the end of that period. This standardized version of average annual total return reflects all historical investment results, less all charges and deductions applied under the Contract and any surrender charges that would apply if you terminated the Contract at the end of each indicated period, but excluding any deductions for premium taxes.
When a Sub-Account has been in operation prior to the commencement of the offering of the Contract described in this prospectus, Protective Life may advertise and include in sales literature the performance of the Sub-Accounts for these prior periods. The Sub-Account performance information of any period prior to the commencement of the offering of the Contract is calculated as if the Contract had been offered during those periods, using current charges and expenses.
Until a Sub-Account (other than the Oppenheimer Government Money Fund/VA Sub-Account) has been in operation for 10 years, Protective Life will always include quotes of standard average annual total return for the period measured from the date that Sub-Account began operations. When a Sub-Account (other than the Oppenheimer Government Money Fund/VA Sub-Account) has been in operation for one, five and ten years, respectively, the standard version average annual total return for these periods will be provided.
Non-Standard Average Annual Total Returns
In addition to the standard version of average annual total return described above, total return performance information computed on non-standard bases may be used in advertisements or sales literature. Non-standard average annual total return information may be presented, computed on the same basis as the standard version except deductions may not include the surrender charges or the contract maintenance fee. In addition, Protective Life may from time to time disclose average annual total return in other non-standard formats and cumulative total return for Contracts funded by the Sub-Accounts.
Protective Life may, from time to time, also disclose yield, standard average annual total returns, and non-standard total returns for the Funds.
Non-standard performance data will only be disclosed if the standard performance data for the periods described in "Standardized Average Annual Total Returns," above, is also disclosed.
Performance Comparisons
Protective Life may, from time to time, advertise or include in sales literature Sub-Account performance relative to certain performance rankings and indices compiled by independent organizations. In advertising and sales literature, the performance of each Sub-Account may be compared to the performance of other variable annuity issuers in general or to the performance of particular types of variable annuities investing in mutual funds, or investment portfolios of mutual funds with investment objectives similar to each of the Sub-Accounts. Lipper Analytical Services, Inc. ("Lipper"), the Variable Annuity Research Data Service ("VARDS"), and Morningstar Inc. ("Morningstar") are independent services which monitor and rank the performance of variable annuity issuers in each of the major categories of investment objectives on an industry-wide basis.
Lipper and Morningstar rankings include variable life insurance issuers as well as variable annuity issuers. VARDS rankings compare only variable annuity issuers. The performance analyses prepared by Lipper, Morningstar and VARDS each rank such issuers on the basis of total return, assuming reinvestment of distributions, but do not take sales charges, redemption fees, or certain expense deductions at the separate account level into consideration. In addition, VARDS prepares risk adjusted rankings, which consider the effects of market risk on total return performance. This type of ranking provides data as to which funds provide the highest total return within various categories of funds defined by the degree of risk inherent in their investment objectives.
Advertising and sales literature may also compare the performance of each Sub-Account to the Standard & Poor's Index of 500 Common Stocks, a widely used measure of stock performance. This unmanaged index assumes the reinvestment of dividends but does not reflect any "deduction" for the expense of operating or managing an investment portfolio. Other independent ranking services and indices may also be used as a source of performance comparison.
Other Matters
Protective Life may also report other information including the effect of tax-deferred compounding on a Sub-Account's investment returns, or returns in general, which may be illustrated by tables, graphs, or charts.
All income and capital gains derived from Sub-Account investments are reinvested and can lead to substantial long-term accumulation of assets, provided that the underlying Fund's investment experience is positive.
FEDERAL TAX MATTERS
Introduction
The following discussion of the federal income tax treatment of the Contract is not exhaustive, does not purport to cover all situations, and is not intended as tax advice. The federal income tax treatment of the Contract is unclear in certain circumstances, and you should always consult a qualified tax adviser regarding the application of law to individual circumstances. This discussion is based on the Code, Treasury Department regulations, and interpretations existing on the date of this Prospectus. These authorities, however, are subject to change by Congress, the Treasury Department, and judicial decisions.
This discussion does not address Federal estate, gift, or generation skipping transfer taxes, or any state or local tax consequences associated with the purchase of the Contract. In addition, Protective Life makes no guarantee regarding any tax treatment — federal, state or local — of any Contract or of any transaction involving a Contract.
The Company's Tax Status
Protective Life is taxed as a life insurance company under the Code. Since the operations of the Variable Account are a part of, and are taxed with, the operations of the Company, the Variable Account is not separately taxed as a "regulated investment company" under the Code. Under existing federal income tax laws, investment income and capital gains of the Variable Account are not taxed to the extent they are applied under a Contract. Protective Life does not anticipate that it will incur any federal income tax liability attributable to such income and gains of the Variable Account, and therefore does not intend to make provision for any such taxes. If Protective Life is taxed on investment income or capital gains of the Variable Account, then Protective Life may impose a charge against the Variable Account in order to make provision for such taxes.
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral During Accumulation Period
Under existing provisions of the Code, except as described below, any increase in an Owner's Contract Value is generally not taxable to the Owner until received, either in the form of annuity payments as contemplated by the Contracts, or in some other form of distribution. However, this rule applies only if:
Diversification Requirements
The Code and Treasury Department regulations prescribe the manner in which the investments of a segregated asset account, such as the Variable Account, are to be "adequately diversified." If the Variable Account fails to comply with these diversification standards, the Contract will not be treated as an annuity contract for federal income tax purposes and the Owner would generally be taxable currently on the excess of the Contact Value over the premiums paid for the Contract. Protective Life expects that the Variable Account, through the Funds, will comply with the diversification requirements prescribed by the Code and Treasury Department regulations.
Ownership Treatment
In certain circumstances, variable annuity contract owners may be considered the owners, for federal income tax purposes, of the assets of a segregated asset account, such as the Variable Account, used to support their contracts. In those circumstances, income and gains from the segregated asset account would be currently includable in the contract owners' gross income. The Internal Revenue Service (the "IRS") has stated in published rulings that a variable contract owner will be considered the owner of the assets of a segregated asset account if the owner possesses incidents of ownership in those assets, such as the ability to exercise investment control over the assets.
The ownership rights under the Contract are similar to, but differ in certain respects from, the ownership rights described in certain IRS rulings where it was determined that contract owners were not owners of the assets of a segregated asset account (and thus not currently taxable on the income and gains). For example, the Owner of this Contract has the choice of more Investment Options to which to allocate purchase payments and Variable Account values than were addressed in such rulings. These differences could result in the Owner being treated as the owner of the assets of the Variable Account and thus subject to current taxation on the income and gains from those assets. In addition, the Company does not know what standards will be set forth in any further regulations or rulings which the Treasury Department or IRS may issue. Protective Life therefore reserves the right to modify the Contract as necessary to attempt to prevent Contract Owners from being considered the owners of the assets of the Variable Account. However, there is no assurance such efforts would be successful.
Nonnatural Owner
As a general rule, Contracts held by "nonnatural persons" such as a corporation, trust or other similar entity, as opposed to a natural person, are not treated as annuity contracts for federal tax purposes. The income on such Contracts (as defined in the tax law) is taxed as ordinary income that is received or accrued by the Owner of the Contract during the taxable year. There are several exceptions to this general rule for nonnatural Owners. First, Contracts will generally be treated as held by a natural person if the nominal owner is a trust or other entity which holds the Contract as an agent for a natural person. Thus, if a group Contract is held by a trust or other entity as an agent for certificate owners who are individuals, those individuals should be treated as owning an annuity for federal income tax purposes. However, this special exception will not apply in the case of any employer who is the nominal owner of a Contract under a non-qualified deferred compensation arrangement for its employees.
In addition, exceptions to the general rule for nonnatural Owners will apply with respect to:
Delayed Annuity Dates
If the Contract's Annuity Date occurs (or is scheduled to occur) at a time when the Annuitant has reached an advanced age ( e.g. , past age 95), it is possible that the Contract would not be treated as an annuity for federal income tax purposes. In that event, the income and gains under the Contract could be currently includable in the Owner's income.
The remainder of this discussion assumes that the Contract will be treated as an annuity contract for federal income tax purposes.
Taxation of Withdrawals and Surrenders
In the case of a withdrawal, amounts you receive are generally includable in income to the extent your Contract Value before the surrender exceeds your "investment in the contract" (defined below). All amounts includable in income with respect to the Contract are taxed as ordinary income; no amounts are taxed at the special lower rates applicable to long term capital gains and corporate dividends. Amounts received under an automatic withdrawal plan are treated for tax purposes as withdrawals, not annuity payments. In the case of a surrender, amounts received are includable in income to the extent they exceed the "investment in the contract." For these purposes, the "investment in the contract" at any time equals the total of the Purchase Payments made under the Contract to that time (to the extent such payments were neither deductible when made nor excludable from income as, for example, in the case of certain contributions to Qualified Contracts) less any amounts previously received from the Contract which were not includable in income.
Under the Waiver of Surrender Charges provision of the Contract, amounts we distribute may not be subject to surrender charges if you have a terminal illness or enter, for a period of at least 90 days, certain nursing home facilities. However, such distributions will still be treated as withdrawals for federal income tax purposes.
Withdrawals and surrenders may be subject to a 10% penalty tax. (See "Penalty Tax on Premature Distributions.") Withdrawals and surrenders may also be subject to federal income tax withholding requirements. (See "FEDERAL INCOME TAX WITHHOLDING.")
As described elsewhere in this prospectus, the Company assesses a fee with respect to the Return of Purchase Payments death benefit. It is possible that this fee (or some portion thereof) could be treated for federal tax purposes as a withdrawal from the Contract.
Taxation of Annuity Payments
Normally, the portion of each annuity income payment taxable as ordinary income equals the excess of the payment over the exclusion amount. In the case of variable income payments, the exclusion amount is the "investment in the contract" (defined above) you allocate to the variable Annuity Option when payments begin, adjusted for any period certain or refund feature, divided by the number of payments expected (as determined by Treasury Department regulations which take into account the Annuitant's life expectancy and the form of annuity benefit selected). In the case of fixed income payments, the exclusion amount is determined by multiplying (1) the payment by (2) the ratio of the investment in the contract you allocate to the fixed Annuity Option, adjusted for any period certain or refund feature, to the total expected amount of annuity income payments for the term of the Contract (determined under Treasury Department regulations).
Once the total amount of the investment in the contract is excluded using the above formulas, annuity income payments will be fully taxable. If annuity income payments cease because of the death of the Annuitant and before the total amount of the investment in the contract is recovered, the unrecovered amount generally will be allowed as a deduction.
There may be special income tax issues present in situations where the Owner and the Annuitant are not the same person and are not married to one another within the meaning of federal tax law. You should consult a tax adviser in those situations.
Annuity income payments may be subject to federal income tax withholding requirements. (See "FEDERAL INCOME TAX WITHHOLDING.")
Taxation of Death Benefit Proceeds
Prior to the Annuity Date, we may distribute amounts from a Contract because of the death of an Owner or, in certain circumstances, the death of the Annuitant. Such death benefit proceeds are includable in income as follows:
After the Annuity Date, if a guaranteed period exists under a life income Annuity Option and the Annuitant dies before the end of that period, payments we make to the Beneficiary for the remainder of that period are includable in income as follows:
Proceeds payable on death may be subject to federal income tax withholding requirements. (See "FEDERAL INCOME TAX WITHHOLDING.")
Assignments, Pledges, and Gratuitous Transfers
Other than in the case of Qualified Contracts (which generally cannot be assigned or pledged), any assignment or pledge of (or agreement to assign or pledge) any portion of the Contract Value is treated for federal income tax purposes as a surrender of such amount or portion. If the entire Contract Value is assigned or pledged, subsequent increases in the Contract Value are also treated as withdrawals for as long as the assignment or pledge remains in place. The investment in the contract is increased by the amount includable as income with respect to such assignment or pledge, though it is not affected by any other aspect of the assignment or pledge (including its release). If an Owner transfers a Contract without adequate consideration to a person other than the Owner's spouse (or to a former spouse incident to divorce), the Owner will be required to include in income the difference between the "cash surrender value" and the investment in the contract at the time of transfer. In such case, the transferee's "investment in the contract" will increase to reflect the increase in the transferor's income. The exceptions for transfers to the Owner's spouse (or to a former spouse) are limited to individuals that are treated as spouses under federal tax law.
Penalty Tax on Premature Distributions
Where we have not issued the Contract in connection with a Qualified Plan, there generally is a 10% penalty tax on the amount of any payment from the Contract ( e.g. , withdrawals, surrenders, annuity payments, death benefit proceeds, assignments, pledges, and gratuitous transfers) that is includable in income unless the payment is:
Certain other exceptions to the 10% penalty tax not described herein also may apply. (Similar rules, discussed below, apply in the case of certain Qualified Contracts.)
Aggregation of Contracts
In certain circumstances, the IRS may determine the amount of an annuity income payment or a surrender from a Contract that is includable in income by combining some or all of the annuity contracts a person owns that were not issued in connection with Qualified Plans. For example, if a person purchases a Contract offered by this Prospectus and also purchases at approximately the same time an immediate annuity issued by Protective Life (or its affiliates), the IRS may treat the two contracts as one contract. In addition, if a person purchases two or more deferred annuity contracts from the same insurance company (or its affiliates) during any calendar year, all such contracts will be treated as one contract for purposes of determining whether any payment that was not received as an annuity (including surrenders or withdrawals prior to the Annuity Date) is includable in income. The effects of such aggregation are not always clear; however, it could affect the amount of a surrender or withdrawal or an annuity payment that is taxable and the amount which might be subject to the 10% penalty tax described above.
Exchanges of Annuity Contracts
We may issue the Contract in exchange for all or part of another annuity contract that you own. Such an exchange will be tax free if certain requirements are satisfied. If the exchange is tax free, your investment in the Contract immediately after the exchange will generally be the same as that of the annuity contract exchanged, increased by any additional Purchase Payment made as part of the exchange. Your Contract Value immediately after the exchange may exceed your investment in the Contract. That excess may be includable in income should amounts subsequently be withdrawn or distributed from the Contract ( e.g. , as a withdrawal, surrender, annuity income payment, or death benefit).
If you exchange part of an existing contract for the Contract, and within 180 days of the exchange you receive a payment other than certain annuity payments ( e.g. , you make a withdrawal) from either contract, the exchange may not be treated as a tax free exchange. Rather, some or all of the amount exchanged into the Contract could be includible in your income and subject to a 10% penalty tax.
You should consult your tax advisor in connection with an exchange of all or part of an annuity contract for the Contract, especially if you may make a withdrawal from either contract within 180 days after the exchange.
Medicare Hospital Insurance Tax on Certain Distributions
Effective for tax years beginning after December 31, 2012, a Medicare hospital insurance tax of 3.8% will apply to some types of investment income. This tax will apply to all taxable distributions from nonqualified annuities. This tax only applies to taxpayers with "modified adjusted gross income" above $250,000 in the case of married couples filing jointly, $125,000 in the case of married couples filing separately, and $200,000 for all others. For more information regarding this tax and whether it may apply to you, please consult your tax advisor.
Loss of Interest Deduction Where Contract Is Held By or For the Benefit of Certain Nonnatural Persons
In the case of Contracts issued after June 8, 1997, to a nonnatural taxpayer (such as a corporation or a trust), or held for the benefit of such an entity, that entity's general interest deduction under the Code may be limited. More specifically, a portion of its otherwise deductible interest may not be deductible by the entity, regardless of whether the interest relates to debt used to purchase or carry the Contract. However, this interest deduction disallowance does not affect Contracts where the income on such Contracts is treated as ordinary income that the Owner received or accrued during the taxable year. Entities that are considering purchasing the Contract, or entities that will be Beneficiaries under a Contract, should consult a tax adviser.
QUALIFIED RETIREMENT PLANS
The Contracts are also designed for use in connection with certain types of retirement plans which receive favorable treatment under the Code. Many Qualified Plans provide the same type of tax deferral as provided by the Contract. The Contract, however, provides a number of benefits and features not provided by such retirement plans and employee benefit plans or arrangements alone. Numerous special tax rules apply to the participants in Qualified Plans and to Contracts used in connection with Qualified Plans. Therefore, we make no attempt in this prospectus to provide more than general information about use of the Contract with the various types of Qualified Plans. State income tax rules applicable to Qualified Plans and Qualified Contracts often differ from federal income tax rules, and this prospectus does not describe any of these differences. Those who intend to use the Contract in connection with Qualified Plans should seek competent advice.
The tax rules applicable to Qualified Plans vary according to the type of plan and the terms and conditions of the plan itself. For example, for surrenders, automatic withdrawals, withdrawals, and annuity income payments under Qualified Contracts, there may be no "investment in the contract" and the total amount received may be taxable. Both the amount of the contribution that you and/or your employer may make, and the tax deduction or exclusion that you and/or your employer may claim for such contribution, are limited under Qualified Plans.
In the case of Qualified Contracts, special rules apply to the time at which distributions must commence and the form in which the distributions must be paid. For example, the length of any guarantee period may be limited in some circumstances to satisfy certain minimum distribution requirements under the Code. Furthermore, failure to comply with minimum distribution requirements applicable to Qualified Plans will result in the imposition of an excise tax. This excise tax generally equals 50% of the amount by which a minimum required distribution exceeds the actual distribution from the Qualified Plan. In the case of Individual Retirement Accounts or Annuities (IRAs), distributions of minimum amounts (as specified in the tax law) must generally commence by April 1 of the calendar year following the calendar year in which the Owner attains age 70-1/2. In the case of certain other Qualified Plans, distributions of such minimum amounts must generally commence by the later of this date or April 1 of the calendar year following the calendar year in which the employee retires. The death benefit under your Contract, the PayStream Plus annuitization benefit, and certain other benefits that the IRS may characterize as "other benefits" for purposes of the regulations under Code Section 401(a)(9), may increase the amount of the minimum required distribution that must be taken from your Contract.
There may be a 10% penalty tax on the taxable amount of payments from certain Qualified Contracts. There are exceptions to this penalty tax which vary depending on the type of Qualified Plan. In the case of an IRA, exceptions provide that the penalty tax does not apply to a payment:
These exceptions generally apply to taxable distributions from other Qualified Plans (although, in the case of plans qualified under Section 401, exception "c" above for substantially equal periodic payments applies only if the Owner has separated from service). In addition, the penalty tax does not apply to certain distributions from IRAs which are used for qualified first time home purchases or for higher education expenses. You must meet special conditions to be eligible for these two exceptions to the penalty tax. Those wishing to take a distribution from an IRA for these purposes should consult their tax adviser. Certain other exceptions to the 10% penalty tax not described herein also may apply.
When issued in connection with a Qualified Plan, we will amend a Contract as generally necessary to conform to the requirements of the plan. However, Owners, Annuitants, and Beneficiaries are cautioned that the rights of any person to any benefits under Qualified Plans may be subject to the terms and conditions of the plans themselves, regardless of the terms and conditions of the Contract. In addition, the Company shall not be bound by terms and conditions of Qualified Plans to the extent such terms and conditions contradict the Contract, unless the Company consents.
Following are brief descriptions of various types of Qualified Plans in connection with which the Company may issue a Contract.
Individual Retirement Accounts and Annuities
Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an IRA. If you use this Contract in connection with an IRA, the Owner and Annuitant generally must be the same individual and generally may not be changed. IRAs are subject to limits on the amounts that may be contributed and deducted and on the time when distributions must commence. Also, subject to the direct rollover and mandatory withholding requirements (discussed below), you may "roll over" distributions from certain Qualified Plans on a tax-deferred basis into an IRA.
However, you may not use the Contract in connection with a "Coverdell Education Savings Account" (formerly known as an "Education IRA") under Section 530 of the Code, a "Simplified Employee Pension" under Section 408(k) of the Code, or a "Simple IRA" under Section 408(p) of the Code.
Roth IRAs
Section 408A of the Code permits eligible individuals to contribute to a type of IRA known as a "Roth IRA." Roth IRAs are generally subject to the same rules as non-Roth IRAs, but differ in several respects. Among the differences is that, although contributions to a Roth IRA are not deductible, "qualified distributions" from a Roth IRA will be excludable from income.
A qualified distribution is a distribution that satisfies two requirements. First, the distribution must be made in a taxable year that is at least five years after the first taxable year for which a contribution to any Roth IRA established for the Owner was made. Second, the distribution must be either (1) made after the Owner attains the age of 59-1/2; (2) made after the Owner's death; (3) attributable to the Owner being disabled; or (4) a qualified first-time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code. In addition, distributions from Roth IRAs need not commence when the Owner attains age 70-1/2. A Roth IRA may accept a "qualified rollover contribution" from a (1) non-Roth IRA, (2) a "designated Roth account" maintained under a Qualified Plan, and (3) certain Qualified Plans of eligible individuals. Special rules apply to rollovers to Roth IRAs from Qualified Plans and from designated Roth accounts under Qualified Plans. You should seek competent advice before making such a rollover.
IRA to IRA Rollovers and Transfers
A rollover contribution is a tax-free movement of amounts from one IRA to another within 60 days after you receive the distribution. In particular, a distribution from a non-Roth IRA generally may be rolled over tax-free within 60 days to another non-Roth IRA, and a distribution from a Roth IRA generally may be rolled over tax-free within 60 days to another Roth IRA. A distribution from a Roth IRA may not be rolled over (or transferred) tax-free to a non-Roth IRA.
A rollover from any one of your IRAs (including IRAs you have with another company) with another IRA is allowed only once within a one-year period. This limitation applies on an aggregate basis and applies to all types of your IRAs, meaning that you cannot make an IRA to IRA rollover if you have made such a rollover involving any of your IRAs in the preceding one-year period. For example, a rollover between your Roth IRAs would preclude a separate rollover within the one-year period between your non-Roth IRAs, and vice versa. The one-year period begins on the date that you receive the IRA distribution, not the date it is rolled over into another IRA.
If the IRA distribution does not satisfy the rollover rules, it may be (1) taxable in the year distributed, (2) subject to a 10% tax on early distributions, and (3) treated as a regular contribution to the recipient IRA, which could result in an excess contribution.
If you inherit an IRA from your spouse, you generally can roll it over into an IRA established for you, or you can choose to make the inherited IRA your own. If you inherited an IRA from someone other than your spouse, you cannot roll it over, make it your own, or allow it to receive rollover contributions.
A rollover from one IRA to another is different from a direct trustee-to-trustee transfer of your IRA assets from one IRA trustee to another IRA trustee. A “trustee-to-trustee” transfer is not considered a rollover and is not subject to the 60-day rollover requirement or the one rollover per year rule. In addition, a rollover between IRAs is different from direct rollovers from certain Qualified Plans to non-Roth IRAs and “qualified rollover contributions” to Roth IRAs.
Pension and Profit-Sharing Plans
Section 401(a) of the Code permits employers to establish various types of tax-favored retirement plans for employees. The Self-Employed Individuals' Tax Retirement Act of 1962, as amended, commonly referred to as "H.R. 10" or "Keogh," permits self-employed individuals also to establish such tax-favored retirement plans for themselves and their employees. Such retirement plans may permit the purchase of the Contract in order to provide benefits under the plans. These types of plans may be subject to rules under Sections 401(a)(11) and 417 of the Code that provide rights to a spouse or former spouse of a participant. In such a case, the participant may need the consent of the spouse or former spouse to change annuity options, to elect a partial automatic withdrawal option, or to make a partial or full surrender of the Contract.
Pension and profit sharing plans are subject to nondiscrimination rules. The nondiscrimination rules generally require that benefits, rights or features of the plan not discriminate in favor of highly compensated employees. In evaluating whether the Contract is suitable for purchase in connection with such a plan, you should consider the effect of the minimum initial Purchase Payment of at least $5,000 in certain circumstances on the plan's compliance with applicable nondiscrimination requirements. You should also consider the extent to which other aspects of the Contract, e.g., that the Annual Contract Maintenance Fee is waived for Contract Values that are greater than $100,000, may affect the plan's compliance with the nondiscrimination requirements. Violation of these rules can cause loss of the plan's tax favored status under the Code. Employers intending to use the Contract in connection with such plans should seek competent advice.
Section 403(b) Annuity Contracts
Protective Life does not issue Contracts under Section 403(b) of the Code ( i.e. , tax sheltered annuities or "TSAs").
Deferred Compensation Plans of State and Local Governments and Tax-Exempt Organizations
Section 457 of the Code permits employees of state and local governments and tax-exempt organizations to defer a portion of their compensation without paying current taxes. The employees must be participants in an eligible deferred compensation plan. Generally, a Contract purchased by a state or local government or a tax-exempt organization under a Section 457 plan will not be treated as an annuity contract for federal income tax purposes. The Contract will be issued in connection with a Section 457 deferred compensation plan sponsored by a state or local government only if the plan has established a trust to hold plan assets, including the Contract.
Direct Rollovers
If your Contract is used in connection with a pension or profit-sharing plan qualified under Section 401(a) of the Code, or is used with an eligible deferred compensation plan that has a government sponsor and that is qualified under Section 457(b) of the Code, any "eligible rollover distribution" from the Contract will be subject to direct rollover and mandatory withholding requirements. An eligible rollover distribution generally is any taxable distribution from a qualified pension plan under Section 401(a) of the Code, or an eligible Section 457(b) deferred compensation plan that has a government sponsor, excluding certain amounts (such as minimum distributions required under Section 401(a)(9) of the Code, distributions which are part of a "series of substantially equal periodic payments" made for life or a specified period of 10 years or more, or hardship distributions as defined in the tax law).
Under these requirements, federal income tax equal to 20% of the eligible rollover distribution will be withheld from the amount of the distribution. Unlike withholding on certain other amounts distributed from the Contract, discussed below, you cannot elect out of withholding with respect to an eligible rollover distribution. However, this 20% withholding will not apply if, instead of receiving the eligible rollover distribution, you elect to have it directly transferred to certain eligible retirement plans (such as an IRA). Prior to receiving an eligible rollover distribution, you will receive a notice (from the plan administrator or the Company) explaining generally the direct rollover and mandatory withholding requirements and how to avoid the 20% withholding by electing a direct transfer.
FEDERAL INCOME TAX WITHHOLDING
In General
Protective Life will withhold and remit to the federal government a part of the taxable portion of each distribution made under a Contract unless the distributee notifies Protective Life at or before the time of the distribution that he or she elects not to have any amounts withheld. In certain circumstances, Protective Life may be required to withhold tax. The withholding rates applicable to the taxable portion of periodic annuity payments (other than eligible rollover distributions) are the same as the withholding rates generally applicable to payments of wages. In addition, a 10% withholding rate applies to the taxable portion of non-periodic payments (including surrenders prior to the Annuity Date) and conversions of, or rollovers from, non-Roth IRAs and Qualified Plans to Roth IRAs. Regardless of whether you elect not to have federal income tax withheld, you are still liable for payment of federal income tax on the taxable portion of the payment. As discussed above, the withholding rate applicable to eligible rollover distributions is 20%.
Nonresident Aliens and Foreign Corporations
The discussion above provides general information regarding federal withholding tax consequences to annuity contract purchasers or beneficiaries that are U.S. citizens or residents. Purchasers or beneficiaries that are not U.S. citizens or residents will generally be subject to U.S. federal withholding tax on taxable distributions from annuity contracts at a 30% rate, unless a lower treaty rate applies. Prospective purchasers that are not U.S. citizens or residents are advised to consult with a tax advisor regarding federal tax withholding with respect to the distributions from a Contract.
FATCA Withholding
If the payee of a distribution from the Contract is a foreign financial institution ("FFI") or a non-financial foreign entity ("NFFE") within the meaning of the Code as amended by the Foreign Account Tax Compliance Act ("FATCA"), the distribution could be subject to U.S. federal withholding tax on the taxable amount of the distribution at a 30% rate irrespective of the status of any beneficial owner of the Contract or the distribution. The rules relating to FATCA are complex, and a tax advisor should be consulted if an FFI or NFFE is or may be designated as a payee with respect to the Contract.
GENERAL MATTERS
Error in Age or Gender
When a benefit of the Contract is contingent upon any person's age or gender, we may require proof of such. We may suspend payments until we receive proof. When we receive satisfactory proof, we will make the payments which were due during the period of suspension. Where the use of unisex mortality rates is required, we will not determine or adjust benefits based upon gender.
If after we receive proof of age and gender (where applicable), we determine that the information you furnished was not correct, we will adjust any benefit under this Contract to that which would be payable based upon the correct information. If we have underpaid a benefit because of the error, we will make up the underpayment in a lump sum. If the error resulted in an overpayment, we will deduct the amount of the overpayment from any current or future payment due under the Contract. We will deduct up to the full amount of any current or future payment until the overpayment has been fully repaid. Underpayments and overpayments will bear interest at an annual effective interest rate of 3% when permitted by the state of issue.
Incontestability
We will not contest the Contract.
Non-Participation
The Contract is not eligible for dividends and will not participate in Protective Life's surplus or profits.
Assignment or Transfer of a Contract
You have the right to assign or transfer a Contract if it is permitted by law. Generally, you do not have the right to assign or transfer a Qualified Contract. We do not assume responsibility for any assignment or transfer. Any claim made under an assignment or transfer is subject to proof of the nature and extent of the assignee's or transferee's interest before we make a payment. Assignments and transfers have federal income tax consequences. An assignment or transfer may result in the Owner recognizing taxable income. (See "TAXATION OF ANNUITIES IN GENERAL, Assignments, Pledges and Gratuitous Transfers.")
Notice
All instructions and requests to change or assign the Contract must be in writing in a form acceptable to us, signed by the Owner(s), and received at our Administrative Office. The instruction, change or assignment will relate back to and take effect on the date it was signed, except we will not be responsible for following any instruction or making any change or assignment before we receive it.
Modification
No one is authorized to modify or waive any term or provision of this Contract unless we agree to the modification or waiver in writing and it is signed by our President, Vice-President or Secretary. We reserve the right to change or modify the provisions of this Contract to conform to any applicable laws, rules or regulations issued by a government agency, or to assure continued qualification of the Contract as an annuity contract under the Code. We will send you a copy of the endorsement that modifies the Contract, and where required we will obtain all necessary approvals, including that of the Owner(s).
Reports
At least annually prior to the Annuity Date, we will send to you at the address contained in our records a report showing the current Contract Value and any other information required by law.
Settlement
Benefits due under this Contract are payable from our Administrative Office. You may apply the settlement proceeds to any payout option we offer for such payments at the time you make the election. Unless directed otherwise in writing, we will make payments according to the Owner's instructions as contained in our records at the time we make the payment. We shall be discharged from all liability for payment to the extent of any payments we make.
Receipt of Payment
If any Owner, Annuitant, Beneficiary or Payee is incapable of giving a valid receipt for any payment, we may make such payment to whomever has legally assumed his or her care and principal support. Any such payment shall fully discharge us to the extent of that payment.
Protection of Proceeds
To the extent permitted by law and except as provided by an assignment, no benefits payable under this Contract will be subject to the claims of creditors.
Minimum Values
The values available under the Contract are at least equal to the minimum values required in the state where the Contract is delivered.
Application of Law
The provisions of the Contract are to be interpreted in accordance with the laws of the state where the Contract is delivered, with the Code and with applicable regulations.
No Default
The Contract will not be in default if subsequent Purchase Payments are not made.
DISTRIBUTION OF THE CONTRACTS
Distribution
We have entered into an agreement with Investment Distributors, Inc. ("IDI") under which IDI has agreed to distribute the Contracts on a "best efforts" basis. Under the agreement, IDI serves as principal underwriter (as defined under Federal securities laws and regulations) for the Contracts. IDI is a Tennessee corporation and was established in 1993. IDI, a wholly-owned subsidiary of PLC, is an affiliate of and shares the same address as Protective Life. IDI is registered with the SEC under the Securities Exchange Act of 1934 as a broker-dealer and is a member of the Financial Industry Regulatory Authority ("FINRA").
IDI does not sell Contracts directly to purchasers. IDI, together with Protective Life, enters into distribution agreements with other broker-dealers, including ProEquities, Inc., an affiliate of Protective Life and IDI, (collectively, "Selling Broker-Dealers") for the sale of the Contracts. Registered representatives of the Selling Broker-Dealers sell the Contracts directly to purchasers. Registered representatives of the Selling Broker-Dealers must be licensed as insurance agents by applicable state insurance authorities and appointed as agents of Protective Life in order to sell the Contracts.
We pay commissions and additional asset-based compensation to Selling Broker-Dealers through IDI. IDI does not retain any commission payment or other amounts as principal underwriter for the Contracts. However, we may pay some or all of IDI's operating and other expenses.
We paid the following aggregate dollar amounts to IDI in commissions and additional asset-based compensation relating to sales of our variable annuity contracts, including the Contracts. IDI did not retain any of these amounts.
| Fiscal Year Ended | Amount Paid to IDI |
| December 31, 2013 | $118,126,390 |
| December 31, 2014 | $86,120,789 |
| December 31, 2015 | $99,348,859 |
We offer the Contract on a continuous basis. While we anticipate continuing to offer the Contracts, we reserve the right to discontinue the offering at any time.
Selling Broker-Dealers
We pay commissions and may provide some form of non-cash compensation to all Selling Broker-Dealers in connection with the promotion and sale of the Contracts. A portion of any payments made to Selling Broker-Dealers may be passed on to their registered representatives in accordance with their internal compensation programs. We may use any of our corporate assets to pay commissions and other costs of distributing the Contracts, including any profit from the mortality and expense risk charge or other fees and charges imposed under the Contracts. Commissions and other incentives or payments described below are not charged directly to Contract owners or the Variable Account. We intend to recoup commissions and other sales expenses through fees and charges deducted under the Contracts or from our general account.
Compensation Paid to All Selling Broker-Dealers. We pay commissions as a percentage of initial and subsequent Purchase Payments at the time we receive them, as a percentage of Contract Value on an ongoing basis, or a combination of both. While the amount and timing of commissions may vary depending on the distribution agreement, we do not expect them to exceed 8% of any Purchase Payment (if compensation is paid as a percentage of Purchase Payments) and/or 1.0% annually of average Contract Value (if compensation is paid as a percentage of Contract Value). In the normal course of business, we may also provide non-cash compensation in connection with the promotion of the Contracts, including conferences and seminars (including travel, lodging and meals in connection therewith), and items of relatively small value, such as promotional gifts, meals, or tickets to sporting or entertainment events.
The registered representative who sells you the Contract typically receives a portion of the compensation we pay to his or her Selling Broker-Dealer, depending on the agreement between the Selling Broker-Dealer and your registered representative and the Selling Broker-Dealer's internal compensation program. These programs may include other types of cash and non-cash compensation and other benefits. If you would like information about what your registered representative and the Selling Broker-Dealer for whom he or she works may receive in connection with your purchase of a Contract, please ask your registered representative.
Additional Compensation Paid to Selected Selling Broker-Dealers. In addition to ordinary commissions and non-cash compensation, we may pay additional asset-based compensation to selected Selling Broker-Dealers. These payments are made through IDI. These payments may be (1) additional amounts as a percentage of purchase payments and/or premiums we receive on our variable insurance products (including the Contracts), and (2) additional "trail" commissions, which are periodic payments as a percentage of the contract and policy values or variable account values of our variable insurance products (including Contract Values and Variable Account values of the Contracts). Some or all of these additional asset-based compensation payments may be conditioned upon the Selling Broker-Dealer producing a specified amount of new purchase payments and/or premiums (including Purchase Payments for the Contracts) and/or maintaining a specified amount of contract and policy value (including Contract Values of the Contracts) with us.
The Selling Broker-Dealers to whom we pay additional asset-based compensation may provide preferential treatment with respect to our products (including the Contracts) in their marketing programs. Preferential treatment of our products by a Selling Broker-Dealer may include any or all of the following: (1) enhanced marketing of our products over non-preferred products; (2) increased access to the Selling Broker-Dealer's registered representatives; and (3) payment of higher compensation to registered representatives for selling our products (including the Contracts) than for selling non-preferred products.
In 2015, we paid additional asset-based compensation to the Selling Broker-Dealers Edward Jones, UBS, ProEquities, Essex National Securities, Inc., AIG Advisor Group, LPL Financial, Raymond James, NFP Securities, Investment Professionals, Inc., CUSO Financial Services, Cetera Financial, TD Wealth Management, Community America, M&T Securities, Regions, Allstate and BBVA Compass Investment Solutions, Inc. in connection with the sale of our variable insurance products (including the Contracts). These payments ranged from $1,018 to $12,676,261.
These additional asset-based compensation arrangements are not offered to all Selling Broker-Dealers. These arrangements are designed to specially encourage the sale of our products (and/or our affiliates' products) by such Selling Broker-Dealers. The prospect of receiving, or the receipt of, additional asset-based compensation may provide Selling Broker-Dealers and/or their registered representatives with an incentive to favor sales of our variable insurance products (including the Contracts) over other variable insurance products (or other investments) with respect to which a Selling Broker-Dealer does not receive additional compensation, or receives lower levels of additional compensation. You may wish to take such payment arrangements into account when considering and evaluating any recommendation relating to the Contracts. If you would like information about what your registered representative and the Selling Broker-Dealer for whom he or she works may receive in connection with your purchase of a Contract, please ask your registered representative.
We may also pay to selected Selling Broker-Dealers, including those listed above as well as others, additional compensation in the form of (1) payments for participation in meetings and conferences that include presentations about our products (including the Contracts), and (2) payments to help defray the costs of sales conferences and educational seminars for the Selling Broker-Dealers' registered representatives.
Arrangements with Affiliated Selling Broker-Dealer. In addition to the ordinary commissions and non-cash compensation that we pay to all Selling Broker-Dealers, including ProEquities, Inc., we or our parent company, Protective Life Corporation, pay some of the operating and other expenses of ProEquities, Inc., such as paid-in-capital and certain overhead expenses. Additionally, employees of ProEquities, Inc. may be eligible to participate in various employee benefit plans offered by Protective Life Corporation.
Inquiries
You may make inquiries regarding a Contract by writing to Protective Life at its Administrative Office.
CEFLI
Protective Life Insurance Company is a member of The Compliance & Ethics Forum for Life Insurers ("CEFLI"), and as such may include the CEFLI logo and information about CEFLI membership in its advertisements. Companies that belong to CEFLI subscribe to a set of ethical standards covering the various aspects of sales and service for individually sold life insurance and annuities.
LEGAL PROCEEDINGS
Protective Life and its subsidiaries, like other insurance companies, in the ordinary course of business are involved in some class action and other lawsuits, or alternatively in arbitration. In some class action and other lawsuits involving insurance companies, substantial damages have been sought and material settlement payments have been made. Although the outcome of any litigation or arbitration cannot be predicted, Protective Life believes that at the present time there are no pending or threatened lawsuits that are reasonably likely to have a material adverse impact on IDI's, Protective Life's or the Variable Account's financial position. We are currently being audited on behalf of multiple states' treasury and controllers' offices for compliance with laws and regulations concerning the identification, reporting, and escheatment of unclaimed benefits or abandoned funds. The audits focus on insurance company processes and procedures for identifying unreported death claims, and their use of the Social Security Master Death File to identify deceased insureds and contract owners. In addition, we are the subject of multiple state Insurance Department inquiries and a multistate market conduct examination with a similar focus on the handling of unreported claims and abandoned property. The audits and related examination activity may result in additional payments to beneficiaries, escheatment of funds deemed abandoned, administrative penalties, and changes in our procedures for the identification of unreported claims and handling of escheatable property. We do not believe that any regulatory actions or agreements that result from these examinations will have a material adverse impact on the separate account, on IDI's ability to perform under its principal underwriting agreement, or on our ability to meet our obligations under the contract.
BUSINESS DISRUPTIONS AND CYBER-SECURITY RISKS
We rely heavily on interconnected computer systems and digital data to conduct our variable product business activities. Because our variable product business is highly dependent upon the effective operation of our computer systems and those of our business partners, our business is vulnerable to disruptions from utility outages, and susceptible to operational and information security risks resulting from information systems failure (e.g., hardware and software malfunctions), and cyber-attacks. These risks include, among other things, the theft, misuse, corruption and destruction of data maintained online or digitally, interference with or denial of service, attacks on websites and other operational disruption and unauthorized release of confidential Owner information. Such systems failures and cyber-attacks affecting us, the Funds, intermediaries and other affiliated or third-party service providers may adversely affect us and your Contract Value. For instance, systems failures and cyber-attacks may interfere with our processing of Contract transactions, including the processing of orders from our website or with the Funds, impact our ability to calculate Contract Value, cause the release and possible destruction of confidential customer or business information, impede order processing, subject us and/or our service providers and intermediaries to regulatory fines and financial losses and/or cause reputational damage. Cyber security risks may also impact the issuers of securities in which the Funds invest, which may cause the Funds underlying your Contract to lose value. There can be no assurance that we or the Funds or our service providers will avoid losses affecting your Contract due to cyber-attacks or information security breaches in the future.
VOTING RIGHTS
In accordance with its view of applicable law, Protective Life will vote the Fund shares held in the Variable Account at special shareholder meetings of the Funds in accordance with instructions received from persons having voting interests in the corresponding Sub-Accounts. If, however, the 1940 Act or any regulation thereunder should be amended, or if the present interpretation thereof should change, or Protective Life determines that it is allowed to vote such shares in its own right, it may elect to do so.
The number of votes available to an Owner will be calculated separately for each Sub-Account of the Variable Account, and may include fractional votes. The number of votes attributable to a Sub-Account will be determined by applying an Owner's percentage interest, if any, in a particular Sub-Account to the total number of votes attributable to that Sub-Account. An Owner holds a voting interest in each Sub-Account to which that Owner has allocated Accumulation Units or Annuity Units. Before the Annuity Date, the Owner's percentage interest, if any, will be percentage of the dollar value of Accumulation Units allocated for his or her Contract to the total dollar value of that Sub-Account. On or after the Annuity Date, the Owner's percentage interest, if any, will be percentage of the dollar value of the liability for future variable income payments to be paid from the Sub-Account to the total dollar value of that Sub-Account. The liability for future payments is calculated on the basis of the mortality assumptions, (if any), the Assumed Investment Return and the Annuity Unit Value of that Sub-Account. Generally, as variable income payments are made to the payee, the liability for future payments decreases as does the number of votes.
The number of votes which are available to the Owner will be determined as of the date coincident with the date established by the Fund for determining shareholders eligible to vote at the relevant meeting of that Fund. Voting instructions will be solicited by written communication prior to such meeting in accordance with procedures established by the Fund.
It is important that each Owner provide voting instructions to Protective Life because shares as to which no timely instructions are received and shares held by Protective Life in a Sub-Account as to which no Owner has a beneficial interest will be voted in proportion to the voting instructions which are received with respect to all Contracts participating in that Sub-Account. As a result, a small number of Owners may control the outcome of a vote. Voting instructions to abstain on any item to be voted upon will be applied to reduce the votes eligible to be cast on that item.
Protective Life will send or make available to each person having a voting interest in a Sub-Account proxy materials, reports, and other material relating to the appropriate Fund.
FINANCIAL STATEMENTS
The audited statement of assets and liabilities of the Protective Variable Annuity Separate Account as of December 31, 2015 and the related statement of operations for the year then ended and the statements of changes in net assets for the years ended December 31, 2015 and 2014 as well as the Report of Independent Registered Public Accounting Firm are contained in the Statement of Additional Information.
The audited consolidated balance sheets for Protective Life as of December 31, 2015 and 2014 and the related consolidated statements of income, share-owner's equity, and cash flows for the periods from January 1, 2015 to January 31, 2015 and February 1, 2015 to December 31, 2015 and for the two years in the period ended December 31, 2014 and the related financial statement schedules as well as the Report of Independent Registered Public Accounting Firm are contained in the Statement of Additional Information.
STATEMENT OF ADDITIONAL INFORMATION
Table of Contents
| Page | |
| SAFEKEEPING OF ACCOUNT ASSETS | 1 |
| STATE REGULATION | 1 |
| RECORDS AND REPORTS | 1 |
| LEGAL MATTERS | 1 |
| EXPERTS | 1 |
| OTHER INFORMATION | 2 |
| FINANCIAL STATEMENTS | 2 |
APPENDIX A
RETURN OF PURCHASE PAYMENT DEATH BENEFIT CALCULATION EXAMPLES
The purpose of the following example is to illustrate the Return of Purchase Payments Death Benefit. The example is based on hypothetical Contract Values and transactions and assumes hypothetical positive and negative investment performance of the Variable Account. The example reflects the deduction of fees and charges. The example is not representative of past or future performance and is not intended to project or predict future investment results. There is, of course, no assurance that the Variable Account will experience positive investment performance. Actual results may be higher or lower.
Assumptions:
|
Transaction
Date |
Transaction
Type |
Hypothetical
Contract Value Before Transaction |
Purchase
Payments |
Net
Withdrawals |
Hypothetical
Contract Value |
Adjusted
Withdrawal Amount |
Return of
Purchase Payments Death Benefit |
| 1/1/14 | Contract Issue | N/A | 100,000 (A) | N/A | 100,000 | — | 100,000 |
| 1/1/15 | Anniversary | 120,000 (B) | — | 120,000 | — | 120,000 | |
| 1/1/16 | Anniversary | 130,000 | — | — | 130,000 | — | 130,000 |
| 4/1/16 | Withdrawal | 125,000 | — | 25,000 (C) | 100,000 (D) | 20,000 (E) | 100,000 (F) |
| 1/1/17 | Anniversary | 103,000 | — | — | 103,000 | — | 103,000 |
| 1/1/18 | Anniversary | 111,000 | — | — | 111,000 | — | 111,000 |
| 10/1/18 | Purchase Payment | 85,000 | 80,000 (G) | — | 165,000 | — | 165,000 |
| 11/30/18 | Withdrawal | 155,000 | — | 5,500 (H) | 149,500 | 5,678 (I) | 154,322 (J) |
| 3/31/19 | Withdrawal | 160,000 | — | 16,000 (K) | 144,000 | 15,432 | 144,000 |
| 7/1/19 | Owner Death | 135,000 (L) | — | — | 135,000 | 138,890 (M) |
(A) Contract is issued with a Purchase Payment of $100,000.
(B) This column shows the Contract Values before any of the noted transactions occur. In this case the Contract Value is $120,000.
(C) A withdrawal of $25,000 (including applicable surrender charges) is made.
(D) $150,000 = $175,000 – $25,000.
(E) The "Adjusted Withdrawal Amount" is used to adjust the Return of Purchase Payments Death Benefit for withdrawals. The adjustment for each withdrawal is the amount that reduces the death benefit at the time of withdrawal in the same proportion that the amount withdrawn (including surrender charges), reduces Contract Value. Assuming the death benefit at the time of withdrawal is $100,000, the adjusted withdrawal amount is $20,000 = $25,000 / $125,000 * 100,000.
(F) The Return of Purchase Payments Death Benefit is greater of Contract Value or aggregate Purchase Payments less an adjustment for each withdrawal amount. $100,000 = the greater of $100,000 or $100,000 less $20,000 respectively.
(G) A Purchase Payment of $80,000 is made on 10/1/2018.
(H) A withdrawal of $5,500 (including applicable surrender charges) is made.
(I) The adjustment for each withdrawal is the amount that reduces the death benefit at the time of withdrawal in the same proportion that the amount withdrawn (including surrender charges) reduces Contract Value. Assuming the death benefit at the time of withdrawal is $155,000, the adjusted withdrawal amount is $5,500 = $5,500 / $155,000 * 155,000.
(J) The Return of Purchase Payments Death Benefit is greater of Contract Value or aggregate Purchase Payments less an adjustment for each withdrawal amount. $154,323 = the greater of $149,500 or $154,323 ($100,000 + $80,000 – $20,000 – $5,677), respectively.
(K) A withdrawal of $16,000 (including applicable surrender charges) is made on 3/31/2019.
(L) The Owner dies on 7/1/2019 and the Contract Value at that time has declined to $135,000.
(M) The actual Return of Purchase Payments Death Benefit is greater of Contract Value or aggregate Purchase Payments less an adjustment for each withdrawal amount. $138,890 = greater of $135,000 or $138,890 ($100,000 + $80,000 – $20,000 – $5,678 – $15,432) respectively.
APPENDIX B
EXAMPLE OF SURRENDER CHARGE CALCULATION
The purpose of the following example is to illustrate the surrender charges. The example is based on hypothetical Contract Values and transactions and assumes hypothetical positive and negative investment performance of the Variable Account. The example is not representative of past or future performance and is not intended to project or predict future investment results. There is, of course, no assurance that the Variable Account will experience positive investment performance. Actual results may be higher or lower.
Within certain time limits, we deduct a surrender charge from your Contract Value when you make a surrender or withdrawal before the Annuity Date or when you fully or partially surrender your Contract for a commuted value while variable income payments under Annuity Option A (payments for a certain period) are being made. We do not apply the surrender charge to the payment of a death benefit or when we apply your Annuity Value to an Annuity Option.
Each Contract Year you may withdraw a specified amount, called the "free withdrawal amount", from your Contract without incurring a surrender charge. During the first Contract Year the free withdrawal amount is equal to 10% of your initial Purchase Payment. In any subsequent Contract Year the free withdrawal amount is equal to the greatest of: (1) the earnings in your Contract as of the prior Contract Anniversary; (2) 10% of your cumulative Purchase Payments as of the prior Contract Anniversary; or (3) 10% of the Contract Value as of the prior Contract Anniversary. For the purpose of determining the free withdrawal amount, earnings equal the Contract Value minus the Purchase Payments not previously assessed with a surrender charge, both measured as of the Contract Anniversary for which values are being determined. Withdrawals in excess of the free withdrawal amount in any Contract Year may be subject to surrender charges.
Surrender charges are applied to Contract Value surrendered according to the table below:
|
Number of Full Years Elapsed
Between the Date Purchase Payment was Accepted and the Date of Surrender |
Surrender
Charge Percentage |
| 0 | 7.0% |
| 1 | 6.0% |
| 2 | 6.0% |
| 3 | 5.0% |
| 4 | 4.0% |
| 5 | 3.0% |
| 6 | 2.0% |
| 7+ | 0% |
Assume an initial Purchase Payment of $50,000 is made on the Issue Date (1/1/2001), followed by subsequent Purchase Payments of $50,000 (paid 5/1/2002) and $50,000 (paid 8/1/2003). On the second Contract Anniversary (1/1/2003), assume the Contract Value equals $130,000.
A partial withdrawal request for $45,000 is received on 10/31/2003.
On the third Contract Anniversary (1/1/2004), assume the Contract Value equals $125,000. Assume that a full surrender is received on 12/17/2004 when the Contract Value equals $165,000. First note that surrender charges can never exceed 9% of aggregate Purchase Payments, which in this case is $13,500.
The following table outlines the steps we take to determine the surrender charge for the $45,000 withdrawal and for the $165,000 full surrender:
| Step | $45,000 Withdrawal | $165,000 Full Surrender |
(i) Determination of free withdrawal amount – greatest of
|
Greatest of:
Greatest value is (2), or $15,000 |
Greatest of:
Greatest value is (2), or $15,000 |
|
(ii) Amount subject to surrender charge =
Requested amount less amount from step (i) |
$45,000 – $15,000 = $30,000 |
$165,000 – $15,000 = $150,000 |
|
(iii) Applicable surrender charge percentage based on the number of full years that have passed
NOTE: Withdrawals come from earliest Purchase Payment first (FIFO) |
Surrender charge = 6% |
Surrender charge = 5%
Surrender charge = 6%
Surrender charge = 6%
|
|
(iv) Surrender charge = amount(s) from
step (ii) multiplied by amount(s) from step (iii) |
$30,000 * 6% = $1,800 |
$25,000 * 5% = $1,250 $62,500 * 6% = $3,750 $62,500 * 6% = $3,750 $1,250 + $3,750 + $3,750 = $8,750 |
(A) For the purposes of this illustration, "Net Purchase Payments" means the total Purchase Payments less total withdrawals.
APPENDIX C
EXPLANATION OF THE VARIABLE INCOME PAYMENT CALCULATION
The purpose of the following example is to illustrate variable income payments under the Contract. The example is based on hypothetical Annuity Values and transactions and assumes hypothetical positive and negative investment performance of the Variable Account. The example is not representative of past or future performance and is not intended to project or predict future investment results. There is, of course, no assurance that the Variable Account will experience positive investment performance. Actual results may be higher or lower.
Assuming an Annuity Value of $100,000 on the Annuity Date and annual variable income payments selected under Option A with a 5 year certain period, the dollar amount of the payment determined, but not paid, on the Annuity Date is calculated using an interest assumption of 5%, as shown below.
There are 5 annual payments scheduled. Assuming an interest rate of 5%, the applied Annuity Value is then assumed to have a balance of $0 after the last payment is made at the end of the 5th year. The amount of the payment determined on the Annuity Date is the amount necessary to force this balance to $0.
| Date |
Interest
Earned During Year at 5% |
Annuity
Value Before Payment |
Payment
Made |
Annuity
Value After Payment |
| Annuity Date | $100,000.00 | $0.00 | $100,000.00 | |
| End of 1st year | $5,000.00 | $105,000.00 | $23,097.48 | $81,902.52 |
| End of 2nd year | $4,095.13 | $85,997.65 | $23,097.48 | $62,900.17 |
| End of 3rd year | $3,145.01 | $66,045.17 | $23,097.48 | $42,947.69 |
| End of 4th year | $2,147.38 | $45,095.08 | $23,097.48 | $21,997.60 |
| End of 5th year | $1,099.88 | $23,097.48 | $23,097.48 | $0.00 |
Assuming an interest rate of 5%, a payment of $23,097.48 is determined, but not paid, on the Annuity Date.
The actual variable income payment made at the end of the 1st year will equal $23,097.48 only if the net investment return during the 1st year equals 5%. If the net investment return exceeds 5%, then the 1st payment will exceed $23,097.48. If the net investment return is less than 5%, then the 1st payment will be less than $23,097.48.
Subsequent variable payments will vary based on the net investment return during the year in which the payment is scheduled to be made. A payment will equal the payment made at the end of the prior year only if the net investment return equals 5%. If the net investment return exceeds 5%, then the payment will exceed the prior payment. If the net investment return is less than 5%, then the payment will be less than the prior payment.
Explanation Of The Commuted Value Calculation
A Contract may be fully or partially surrendered for a commuted value while variable income payments under Annuity Option A are being made. (See "Annuity Options.") If the Contract is surrendered, the amount payable will be the commuted value of future payments at the assumed interest rate of 5%, which will be equal to the values shown in the column titled "Annuity Value after Payment," above. If the Contract is surrendered while variable income payments are being made under Annuity Option A within 7 years, the amount payable will be reduced by any applicable surrender charge. (See "Annuity Income Payments, Variable Income Payments .")
APPENDIX D
CONDENSED FINANCIAL INFORMATION
Sub-Accounts
The date of inception of each of the Sub-Accounts available in the Contract as follows:
| March 14, 1994 — |
Oppenheimer Government Money Fund/VA
|
| October 2, 2000 — |
Invesco V.I. Mid Cap Growth II
|
| May 1, 2002 — |
Lord Abbett Mid-Cap Stock, Value Class
Lord Abbett Bond-Debenture, Value Class |
| June 2, 2003 — |
Lord Abbett Growth Opportunities, Value Class
Lord Abbett Calibrated Dividend Growth, Value Class MFS ® Growth SS MFS ® Research SS MFS ® Investors Trust SS MFS ® VIT II Massachusetts Investors Growth Stock Portfolio SS (A) MFS ® Total Return SS MFS ® New Discovery SS MFS ® Utilities SS Oppenheimer Capital Appreciation SS Oppenheimer Main Street SS Oppenheimer Global Strategic Income SS Oppenheimer Global SS Invesco V.I. Comstock II Invesco V.I. Growth and Income II |
| December 19, 2003 — |
Invesco V.I. Government Securities II
Invesco V.I. Equity and Income II |
| May 1, 2006 — |
Fidelity VIP Mid Cap-SC2
Fidelity VIP Contrafund ® -SC2 Fidelity VIP Investment Grade Bond-SC2 Fidelity VIP Index 500-SC2 Franklin Income VIP-C2 Franklin Rising Dividends VIP-C2 Franklin Small-Mid Cap Growth VIP-C2 Franklin Flex Cap Growth VIP-C2 Franklin Mutual Shares VIP-C2 Templeton Foreign VIP-C2 Templeton Growth VIP-C2 |
| May 1, 2007 — |
Franklin U.S. Government Securities VIP-C2
Templeton Global Bond VIP-C2 |
| May 1, 2008 — |
Goldman Sachs Strategic Growth, Service Class
Goldman Sachs Strategic International Equity, Service Class Lord Abbett Classic Stock, Value Class |
| November 2, 2009 — |
Franklin Small Cap Value VIP-C2
Goldman Sachs Growth Opportunities, Service Class ClearBridge Variable Mid Cap, Class II ClearBridge Variable Small Cap Growth, Class II Lord Abbett Fundamental Equity, Value Class MFS ® Total Return Bond SS MFS ® Value SS PIMCO Long-Term US Government, Advisor Class PIMCO Low Duration, Advisor Class PIMCO Real Return, Advisor Class PIMCO Short-Term, Advisor Class PIMCO Total Return, Advisor Class Royce Capital Micro-Cap, Service Class Royce Capital Small-Cap, Service Class Invesco V.I. American Value II Invesco V.I. Balanced Risk Allocation II |
| May 1, 2010 — |
Goldman Sachs Mid Cap Value, Service Class
|
| May 1, 2012 — |
Invesco V.I. Global Real Estate II
Invesco V.I. International Growth II Invesco V.I. Small Cap Equity II QS Legg Mason Dynamic Multi-Strategy VIT, Class II MFS ® VIT II Emerging Markets Equity Portfolio SS MFS ® VIT II International Value Portfolio SS PIMCO All Asset, Advisor Class Templeton Developing Markets VIP-C2 |
| May 1, 2013 — |
Goldman Sachs Global Trends Allocation, Service Class
PIMCO Global Diversified Allocation, Advisor Class |
| November 1, 2013 — |
Guggenheim Floating Rate Strategies (Series F)
Guggenheim Macro Opportunities (Series M) Guggenheim Multi-Hedge Strategies Guggenheim Global Managed Futures Strategy Guggenheim Long Short Equity Rydex Nova Rydex Inverse S&P 500 Strategy Rydex Inverse Government Long Bond Strategy Rydex Commodities Strategy |
(A) MFS Investors Growth Stock Series merged into MFS Massachusetts Investors Growth Stock Portfolio, a series of MFS Variable Insurance Trust II in March, 2015.
Accumulation Units
The following table shows, for each available Sub-Account, Accumulation Unit values and outstanding Accumulation Units for the class of Accumulation Units available in the Contract as of December 31 of each year listed. We offer other variable annuity contracts with classes of Accumulation Units in each available Sub-Account that have different mortality and expense risk charges and administration charges than the classes of Accumulation Units offered in the Contract. Only the classes of Accumulation Units available in the Contract are shown in the following table. For charges associated with these classes of Accumulation Units, see "Fees and Expenses, Periodic Charges," on page 4 of this prospectus.
You should read the information in the following table in conjunction with the Variable Account's financial statements and the related notes in the Statement of Additional Information.
The following table does not include Sub-Accounts that were not in operation as of December 31, 2015.
|
Accumulation
Unit Values |
Accumulation
Units Outstanding |
||
|
ALL ACCUMULATION UNIT
VALUES ARE ROUNDED TO THE NEAREST WHOLE CENT |
ALL ACCUMULATION
UNITS ARE ROUNDED TO THE NEAREST UNIT |
||
| Sub Account |
Year
Ended |
Investors Series VA | Investors Series VA |
| ClearBridge Mid Cap Core - Class II | 2015 | $18.25 | 36,122 |
| 2014 | $18.08 | 48,393 | |
| 2013 | $16.94 | 754 | |
| 2012 | $12.48 | — | |
| 2011 | $10.72 | — | |
| 2010 | $11.30 | — | |
| ClearBridge Small Cap Growth - Class II | 2015 | $19.17 | 11,085 |
| 2014 | $20.29 | 46,059 | |
| 2013 | $19.75 | 222 | |
| 2012 | $13.61 | — | |
| 2011 | $11.55 | — | |
| 2010 | $11.55 | — | |
| Fidelity VIP Contrafund ® - Service Class 2 | 2015 | $16.97 | 234,899 |
| 2014 | $17.07 | 362,683 | |
| 2013 | $15.44 | 15,314 | |
| 2012 | $11.91 | 10,682 | |
| 2011 | $10.36 | 12,223 | |
| 2010 | $10.76 | 15,689 | |
| 2009 | $9.30 | 18,675 | |
| 2008 | $6.93 | 17,817 | |
| 2007 | $12.22 | 8,632 | |
| 2006 | $10.52 | 1,762 | |
| Fidelity VIP Index 500 - Service Class 2 | 2015 | $17.19 | 8,089,261 |
| 2014 | $17.18 | 3,190,669 | |
| 2013 | $15.31 | 5,727 | |
| 2012 | $11.73 | — | |
| 2011 | $10.24 | — | |
| 2010 | $10.17 | — | |
| 2009 | $8.95 | — | |
| 2008 | $7.16 | — | |
| 2007 | $11.51 | — | |
| 2006 | $11.05 | — | |
| Fidelity VIP Investment Grade Bond - Service Class 2 | 2015 | $13.81 | 464,982 |
| 2014 | $14.07 | 59,190 | |
| 2013 | $13.46 | 9,291 | |
| 2012 | $13.88 | 8,539 | |
| 2011 | $13.28 | 7,933 | |
| 2010 | $12.53 | 7,722 | |
| 2009 | $11.77 | 3,776 | |
| 2008 | $10.29 | 2,243 | |
| 2007 | $10.77 | 2,300 | |
| 2006 | $10.45 | 3,506 | |
| Fidelity VIP Mid-Cap - Service Class 2 | 2015 | $16.86 | 105,234 |
| 2014 | $17.31 | 340,156 | |
| 2013 | $16.49 | 9,039 | |
| 2012 | $12.26 | 9,239 | |
| 2011 | $10.81 | 7,796 | |
| 2010 | $12.25 | 14,803 | |
| 2009 | $9.62 | 10,517 | |
| 2008 | $6.95 | 9,148 | |
| 2007 | $11.63 | 2,802 | |
| 2006 | $10.19 | 427 | |
| Franklin Templeton - Franklin Flex Cap Growth VIP - Class 2 | 2015 | $16.53 | 22,940 |
| 2014 | $16.00 | 14,776 | |
| 2013 | $15.23 | 1,477 | |
| 2012 | $11.19 | 1,614 | |
| 2011 | $10.35 | 1,766 | |
| 2010 | $10.98 | 200 | |
| 2009 | $9.54 | 199 | |
| 2008 | $7.25 | — | |
| 2007 | $11.32 | — | |
| 2006 | $10.00 | — | |
| Franklin Templeton - Franklin Income VIP - Class 2 | 2015 | $14.72 | 75,362 |
| 2014 | $16.00 | 80,784 | |
| 2013 | $15.45 | 38,764 | |
| 2012 | $13.70 | 12,956 | |
| 2011 | $12.28 | 14,024 | |
| 2010 | $12.12 | 25,175 | |
| 2009 | $10.86 | 38,888 | |
| 2008 | $8.09 | 12,708 | |
| 2007 | $11.62 | 17,274 | |
| 2006 | $11.31 | 4,716 | |
| Franklin Templeton - Franklin Mutual Shares VIP - Class 2 | 2015 | $13.67 | 61,091 |
| 2014 | $14.52 | 257,546 | |
| 2013 | $13.69 | 27,213 | |
| 2012 | $10.78 | 27,473 | |
| 2011 | $9.53 | 24,741 | |
| 2010 | $9.73 | 26,705 | |
| 2009 | $8.84 | 29,293 | |
| 2008 | $7.08 | 18,776 | |
| 2007 | $11.38 | 19,739 | |
| 2006 | $11.11 | 5,532 | |
| Franklin Templeton - Franklin Rising Dividends VIP - Class 2 | 2015 | $16.26 | 101,321 |
| 2014 | $17.05 | 266,564 | |
| 2013 | $15.84 | 15,751 | |
| 2012 | $12.34 | 11,884 | |
| 2011 | $11.13 | 9,150 | |
| 2010 | $10.61 | 6,194 | |
| 2009 | $8.88 | 6,234 | |
| 2008 | $7.64 | 1,683 | |
| 2007 | $10.59 | 16,978 | |
| 2006 | $10.99 | — | |
| Franklin Templeton - Franklin Small Cap Value VIP - Class 2 | 2015 | $15.42 | 6,952 |
| 2014 | $16.82 | 12,904 | |
| 2013 | $16.90 | 1,185 | |
| 2012 | $12.53 | 712 | |
| 2011 | $10.69 | 427 | |
| 2010 | $11.22 | 422 | |
| Franklin Templeton - Franklin Small-Mid Cap Growth VIP - Class 2 | 2015 | $16.26 | 7,936 |
| 2014 | $16.87 | 74,639 | |
| 2013 | $15.86 | 5,477 | |
| 2012 | $11.60 | 4,175 | |
| 2011 | $10.57 | 2,065 | |
| 2010 | $11.21 | 86 | |
| 2009 | $8.88 | 3,018 | |
| 2008 | $6.24 | 3,018 | |
| 2007 | $10.97 | 5,332 | |
| 2006 | $9.96 | — | |
| Franklin Templeton - Franklin U.S. Government Securities VIP - Class 2 | 2015 | $12.32 | 344,885 |
| 2014 | $12.39 | 120,099 | |
| 2013 | $12.10 | 19,558 | |
| 2012 | $12.51 | 19,167 | |
| 2011 | $12.40 | 17,287 | |
| 2010 | $11.85 | 15,006 | |
| 2009 | $11.37 | 38,712 | |
| 2008 | $11.14 | 14,541 | |
| 2007 | $10.46 | — | |
| Franklin Templeton - Templeton Developing Markets VIP CL2 | 2015 | $7.11 | 7,283 |
| 2014 | $8.94 | 2,357 | |
| 2013 | $9.85 | 334 | |
| Franklin Templeton - Templeton Foreign VIP - Class 2 | 2015 | $11.39 | 34,722 |
| 2014 | $12.30 | 21,672 | |
| 2013 | $13.98 | 11,603 | |
| 2012 | $11.49 | 13,703 | |
| 2011 | $9.81 | 16,675 | |
| 2010 | $11.09 | 13,680 | |
| 2009 | $10.34 | 26,600 | |
| 2008 | $7.62 | 16,831 | |
| 2007 | $12.91 | 19,766 | |
| 2006 | $11.29 | 1,111 | |
| Franklin Templeton - Templeton Global Bond VIP - Class 2 | 2015 | $16.08 | 769,439 |
| 2014 | $16.98 | 274,103 | |
| 2013 | $16.84 | 12,589 | |
| 2012 | $16.74 | 11,210 | |
| 2011 | $14.69 | 11,776 | |
| 2010 | $14.97 | 11,374 | |
| 2009 | $13.25 | 22,840 | |
| 2008 | $11.27 | 10,424 | |
| 2007 | $10.72 | 4,073 | |
| Franklin Templeton - Templeton Growth VIP - Class 2 | 2015 | $11.65 | 11,221 |
| 2014 | $12.59 | 9,726 | |
| 2013 | $13.08 | 8,699 | |
| 2012 | $10.10 | 9,969 | |
| 2011 | $8.43 | 10,395 | |
| 2010 | $9.15 | 11,529 | |
| 2009 | $8.61 | 10,544 | |
| 2008 | $6.63 | 17,332 | |
| 2007 | $11.61 | 25,619 | |
| 2006 | $11.46 | 11,299 | |
| Goldman Sachs Global Trends Allocation - Service Class | 2015 | $9.87 | 5,321 |
| 2014 | $10.59 | 91 | |
| 2013 | $10.29 | — | |
| Goldman Sachs Growth Opportunities - Service Class | 2015 | $16.80 | 4,220 |
| 2014 | $17.90 | 14,821 | |
| 2013 | $16.27 | 910 | |
| 2012 | $12.44 | 1,030 | |
| 2011 | $10.52 | 2,174 | |
| 2010 | $11.06 | 1,160 | |
| Goldman Sachs MidCap Value - Service Class | 2015 | $10.59 | 22,931 |
| 2014 | $11.82 | 127,521 | |
| 2013 | $10.54 | 2,103 | |
| Goldman Sachs Strategic Growth - Service Class | 2015 | $12.38 | 246,073 |
| 2014 | $12.12 | 100,444 | |
| 2013 | $10.80 | 1,553 | |
| Goldman Sachs Strategic International Equity - Service Class | 2015 | $9.45 | 8,854 |
| 2014 | $9.47 | 3,343 | |
| 2013 | $10.36 | 2,989 | |
| Guggenheim Floating Rate Strategies (Series F) | 2015 | $10.25 | 158,794 |
| 2014 | $10.28 | 53,224 | |
| 2013 | $10.14 | 8,253 | |
| Guggenheim Global Managed Futures Strategy | 2015 | $11.42 | 30,214 |
| 2014 | $11.72 | 14,112 | |
| 2013 | $10.56 | — | |
| Guggenheim Long Short Equity | 2015 | $10.79 | 22,041 |
| 2014 | $10.76 | 4,855 | |
| 2013 | $10.58 | — | |
| Guggenheim Macro Opportunities (Series M) | 2015 | $10.50 | 12,492 |
| 2014 | $10.64 | 377 | |
| 2013 | $10.20 | — | |
| Guggenheim Multi-Hedge Strategies | 2015 | $10.58 | 58,934 |
| 2014 | $10.50 | 17,306 | |
| 2013 | $10.13 | — | |
| Invesco VI American Value II | 2015 | $16.28 | 1,265 |
| 2014 | $18.14 | 56,939 | |
| 2013 | $16.74 | — | |
| 2012 | $12.63 | — | |
| 2011 | $10.89 | — | |
| 2010 | $10.91 | — | |
| Invesco VI Balanced Risk Allocation II | 2015 | $12.72 | 160,407 |
| 2014 | $13.44 | 24,218 | |
| 2013 | $12.84 | — | |
| 2012 | $12.79 | — | |
| 2011 | $11.68 | — | |
| 2010 | $10.66 | — | |
| Invesco VI Comstock II | 2015 | $19.96 | 96,620 |
| 2014 | $21.49 | 126,240 | |
| 2013 | $19.90 | 116,822 | |
| 2012 | $14.82 | 143,757 | |
| 2011 | $12.58 | 179,131 | |
| 2010 | $12.98 | 225,111 | |
| 2009 | $11.34 | 271,068 | |
| 2008 | $8.92 | 343,414 | |
| 2007 | $14.03 | 395,482 | |
| 2006 | $14.51 | 471,959 | |
| Invesco VI Equity and Income II | 2015 | $19.98 | 77,570 |
| 2014 | $20.72 | 126,704 | |
| 2013 | $19.24 | 75,228 | |
| 2012 | $15.56 | 90,045 | |
| 2011 | $13.98 | 110,583 | |
| 2010 | $14.31 | 137,287 | |
| 2009 | $12.90 | 173,902 | |
| 2008 | $10.64 | 225,392 | |
| 2007 | $13.90 | 251,918 | |
| 2006 | $13.59 | 293,591 | |
| Invesco VI Global Real Estate II | 2015 | $10.61 | 14,931 |
| 2014 | $10.91 | 114,398 | |
| 2013 | $9.64 | 340 | |
| Invesco VI Government Securities II | 2015 | $11.41 | 30,520 |
| 2014 | $11.52 | 22,405 | |
| 2013 | $11.64 | 20,342 | |
| 2012 | $11.75 | 22,074 | |
| 2011 | $11.87 | 28,535 | |
| 2010 | $11.87 | 26,604 | |
| 2009 | $11.43 | 40,992 | |
| 2008 | $11.45 | 82,444 | |
| 2007 | $11.39 | 46,714 | |
| 2006 | $10.75 | 42,703 | |
| Invesco VI Growth & Income II | 2015 | $20.85 | 114,289 |
| 2014 | $21.78 | 230,904 | |
| 2013 | $20.01 | 89,025 | |
| 2012 | $15.11 | 105,697 | |
| 2011 | $13.35 | 126,814 | |
| 2010 | $13.79 | 150,048 | |
| 2009 | $12.42 | 167,576 | |
| 2008 | $10.11 | 212,595 | |
| 2007 | $15.06 | 254,828 | |
| 2006 | $14.84 | 280,941 | |
| Invesco VI International Growth II | 2015 | $11.20 | 24,579 |
| 2014 | $11.61 | 22,958 | |
| 2013 | $11.72 | 1,194 | |
| 2012 | $9.97 | 1,876 | |
| 2011 | $8.96 | 1,755 | |
| 2010 | $8.26 | 2,215 | |
| 2009 | $7.60 | 2,110 | |
| 2008 | $5.62 | — | |
| Invesco VI Mid-Cap Growth II | 2015 | $22.74 | 10,825 |
| 2014 | $22.74 | 15,644 | |
| 2013 | $21.32 | 3,418 | |
| 2012 | $15.77 | 2,361 | |
| 2011 | $14.27 | 2,426 | |
| 2010 | $15.90 | 1,876 | |
| 2009 | $12.62 | 13,027 | |
| 2008 | $8.15 | 3,946 | |
| 2007 | $15.49 | 6,438 | |
| 2006 | $13.30 | 5,838 | |
| Invesco VI Small Cap Equity II | 2015 | $10.14 | 7,271 |
| 2014 | $10.86 | 16,339 | |
| 2013 | $10.75 | 2,272 | |
| Lord Abbett Bond-Debenture VC | 2015 | $18.44 | 569,547 |
| 2014 | $18.92 | 264,656 | |
| 2013 | $18.31 | 94,468 | |
| 2012 | $17.10 | 103,519 | |
| 2011 | $15.35 | 135,804 | |
| 2010 | $14.85 | 176,911 | |
| 2009 | $13.36 | 203,724 | |
| 2008 | $10.04 | 237,653 | |
| 2007 | $12.30 | 285,461 | |
| 2006 | $11.70 | 311,395 | |
| Lord Abbett Calibrated Dividend Growth VC | 2015 | $21.73 | 48,317 |
| 2014 | $22.43 | 57,995 | |
| 2013 | $20.31 | 53,737 | |
| 2012 | $16.04 | 62,829 | |
| 2011 | $14.41 | 81,816 | |
| 2010 | $14.52 | 100,032 | |
| 2009 | $12.78 | 110,425 | |
| 2008 | $10.46 | 124,829 | |
| 2007 | $14.32 | 146,865 | |
| 2006 | $14.02 | 159,071 | |
| Lord Abbett Classic Stock VC | 2015 | $14.43 | 23,102 |
| 2014 | $14.71 | 20,409 | |
| 2013 | $13.62 | 6,058 | |
| 2012 | $10.59 | 6,055 | |
| 2011 | $9.30 | 6,233 | |
| 2010 | $10.22 | 6,223 | |
| 2009 | $9.05 | 8,073 | |
| 2008 | $7.28 | — | |
| Lord Abbett Fundamental Equity VC | 2015 | $15.37 | 27,689 |
| 2014 | $16.08 | 117,896 | |
| 2013 | $15.16 | 5,543 | |
| 2012 | $11.28 | 3,523 | |
| 2011 | $10.30 | 3,523 | |
| 2010 | $10.89 | — | |
| Lord Abbett Growth Opportunities VC | 2015 | $23.46 | 17,621 |
| 2014 | $23.07 | 17,996 | |
| 2013 | $21.97 | 12,038 | |
| 2012 | $16.19 | 14,363 | |
| 2011 | $14.33 | 16,201 | |
| 2010 | $16.09 | 28,279 | |
| 2009 | $13.22 | 31,879 | |
| 2008 | $9.18 | 38,263 | |
| 2007 | $15.01 | 49,331 | |
| 2006 | $12.50 | 71,872 | |
| Lord Abbett Mid Cap Stock VC | 2015 | $20.78 | 57,402 |
| 2014 | $21.82 | 96,266 | |
| 2013 | $19.76 | 77,549 | |
| 2012 | $15.31 | 97,639 | |
| 2011 | $13.51 | 127,898 | |
| 2010 | $14.21 | 176,360 | |
| 2009 | $11.44 | 208,534 | |
| 2008 | $9.13 | 244,172 | |
| 2007 | $15.21 | 300,792 | |
| 2006 | $15.27 | 336,936 | |
| MFS Growth - Service Shares | 2015 | $26.61 | 3,913 |
| 2014 | $25.05 | 28,735 | |
| 2013 | $23.28 | 3,831 | |
| 2012 | $17.23 | 3,561 | |
| 2011 | $14.86 | 2,890 | |
| 2010 | $15.10 | 2,949 | |
| 2009 | $13.26 | 2,944 | |
| 2008 | $9.75 | 1,729 | |
| 2007 | $15.77 | 695 | |
| 2006 | $13.18 | 897 | |
| MFS Investors Trust - Service Shares | 2015 | $21.57 | 7,428 |
| 2014 | $21.80 | 51,673 | |
| 2013 | $19.89 | 4,586 | |
| 2012 | $15.25 | 3,846 | |
| 2011 | $12.96 | 2,331 | |
| 2010 | $13.42 | 2,830 | |
| 2009 | $12.22 | 2,924 | |
| 2008 | $9.76 | 5,460 | |
| 2007 | $14.76 | 6,490 | |
| 2006 | $13.55 | 6,581 | |
| MFS New Discovery - Service Shares | 2015 | $21.64 | 6,048 |
| 2014 | $22.34 | 5,484 | |
| 2013 | $24.39 | 3,386 | |
| 2012 | $17.45 | 2,275 | |
| 2011 | $14.58 | 4,454 | |
| 2010 | $16.45 | 5,274 | |
| 2009 | $12.22 | 1,184 | |
| 2008 | $7.58 | — | |
| 2007 | $12.66 | — | |
| 2006 | $12.50 | — | |
| MFS Research - Service Shares | 2015 | $23.22 | 4,058 |
| 2014 | $23.33 | 7,856 | |
| 2013 | $21.44 | 3,054 | |
| 2012 | $16.40 | 3,158 | |
| 2011 | $14.17 | 3,156 | |
| 2010 | $14.42 | 3,585 | |
| 2009 | $12.59 | 3,555 | |
| 2008 | $9.77 | 3,931 | |
| 2007 | $15.48 | 1,682 | |
| 2006 | $13.85 | 4,082 | |
| MFS Total Return - Service Shares | 2015 | $17.46 | 32,024 |
| 2014 | $17.74 | 120,522 | |
| 2013 | $16.55 | 52,276 | |
| 2012 | $14.08 | 65,967 | |
| 2011 | $12.82 | 77,097 | |
| 2010 | $12.75 | 96,456 | |
| 2009 | $11.75 | 120,097 | |
| 2008 | $10.08 | 118,967 | |
| 2007 | $13.10 | 137,329 | |
| 2006 | $12.74 | 213,516 | |
| MFS Utilities - Service Shares | 2015 | $30.79 | 13,069 |
| 2014 | $36.48 | 94,899 | |
| 2013 | $32.76 | 7,930 | |
| 2012 | $27.53 | 6,481 | |
| 2011 | $24.56 | 8,171 | |
| 2010 | $23.29 | 6,924 | |
| 2009 | $20.73 | 10,769 | |
| 2008 | $15.76 | 10,958 | |
| 2007 | $25.60 | 12,276 | |
| 2006 | $20.27 | 13,004 | |
| MFS Value - Service Shares | 2015 | $17.01 | 15,970 |
| 2014 | $17.34 | 140,289 | |
| 2013 | $15.90 | 7,493 | |
| 2012 | $11.84 | 5,474 | |
| 2011 | $10.32 | 5,192 | |
| 2010 | $10.47 | 2,417 | |
| MFS VIT II Emerging Markets Equity SC | 2015 | $7.68 | 1,296 |
| 2014 | $8.92 | 1,581 | |
| 2013 | $9.69 | — | |
| MFS VIT II International Value SC | 2015 | $11.05 | 8,842 |
| 2014 | $10.50 | 48,746 | |
| 2013 | $10.49 | — | |
| MFS VIT II MA Investors Growth Stock - Service Shares | 2015 | $20.88 | 5,532 |
| 2014 | $20.83 | 6,698 | |
| 2013 | $18.93 | 2,762 | |
| 2012 | $14.70 | 2,745 | |
| 2011 | $12.73 | 1,115 | |
| 2010 | $12.81 | 1,418 | |
| 2009 | $11.54 | 1,404 | |
| 2008 | $8.38 | 1,369 | |
| 2007 | $13.43 | 1,478 | |
| 2006 | $12.22 | 1,427 | |
| MFS VIT Total Return Bond - Service Shares | 2015 | $11.68 | 45,357 |
| 2014 | $11.86 | 53,197 | |
| 2013 | $11.35 | 9,281 | |
| 2012 | $11.61 | 12,728 | |
| 2011 | $10.96 | 9,506 | |
| 2010 | $10.39 | 4,067 | |
| OppenheimerFunds Capital Appreciation - Service Shares | 2015 | $18.70 | 139,401 |
| 2014 | $18.29 | 25,547 | |
| 2013 | $16.05 | 6,555 | |
| 2012 | $12.53 | 7,413 | |
| 2011 | $11.12 | 11,339 | |
| 2010 | $11.39 | 16,327 | |
| 2009 | $10.54 | 20,763 | |
| 2008 | $7.38 | 24,004 | |
| 2007 | $13.73 | 22,347 | |
| 2006 | $12.18 | 23,878 | |
| OppenheimerFunds Global Fund - Service Shares | 2015 | $22.51 | 47,668 |
| 2014 | $21.93 | 99,695 | |
| 2013 | $21.70 | 19,839 | |
| 2012 | $17.26 | 20,991 | |
| 2011 | $14.42 | 25,603 | |
| 2010 | $15.92 | 25,831 | |
| 2009 | $13.90 | 33,554 | |
| 2008 | $10.07 | 40,948 | |
| 2007 | $17.05 | 48,022 | |
| 2006 | $16.24 | 61,952 | |
| OppenheimerFunds Global Strategic Income - Service Shares | 2015 | $15.45 | 274,830 |
| 2014 | $16.01 | 110,086 | |
| 2013 | $15.77 | 18,821 | |
| 2012 | $15.99 | 18,129 | |
| 2011 | $14.28 | 25,486 | |
| 2010 | $14.33 | 30,587 | |
| 2009 | $12.61 | 53,222 | |
| 2008 | $10.76 | 39,902 | |
| 2007 | $12.70 | 44,527 | |
| 2006 | $11.91 | 49,446 | |
| OppenheimerFunds Main Street - Service Shares | 2015 | $20.17 | 35,591 |
| 2014 | $19.76 | 9,469 | |
| 2013 | $18.08 | 2,107 | |
| 2012 | $13.90 | 3,352 | |
| 2011 | $12.04 | 4,339 | |
| 2010 | $12.20 | 4,815 | |
| 2009 | $10.64 | 4,747 | |
| 2008 | $8.39 | 7,146 | |
| 2007 | $13.81 | 9,071 | |
| 2006 | $13.38 | 11,610 | |
| OppenheimerFunds Money Fund | 2015 | $10.44 | 26,325,654 |
| 2014 | $10.54 | 1,828,985 | |
| 2013 | $10.65 | 66,782 | |
| 2012 | $10.75 | 38,057 | |
| 2011 | $10.86 | 32,725 | |
| 2010 | $10.97 | 32,701 | |
| 2009 | $11.08 | 56,482 | |
| 2008 | $11.15 | 96,085 | |
| 2007 | $10.96 | 41,317 | |
| 2006 | $10.55 | 4,771 | |
| PIMCO VIT All Asset Advisor | 2015 | $8.89 | 167 |
| 2014 | $9.89 | — | |
| 2013 | $9.95 | — | |
| PIMCO VIT Global Diversified Allocation | 2015 | $10.17 | 15,613 |
| 2014 | $10.87 | — | |
| 2013 | $10.39 | — | |
| PIMCO VIT Long-Term US Government Advisor Class | 2015 | $14.63 | 64,083 |
| 2014 | $15.00 | 36,979 | |
| 2013 | $12.23 | — | |
| 2012 | $14.21 | — | |
| 2011 | $13.75 | — | |
| 2010 | $10.88 | 4,621 | |
| PIMCO VIT Low Duration Advisor Class | 2015 | $10.47 | 149,059 |
| 2014 | $10.55 | 58,121 | |
| 2013 | $10.58 | 1,792 | |
| 2012 | $10.71 | 3,615 | |
| 2011 | $10.23 | 48 | |
| 2010 | $10.23 | 49 | |
| PIMCO VIT Real Return Advisor Class | 2015 | $11.02 | 418,439 |
| 2014 | $11.45 | 186,571 | |
| 2013 | $11.23 | 6,350 | |
| 2012 | $12.51 | 2,104 | |
| 2011 | $11.63 | 6,971 | |
| 2010 | $10.53 | 9,771 | |
| PIMCO VIT Short-Term Advisor Class | 2015 | $10.05 | 124,864 |
| 2014 | $10.05 | 23,562 | |
| 2013 | $10.09 | — | |
| 2012 | $10.14 | 2,857 | |
| 2011 | $9.98 | — | |
| 2010 | $10.04 | — | |
| PIMCO VIT Total Return Advisor Class | 2015 | $11.53 | 904,023 |
| 2014 | $11.61 | 346,599 | |
| 2013 | $11.26 | 21,225 | |
| 2012 | $11.61 | 15,901 | |
| 2011 | $10.71 | 27,418 | |
| 2010 | $10.45 | 7,642 | |
| QS Legg Mason Dynamic Multi-Strategy VIT Portfolio II | 2015 | $10.23 | 54,765 |
| 2014 | $10.92 | 8,964 | |
| 2013 | $10.37 | — | |
| Royce Capital Micro-Cap - Service Class | 2015 | $10.82 | 12,017 |
| 2014 | $12.51 | 4,751 | |
| 2013 | $13.14 | 1,354 | |
| 2012 | $11.00 | 1,062 | |
| 2011 | $10.34 | — | |
| 2010 | $11.90 | — | |
| Royce Capital Small-Cap - Service Class | 2015 | $13.83 | 22,690 |
| 2014 | $15.87 | 155,085 | |
| 2013 | $15.57 | 3,423 | |
| 2012 | $11.70 | 849 | |
| 2011 | $10.53 | 849 | |
| 2010 | $11.03 | — | |
| Rydex Commodities Strategy | 2015 | $4.19 | 1,917 |
| 2014 | $6.40 | 1,340 | |
| 2013 | $9.79 | 675 | |
| Rydex Inverse Government Long Bond | 2015 | $7.45 | 807 |
| 2014 | $7.62 | 841 | |
| 2013 | $10.25 | 642 | |
| Rydex Inverse S&P 500 Strategy | 2015 | $7.37 | — |
| 2014 | $7.79 | — | |
| 2013 | $9.20 | — | |
| Rydex Nova | 2015 | $12.84 | — |
| 2014 | $13.06 | — | |
| 2013 | $11.12 | — |
APPENDIX E
EXAMPLE OF ALLOCATION ADJUSTMENT PROGRAM
The purpose of this example is to demonstrate the operation of the Allocation Adjustment Program. The example is based on hypothetical Contract Values and transactions and assumes hypothetical positive and negative investment performance of the Variable Account. The example is not representative of past or future performance and is not intended to project or predict performance. There is, of course, no assurance that the Variable Account will experience positive investment performance.
Under the Allocation Adjustment, if, on any Monthly Anniversary Date, the Accumulation Unit value of any Sub-Account (other than an Unmonitored Sub-Account) drops below its 12-month Simple Moving Average ("SMA"), the Sub-Account will be temporarily "restricted" from allocations of Purchase Payments and Contract Value and we will transfer all existing Contract Value in the Sub-Account to the Oppenheimer Money Fund/VA Sub-Account.
|
Contract
Month |
Accumulation
Unit Value |
SMA12 (A) |
Is Sub-Account 1
Restricted? (B) |
Hypothetical
Contract Value in Sub-Account 1 (C) |
Hypothetical
Contract Value in Money Fund Sub-Account (D) |
| 12 | 6.17 | 6.16 | 10,000 | ||
| 13 | 6.24 | 6.17 | No (E) | 10,089 | |
| 14 | 5.76 | 6.14 | Yes | — | 9,282 (F) |
| 15 | 5.41 | 6.09 | Yes | 9,286 | |
| 16 | 5.35 | 6.03 | Yes | 9,290 | |
| 17 | 4.53 | 5.87 | Yes | 9,294 | |
| 18 | 3.73 | 5.62 | Yes | 9,298 | |
| 19 | 2.94 | 5.33 | Yes | 9,302 | |
| 20 | 3.33 | 5.08 | Yes | 9,305 | |
| 21 | 3.15 | 4.85 | Yes | 9,309 | |
| 22 | 2.98 | 4.62 | Yes | 9,313 | |
| 23 | 3.29 | 4.41 | Yes | 9,317 | |
| 24 | 3.81 | 4.21 | Yes | 9,321 | |
| 25 | 4.19 | 4.04 (G) | No (H) | 9,325 |
(A) SMA12 is the sum of the 12 most recent Monthly Anniversary Dates Accumulation Unit values divided by 12.
(B) Once we calculate a Sub-Account's SMA on a Monthly Anniversary Date, we then compare that SMA to the Sub-Account's current Accumulation Unit value on that Monthly Anniversary Date. If the Sub-Account's current Accumulation Unit value is equal to or less than the Sub-Account's SMA over the most recent 12 Monthly Anniversary Dates, then we will consider the Sub-Account to be restricted.
(C) $10,000 of the initial Purchase Payment is allocated to the hypothetical Sub-Account 1.
(D) If a Sub-Account becomes restricted, as described in (B), we transfer the Contract Value in that Sub-Account to the Money Fund/VA Sub-Account, until the Sub-Account is no longer restricted.
(E) At the end of the first contract month after the first Contract Anniversary 1, the Accumulation Unit value of Sub-Account 1 (6.24) is greater than SMA12 (6.17). Therefore, Sub-Account 1 is not restricted.
(F) At the end of contract month 14, the Accumulation Unit value of Sub-Account 1 (5.76) is less than or equal to SMA12 (6.14). Therefore, Sub-Account 1 is restricted and the entire allocation in Sub-Account 1 ($9,282) is transferred to the Money Sub-Account.
(G) Calculation of SMA12 (4.19 + 3.81 + 3.29 + 2.98 + 3.15 + 3.33 + 2.94 + 3.73 + 4.53 + 5.35 + 5.41 + 5.76)/12 = 4.04.
(H) At the end of contract month 25, the Accumulation Unit value of Sub-Account 1 (4.19) is greater than SMA12 (4.04). Therefore, Sub-Account 1 is no longer restricted and the entire allocation in the Money Fund/VA Sub-Account is re-allocated back to Sub-Account 1.
Please tear off, complete and return this form to order a free Statement of Additional Information for the Contracts offered under the prospectus. Address the form to Protective Life's Life and Annuity Division, customer service center at the address shown on the cover.
Please send me a free copy of the Statement of Additional Information for the Protective Variable Annuity Investors Series.
Name:
Address
City, State, Zip
Daytime Telephone Number
PROTECTIVE LIFE INSURANCE COMPANY
P.O. Box 10648
Birmingham, Alabama 35202-0648
Telephone: 1-800-456-6330
STATEMENT OF ADDITIONAL INFORMATION
PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
A FLEXIBLE PREMIUM
DEFERRED VARIABLE AND FIXED ANNUITY CONTRACT
This Statement of Additional Information contains information in addition to the information described in the Prospectus for the individual flexible premium deferred variable and fixed annuity contract (the "Contract") offered by Protective Life Insurance Company. This Statement of Additional Information is not a Prospectus. It should be read only in conjunction with the Prospectuses for the Contract and the Funds. The Prospectus for the Contract is dated the same as this Statement of Additional Information. You may obtain a copy of the Prospectus by writing or calling us at our address or phone number shown above.
THE DATE OF THIS STATEMENT OF ADDITIONAL INFORMATION IS May 1, 2016.
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
|
Page |
|||||||
|
SAFEKEEPING OF ACCOUNT ASSETS |
1 |
||||||
|
STATE REGULATION |
1 |
||||||
|
RECORDS AND REPORTS |
1 |
||||||
|
LEGAL MATTERS |
1 |
||||||
|
EXPERTS |
1 |
||||||
|
OTHER INFORMATION |
2 |
||||||
|
FINANCIAL STATEMENTS |
2 |
||||||
SAFEKEEPING OF ACCOUNT ASSETS
Title to the assets of the Variable Account is held by Protective Life. The assets are kept physically segregated and held separate and apart from the Company's General Account assets and from the assets in any other separate account.
Records are maintained of all purchases and redemptions of Fund shares held by each of the Sub-Accounts.
The officers and employees of Protective Life are covered by an insurance company blanket bond issued in the amount of $20 million dollars. The bond insures against dishonest and fraudulent acts of officers and employees.
STATE REGULATION
Protective Life is subject to regulation and supervision by the Department of Insurance of the State of Tennessee which periodically examines its affairs. It is also subject to the insurance laws and regulations of all jurisdictions where it is authorized to do business. Where required, a copy of the Contract form has been filed with, and, if applicable, approved by, insurance officials in each jurisdiction where the Contracts are sold. Protective Life is required to submit annual statements of its operations, including financial statements, to the insurance departments of the various jurisdictions in which it does business for the purposes of determining solvency and compliance with local insurance laws and regulations.
RECORDS AND REPORTS
Protective Life will maintain all records and accounts relating to the Variable Account. As presently required by the 1940 Act and regulations promulgated thereunder, reports containing such information as may be required under the Act or by any other applicable law or regulation will be sent to Owner(s) periodically at the last known address.
LEGAL MATTERS
Sutherland Asbill & Brennan LLP of Washington, D. C. has provided advice on certain matters relating to the federal securities laws.
EXPERTS
The statement of assets and liabilities of Protective Variable Annuity Separate Account as of December 31, 2015 and the related statement of operations for the year then ended and the statement of changes in net assets for the years ended December 31, 2015 and 2014 included in this SAI have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The consolidated financial statements of Protective Life Insurance Company as of December 31, 2015, and 2014 and for the periods from January 1, 2015 to January 31, 2015 and February 1, 2015 to December 31, 2015 and for each of the two years in the period ended December 31, 2014 included in this SAI have been so included in reliance on the reports (which contain an explanatory paragraph related to the purchase of Protective Life's parent company on February 1, 2015 by The Dai-ichi Life Insurance Company, Limited and the election to apply "pushdown" accounting as of the acquisition date) of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The principal business address of PricewaterhouseCoopers LLP is 569 Brookwood Village Suite 851, Birmingham, Alabama 35209.
1
OTHER INFORMATION
A registration statement has been filed with the SEC under the Securities Act of 1933, as amended, with respect to the Contracts discussed in this Statement of Additional Information. Not all the information set forth in the registration statement, amendments and exhibits thereto has been included in this Statement of Additional Information. Statements contained in this Statement of Additional Information concerning the content of the Contracts and other legal instruments are intended to be summaries. For a complete statement of the terms of these documents, reference should be made to the instruments filed with the SEC at 100 F Street, N.E., Washington, D.C. 20549.
FINANCIAL STATEMENTS
The audited statement of assets and liabilities of the Protective Variable Annuity Separate Account as of December 31, 2015 and the related statement of operations for the year then ended and the changes in net assets for the years ended December 31, 2015 and 2014 as well as the Report of Independent Registered Public Accounting Firm are contained herein.
The audited consolidated balance sheets for Protective Life as of December 31, 2015 and 2014 and the related consolidated statements of income, share-owner's equity, and cash flows for the periods from January 1, 2015 to January 31, 2015 and February 1, 2015 to December 31, 2015 and for each of the two years in the period ended December 31, 2014 as well as the Report of Independent Registered Public Accounting Firm are contained herein. Protective Life's Financial Statements should be considered only as bearing on its ability to meet its obligations under the Contracts. They should not be considered as bearing on the investment performance of the assets held in the Protective Variable Annuity Separate Account.
Financial Statements follow this page.
2
INDEX TO FINANCIAL STATEMENTS
|
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT |
|||||||
| Report of Independent Registered Public Accounting Firm |
FSA-2 |
||||||
| Statement of Assets and Liabilities as of December 31, 2015 |
FSA-3 |
||||||
| Statement of Operations for the year ended December 31, 2015 |
FSA-16 |
||||||
| Statement of Changes in Net Assets for the year ended December 31, 2015 |
FSA-29 |
||||||
| Statement of Changes in Net Assets for the year ended December 31, 2014 |
FSA-42 |
||||||
| Notes to Financial Statements |
FSA-53 |
||||||
|
PROTECTIVE LIFE INSURANCE COMPANY |
|||||||
|
Report of Independent Registered Public Accounting Firm |
F-1 |
||||||
|
Consolidated Statements of Income for the periods from February 1, 2015 to December 31,
2015 and January 1, 2015 to January 31, 2015 and the years ended December 31, 2014, and 2013 |
F-3 |
||||||
|
Consolidated Statements of Comprehensive Income for the periods from February 1, 2015 to
December 31, 2015 and January 1, 2015 to January 31, 2015 and the years ended December 31, 2014 and 2013 |
F-4 |
||||||
|
Consolidated Balance Sheets as of December 31, 2015 and 2014 |
F-5 |
||||||
|
Consolidated Statements of Share-Owner's Equity for the periods from February 1, 2015 to
December 31, 2015 and January 1, 2015 to January 31, 2015 and the years ended December 31, 2014, and 2013 |
F-6 |
||||||
|
Consolidated Statements of Cash Flows for the periods from February 1, 2015 to
December 31, 2015 and January 1, 2015 to January 31, 2015 and the years ended December 31, 2014, and 2013 |
F-7 |
||||||
|
Notes to Consolidated Financial Statements |
F-8 |
||||||
|
Financial Statement Schedules: |
|||||||
|
Schedule III — Supplementary Insurance Information |
S-1 |
||||||
|
Schedule IV — Reinsurance |
S-3 |
||||||
|
Schedule V — Valuation Accounts |
S-4 |
||||||
All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.
FSA-1
Report of Independent Registered Public Accounting Firm
To the Contract Owners of the Protective Variable Annuity Separate Account
and the Board of Directors of Protective Life Insurance Company:
In our opinion, the accompanying statement of assets and liabilities and the related statements of operations and of changes in net assets present fairly, in all material respects, the financial position of each of the subaccounts listed in Note 1 of the Protective Variable Annuity Separate Account (the "Separate Account") at December 31, 2015, and the results of each of their operations for the year then ended and the changes in each of their net assets for each of the two years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the management of Protective Life Insurance Company. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments at December 31, 2015 by correspondence with the transfer agents of the investee mutual funds, provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
April 25, 2016
FSA-2
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
American Funds Insurance Series |
|||||||||||||||||||||||||||||||||||||||||||
|
American
Funds Asset Allocation Class 2 |
American
Funds Asset Allocation Class 4 |
American
Funds Blue Chip Income & Growth Class 2 |
American
Funds Blue Chip Income & Growth Class 4 |
American
Funds Global Growth Class 2 |
American
Funds Global Growth Class 4 |
American
Funds Global Small Capitalization Class 2 |
American
Funds Global Small Capitalization Class 4 |
American
Funds Growth Class 2 |
American
Funds Growth Class 4 |
||||||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair
value |
$ |
63,311 |
$ |
708 |
$ |
2,320 |
$ |
218 |
$ |
9,654 |
$ |
1,593 |
$ |
123 |
$ |
9 |
$ |
1,669 |
$ |
211 |
|||||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
25 |
— |
9 |
— |
38 |
17 |
— |
— |
8 |
— |
|||||||||||||||||||||||||||||||||
|
Total Assets |
63,336 |
708 |
2,329 |
218 |
9,692 |
1,610 |
123 |
9 |
1,677 |
211 |
|||||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
25 |
— |
9 |
— |
38 |
17 |
— |
— |
8 |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
63,311 |
$ |
708 |
$ |
2,320 |
$ |
218 |
$ |
9,654 |
$ |
1,593 |
$ |
123 |
$ |
9 |
$ |
1,669 |
$ |
211 |
|||||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
63,311 |
708 |
2,320 |
218 |
9,654 |
1,593 |
123 |
9 |
1,669 |
211 |
|||||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
63,311 |
$ |
708 |
$ |
2,320 |
$ |
218 |
$ |
9,654 |
$ |
1,593 |
$ |
123 |
$ |
9 |
$ |
1,669 |
$ |
211 |
|||||||||||||||||||||||
|
Units Outstanding |
3,745 |
72 |
247 |
23 |
1,000 |
166 |
14 |
1 |
168 |
21 |
|||||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
3,096 |
35 |
185 |
17 |
369 |
61 |
5 |
— |
25 |
3 |
|||||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
20.45 |
$ |
20.40 |
$ |
12.51 |
$ |
12.53 |
$ |
26.19 |
$ |
26.16 |
$ |
23.90 |
$ |
24.11 |
$ |
67.69 |
$ |
67.26 |
|||||||||||||||||||||||
|
Investment in Portfolio shares,
at Cost |
$ |
48,892 |
$ |
717 |
$ |
2,352 |
$ |
221 |
$ |
9,634 |
$ |
1,598 |
$ |
125 |
$ |
9 |
$ |
1,660 |
$ |
207 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-3
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
American Funds Insurance Series |
Calvert
Variable Series, Inc. |
Fidelity Variable Insurance Products |
|||||||||||||||||||||||||||||||||||||
|
American
Funds International Class 2 |
American
Funds International Class 4 |
American
Funds New World Class 2 |
American
Funds New World Class 4 |
Calvert
VP SRI Balanced |
Fidelity
Contrafund Portfolio SC2 |
Fidelity
Equity Income SC2 |
Fidelity
Freedom Fund - 2015 Maturity SC2 |
Fidelity
Freedom Fund - 2020 Maturity SC2 |
|||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair value |
$ |
420 |
$ |
4 |
$ |
261 |
$ |
— |
$ |
1,351 |
$ |
184,377 |
$ |
7,771 |
$ |
1,047 |
$ |
2,097 |
|||||||||||||||||||||
|
Receivable from Protective Life Insurance Company |
— |
— |
— |
— |
— |
2,347 |
— |
— |
— |
||||||||||||||||||||||||||||||
|
Total Assets |
420 |
4 |
261 |
— |
1,351 |
186,724 |
7,771 |
1,047 |
2,097 |
||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance Company |
— |
— |
— |
— |
— |
2,347 |
— |
— |
— |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
420 |
$ |
4 |
$ |
261 |
$ |
— |
$ |
1,351 |
$ |
184,377 |
$ |
7,771 |
$ |
1,047 |
$ |
2,097 |
|||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
420 |
4 |
261 |
— |
1,351 |
184,365 |
7,771 |
1,047 |
2,097 |
||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
— |
— |
— |
12 |
— |
— |
— |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
420 |
$ |
4 |
$ |
261 |
$ |
— |
$ |
1,351 |
$ |
184,377 |
$ |
7,771 |
$ |
1,047 |
$ |
2,097 |
|||||||||||||||||||||
|
Units Outstanding |
48 |
— |
29 |
— |
71 |
9,961 |
448 |
71 |
133 |
||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
23 |
— |
14 |
— |
677 |
5,544 |
388 |
86 |
169 |
||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
18.02 |
$ |
17.93 |
$ |
18.71 |
$ |
18.69 |
$ |
2.00 |
$ |
33.26 |
$ |
20.04 |
$ |
12.19 |
$ |
12.38 |
|||||||||||||||||||||
|
Investment in Portfolio shares, at Cost |
$ |
432 |
$ |
4 |
$ |
262 |
$ |
— |
$ |
1,422 |
$ |
145,211 |
$ |
7,567 |
$ |
931 |
$ |
1,745 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-4
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Fidelity Variable Insurance Products |
Franklin Templeton Variable Insurance Products Trust |
||||||||||||||||||||||||||||||||||||||
|
Fidelity
Growth Portfolio SC2 |
Fidelity
Index 500 Portfolio SC2 |
Fidelity
Investment Grade Bonds SC2 |
Fidelity
Mid Cap SC2 |
Franklin
Flex Cap Growth VIP CL 2 |
Franklin
Income VIP CL 2 |
Franklin
Mutual Shares VIP CL 2 |
Franklin
Rising Dividend VIP CL 2 |
Franklin
Small Cap Value VIP CL 2 |
|||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair value |
$ |
2,962 |
$ |
231,506 |
$ |
195,844 |
$ |
170,667 |
$ |
18,971 |
$ |
150,656 |
$ |
484,635 |
$ |
228,798 |
$ |
40,092 |
|||||||||||||||||||||
|
Receivable from Protective Life Insurance Company |
— |
4,649 |
605 |
18 |
196 |
16 |
46 |
25 |
5 |
||||||||||||||||||||||||||||||
|
Total Assets |
2,962 |
236,155 |
196,449 |
170,685 |
19,167 |
150,672 |
484,681 |
228,823 |
40,097 |
||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance Company |
— |
4,649 |
605 |
18 |
196 |
15 |
44 |
25 |
5 |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
2,962 |
$ |
231,506 |
$ |
195,844 |
$ |
170,667 |
$ |
18,971 |
$ |
150,657 |
$ |
484,637 |
$ |
228,798 |
$ |
40,092 |
|||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
2,962 |
231,506 |
195,842 |
170,667 |
18,971 |
150,618 |
484,583 |
228,797 |
40,092 |
||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
2 |
— |
— |
39 |
54 |
1 |
— |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
2,962 |
$ |
231,506 |
$ |
195,844 |
$ |
170,667 |
$ |
18,971 |
$ |
150,657 |
$ |
484,637 |
$ |
228,798 |
$ |
40,092 |
|||||||||||||||||||||
|
Units Outstanding |
147 |
13,418 |
16,489 |
9,433 |
1,116 |
10,486 |
33,349 |
13,637 |
2,388 |
||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
46 |
1,133 |
16,199 |
5,362 |
2,676 |
10,610 |
25,241 |
9,256 |
2,268 |
||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
65.01 |
$ |
204.25 |
$ |
12.09 |
$ |
31.83 |
$ |
7.09 |
$ |
14.20 |
$ |
19.20 |
$ |
24.72 |
$ |
17.68 |
|||||||||||||||||||||
|
Investment in Portfolio shares, at Cost |
$ |
1,674 |
$ |
219,632 |
$ |
204,231 |
$ |
162,466 |
$ |
25,012 |
$ |
163,183 |
$ |
415,303 |
$ |
174,157 |
$ |
36,779 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-5
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Franklin Templeton Variable Insurance Products Trust |
Goldman Sachs Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||
|
Franklin
Small-Mid Cap Growth VIP CL 2 |
Franklin US
Government Securities VIP CL 2 |
Templeton
Developing Markets VIP CL 2 |
Templeton
Foreign VIP CL 2 |
Templeton
Global Bond VIP Fund CL 2 |
Templeton
Growth VIP CL 2 |
Goldman
Sachs Global Trends Allocation Fund SC |
Goldman
Sachs Large Cap Value |
Goldman
Sachs Large Cap Value Fund SC |
|||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair value |
$ |
18,593 |
$ |
553,685 |
$ |
1,494 |
$ |
98,221 |
$ |
348,208 |
$ |
125,428 |
$ |
6,835 |
$ |
51,990 |
$ |
131,778 |
|||||||||||||||||||||
|
Receivable from Protective Life Insurance Company |
1 |
114 |
— |
8 |
241 |
12 |
— |
4 |
7 |
||||||||||||||||||||||||||||||
|
Total Assets |
18,594 |
553,799 |
1,494 |
98,229 |
348,449 |
125,440 |
6,835 |
51,994 |
131,785 |
||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance Company |
1 |
113 |
— |
8 |
241 |
11 |
— |
6 |
7 |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
18,593 |
$ |
553,686 |
$ |
1,494 |
$ |
98,221 |
$ |
348,208 |
$ |
125,429 |
$ |
6,835 |
$ |
51,988 |
$ |
131,778 |
|||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
18,593 |
553,643 |
1,494 |
98,220 |
348,198 |
125,403 |
6,835 |
51,808 |
131,778 |
||||||||||||||||||||||||||||||
|
Annuity period |
— |
43 |
— |
1 |
10 |
26 |
— |
180 |
— |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
18,593 |
$ |
553,686 |
$ |
1,494 |
$ |
98,221 |
$ |
348,208 |
$ |
125,429 |
$ |
6,835 |
$ |
51,988 |
$ |
131,778 |
|||||||||||||||||||||
|
Units Outstanding |
1,078 |
50,826 |
212 |
8,409 |
28,607 |
10,086 |
660 |
2,092 |
9,046 |
||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
1,051 |
44,401 |
236 |
7,441 |
22,039 |
9,417 |
628 |
5,537 |
14,034 |
||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
17.69 |
$ |
12.47 |
$ |
6.32 |
$ |
13.20 |
$ |
15.80 |
$ |
13.32 |
$ |
10.88 |
$ |
9.39 |
$ |
9.39 |
|||||||||||||||||||||
|
Investment in Portfolio shares, at Cost |
$ |
20,935 |
$ |
581,682 |
$ |
2,090 |
$ |
107,969 |
$ |
406,209 |
$ |
107,719 |
$ |
7,127 |
$ |
53,492 |
$ |
131,774 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-6
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Goldman Sachs Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs Mid Cap Value |
Goldman
Sachs Mid Cap Value SC |
Goldman
Sachs Small Cap Equity Insights |
Goldman
Sachs Small Cap Equity Insights SC |
Goldman
Sachs Strategic Growth |
Goldman
Sachs Strategic Growth SC |
Goldman
Sachs Strategic International Equity |
Goldman
Sachs Strategic International Equity SC |
Goldman
Sachs US Equity Insights |
Goldman
Sachs US Equity Insights SC |
||||||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair
value |
$ |
7,363 |
$ |
76,265 |
$ |
26,200 |
$ |
18,749 |
$ |
35,156 |
$ |
157,352 |
$ |
30,991 |
$ |
47,866 |
$ |
31,841 |
$ |
670 |
|||||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
20 |
5 |
3 |
1 |
1 |
1,534 |
2 |
3 |
4 |
— |
|||||||||||||||||||||||||||||||||
|
Total Assets |
7,383 |
76,270 |
26,203 |
18,750 |
35,157 |
158,886 |
30,993 |
47,869 |
31,845 |
670 |
|||||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
20 |
5 |
4 |
1 |
1 |
1,534 |
2 |
3 |
7 |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
7,363 |
$ |
76,265 |
$ |
26,199 |
$ |
18,749 |
$ |
35,156 |
$ |
157,352 |
$ |
30,991 |
$ |
47,866 |
$ |
31,838 |
$ |
670 |
|||||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
7,345 |
76,263 |
26,113 |
18,749 |
35,128 |
157,352 |
30,948 |
47,864 |
31,778 |
670 |
|||||||||||||||||||||||||||||||||
|
Annuity period |
18 |
2 |
86 |
— |
28 |
— |
43 |
2 |
60 |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
7,363 |
$ |
76,265 |
$ |
26,199 |
$ |
18,749 |
$ |
35,156 |
$ |
157,352 |
$ |
30,991 |
$ |
47,866 |
$ |
31,838 |
$ |
670 |
|||||||||||||||||||||||
|
Units Outstanding |
302 |
4,977 |
712 |
1,030 |
1,322 |
8,563 |
2,072 |
4,695 |
866 |
30 |
|||||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
508 |
5,256 |
2,259 |
1,627 |
2,251 |
10,093 |
3,372 |
5,197 |
1,906 |
40 |
|||||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
14.49 |
$ |
14.51 |
$ |
11.60 |
$ |
11.52 |
$ |
15.62 |
$ |
15.59 |
$ |
9.19 |
$ |
9.21 |
$ |
16.71 |
$ |
16.77 |
|||||||||||||||||||||||
|
Investment in Portfolio shares,
at Cost |
$ |
7,651 |
$ |
74,745 |
$ |
28,069 |
$ |
12,851 |
$ |
22,660 |
$ |
138,387 |
$ |
41,480 |
$ |
38,314 |
$ |
17,886 |
$ |
363 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-7
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Goldman Sachs
Variable Insurance Trust |
Guggenheim Variable Fund |
Invesco Variable
Insurance Funds |
|||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs VIT Core Fixed Income Fund SC |
Goldman
Sachs VIT Growth Opportunities SC |
Guggenheim
Floating Rate Strategies (Series F) |
Guggenheim
Global Managed Futures Strategy |
Guggenheim
Long Short Equity |
Guggenheim
Macro Opportunities Strategies (Series M) |
Guggenheim
Multi-Hedge Strategies |
Invesco VI
American Franchise I |
Invesco VI
American Franchise II |
|||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair value |
$ |
11,045 |
$ |
60,352 |
$ |
1,627 |
$ |
345 |
$ |
238 |
$ |
131 |
$ |
624 |
$ |
6,036 |
$ |
3,192 |
|||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
47 |
10 |
— |
— |
— |
— |
— |
— |
1 |
||||||||||||||||||||||||||||||
|
Total Assets |
11,092 |
60,362 |
1,627 |
345 |
238 |
131 |
624 |
6,036 |
3,193 |
||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
47 |
9 |
— |
— |
— |
— |
— |
— |
2 |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
11,045 |
$ |
60,353 |
$ |
1,627 |
$ |
345 |
$ |
238 |
$ |
131 |
$ |
624 |
$ |
6,036 |
$ |
3,191 |
|||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
11,045 |
60,346 |
1,627 |
345 |
238 |
131 |
624 |
6,036 |
3,191 |
||||||||||||||||||||||||||||||
|
Annuity period |
— |
7 |
— |
— |
— |
— |
— |
— |
— |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
11,045 |
$ |
60,353 |
$ |
1,627 |
$ |
345 |
$ |
238 |
$ |
131 |
$ |
624 |
$ |
6,036 |
$ |
3,191 |
|||||||||||||||||||||
|
Units Outstanding |
1,109 |
3,268 |
159 |
30 |
22 |
12 |
59 |
701 |
273 |
||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
1,049 |
9,035 |
63 |
18 |
16 |
5 |
26 |
105 |
57 |
||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
10.53 |
$ |
6.68 |
$ |
25.72 |
$ |
19.42 |
$ |
15.27 |
$ |
25.78 |
$ |
24.09 |
$ |
57.30 |
$ |
55.85 |
|||||||||||||||||||||
|
Investment in Portfolio shares, at Cost |
$ |
11,140 |
$ |
60,002 |
$ |
1,655 |
$ |
353 |
$ |
235 |
$ |
136 |
$ |
614 |
$ |
5,146 |
$ |
1,369 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-8
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Invesco Variable Insurance Funds |
|||||||||||||||||||||||||||||||||||||||||||
|
Invesco VI
American Value II |
Invesco VI
Balanced Risk Allocation II |
Invesco VI
Comstock I |
Invesco VI
Comstock II |
Invesco VI
Equity and Income II |
Invesco VI
Global Real Estate II |
Invesco VI
Government Securities II |
Invesco VI
Growth & Income I |
Invesco VI
Growth & Income II |
Invesco VI
International Growth II |
||||||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair
value |
$ |
27,984 |
$ |
75,614 |
$ |
29,439 |
$ |
158,849 |
$ |
164,488 |
$ |
2,960 |
$ |
97,512 |
$ |
34,048 |
$ |
411,587 |
$ |
35,435 |
|||||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
35 |
44 |
16 |
42 |
29 |
— |
59 |
11 |
47 |
11 |
|||||||||||||||||||||||||||||||||
|
Total Assets |
28,019 |
75,658 |
29,455 |
158,891 |
164,517 |
2,960 |
97,571 |
34,059 |
411,634 |
35,446 |
|||||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
35 |
44 |
15 |
42 |
30 |
— |
58 |
9 |
47 |
11 |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
27,984 |
$ |
75,614 |
$ |
29,440 |
$ |
158,849 |
$ |
164,487 |
$ |
2,960 |
$ |
97,513 |
$ |
34,050 |
$ |
411,587 |
$ |
35,435 |
|||||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
27,984 |
75,614 |
29,402 |
158,826 |
164,440 |
2,960 |
97,513 |
34,004 |
411,587 |
35,430 |
|||||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
38 |
23 |
47 |
— |
— |
46 |
— |
5 |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
27,984 |
$ |
75,614 |
$ |
29,440 |
$ |
158,849 |
$ |
164,487 |
$ |
2,960 |
$ |
97,513 |
$ |
34,050 |
$ |
411,587 |
$ |
35,435 |
|||||||||||||||||||||||
|
Units Outstanding |
1,769 |
6,359 |
1,196 |
7,016 |
8,804 |
238 |
9,206 |
1,553 |
21,433 |
3,057 |
|||||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
1,800 |
7,501 |
1,676 |
9,072 |
10,179 |
186 |
8,539 |
1,737 |
21,032 |
1,072 |
|||||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
15.55 |
$ |
10.08 |
$ |
17.57 |
$ |
17.51 |
$ |
16.16 |
$ |
15.91 |
$ |
11.42 |
$ |
19.60 |
$ |
19.57 |
$ |
33.04 |
|||||||||||||||||||||||
|
Investment in Portfolio shares,
at Cost |
$ |
26,915 |
$ |
89,884 |
$ |
18,476 |
$ |
107,009 |
$ |
140,946 |
$ |
2,774 |
$ |
99,387 |
$ |
29,250 |
$ |
389,890 |
$ |
31,034 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-9
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Invesco Variable
Insurance Funds |
Legg Mason Partners Variable Equity Trust |
Lord Abbett Series Fund, Inc. |
|||||||||||||||||||||||||||||||||||||
|
Invesco VI
Mid-Cap Growth II |
Invesco VI
Small Cap Equity II |
ClearBridge
Variable Mid Cap Core II |
ClearBridge
Variable Small Cap Growth II |
QS Legg Mason
Dynamic Multi-Strategy VIT II |
Lord Abbett
Bond Debenture VC |
Lord Abbett
Calibrated Dividend Growth VC |
Lord Abbett
Classic Stock VC |
Lord Abbett
Growth & Income VC |
|||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair value |
$ |
32,590 |
$ |
5,206 |
$ |
37,265 |
$ |
8,768 |
$ |
39,280 |
$ |
618,734 |
$ |
44,922 |
$ |
18,978 |
$ |
88,967 |
|||||||||||||||||||||
|
Receivable from Protective Life Insurance
Company |
52 |
12 |
558 |
240 |
321 |
157 |
37 |
233 |
7 |
||||||||||||||||||||||||||||||
|
Total Assets |
32,642 |
5,218 |
37,823 |
9,008 |
39,601 |
618,891 |
44,959 |
19,211 |
88,974 |
||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance Company |
52 |
12 |
558 |
240 |
321 |
157 |
36 |
233 |
7 |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
32,590 |
$ |
5,206 |
$ |
37,265 |
$ |
8,768 |
$ |
39,280 |
$ |
618,734 |
$ |
44,923 |
$ |
18,978 |
$ |
88,967 |
|||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
32,578 |
5,206 |
37,265 |
8,768 |
39,280 |
618,706 |
44,893 |
18,978 |
88,933 |
||||||||||||||||||||||||||||||
|
Annuity period |
12 |
— |
— |
— |
— |
28 |
30 |
— |
34 |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
32,590 |
$ |
5,206 |
$ |
37,265 |
$ |
8,768 |
$ |
39,280 |
$ |
618,734 |
$ |
44,923 |
$ |
18,978 |
$ |
88,967 |
|||||||||||||||||||||
|
Units Outstanding |
1,904 |
405 |
2,038 |
455 |
3,427 |
41,371 |
2,179 |
1,206 |
5,041 |
||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
6,114 |
307 |
2,085 |
432 |
3,241 |
55,542 |
3,303 |
1,628 |
2,762 |
||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
5.33 |
$ |
16.96 |
$ |
17.87 |
$ |
20.31 |
$ |
12.12 |
$ |
11.14 |
$ |
13.60 |
$ |
11.66 |
$ |
32.21 |
|||||||||||||||||||||
|
Investment in Portfolio shares, at Cost |
$ |
22,732 |
$ |
5,586 |
$ |
30,034 |
$ |
8,114 |
$ |
38,041 |
$ |
672,474 |
$ |
44,606 |
$ |
19,621 |
$ |
62,867 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-10
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Lord Abbett Series Fund, Inc. |
MFS Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||||||
|
Lord Abbett
Growth Opportunities VC |
Lord Abbett
International Opportunities VC |
Lord Abbett
Mid Cap Stock VC |
Lord Abbett
Series Fundamental Equity VC |
MFS
Growth Series IC |
MFS
Growth Series SC |
MFS
Investors Growth Stock IC |
MFS
Investors Growth Stock SC |
MFS
Investors Trust IC |
MFS
Investors Trust SC |
||||||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair
value |
$ |
38,379 |
$ |
27,940 |
$ |
66,033 |
$ |
125,147 |
$ |
5,390 |
$ |
58,065 |
$ |
— |
$ |
— |
$ |
7,874 |
$ |
70,030 |
|||||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
2 |
5 |
8 |
15 |
— |
17 |
— |
— |
— |
129 |
|||||||||||||||||||||||||||||||||
|
Total Assets |
38,381 |
27,945 |
66,041 |
125,162 |
5,390 |
58,082 |
— |
— |
7,874 |
70,159 |
|||||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
2 |
5 |
7 |
15 |
— |
17 |
— |
— |
21 |
129 |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
38,379 |
$ |
27,940 |
$ |
66,034 |
$ |
125,147 |
$ |
5,390 |
$ |
58,065 |
$ |
— |
$ |
— |
$ |
7,853 |
$ |
70,030 |
|||||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
38,379 |
27,940 |
65,962 |
125,147 |
5,390 |
58,065 |
— |
— |
7,827 |
70,030 |
|||||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
72 |
— |
— |
— |
— |
— |
26 |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
38,379 |
$ |
27,940 |
$ |
66,034 |
$ |
125,147 |
$ |
5,390 |
$ |
58,065 |
$ |
— |
$ |
— |
$ |
7,853 |
$ |
70,030 |
|||||||||||||||||||||||
|
Units Outstanding |
1,834 |
1,967 |
3,258 |
7,825 |
200 |
2,820 |
— |
— |
361 |
3,743 |
|||||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
3,231 |
3,399 |
2,836 |
7,687 |
134 |
1,485 |
— |
— |
296 |
2,663 |
|||||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
11.88 |
$ |
8.22 |
$ |
23.28 |
$ |
16.28 |
$ |
40.17 |
$ |
39.09 |
$ |
— |
$ |
— |
$ |
26.58 |
$ |
26.30 |
|||||||||||||||||||||||
|
Investment in Portfolio shares,
at Cost |
$ |
40,861 |
$ |
22,781 |
$ |
52,537 |
$ |
131,597 |
$ |
2,950 |
$ |
37,710 |
$ |
— |
$ |
— |
$ |
5,617 |
$ |
54,122 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-11
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
MFS Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||||
|
MFS New
Discovery IC |
MFS New
Discovery SC |
MFS
Research IC |
MFS
Research SC |
MFS Total
Return IC |
MFS Total
Return SC |
MFS
Utilities IC |
MFS
Utilities SC |
MFS VIT
Total Return Bond SC |
MFS VIT
Value SC |
||||||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair
value |
$ |
2,152 |
$ |
73,525 |
$ |
6,708 |
$ |
4,475 |
$ |
25,781 |
$ |
67,343 |
$ |
3,118 |
$ |
35,747 |
$ |
567,061 |
$ |
241,369 |
|||||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
— |
7 |
— |
— |
1 |
3 |
— |
13 |
53 |
135 |
|||||||||||||||||||||||||||||||||
|
Total Assets |
2,152 |
73,532 |
6,708 |
4,475 |
25,782 |
67,346 |
3,118 |
35,760 |
567,114 |
241,504 |
|||||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
— |
7 |
— |
— |
1 |
3 |
— |
13 |
51 |
134 |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
2,152 |
$ |
73,525 |
$ |
6,708 |
$ |
4,475 |
$ |
25,781 |
$ |
67,343 |
$ |
3,118 |
$ |
35,747 |
$ |
567,063 |
$ |
241,370 |
|||||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
2,152 |
73,525 |
6,703 |
4,475 |
25,775 |
67,329 |
3,118 |
35,747 |
567,034 |
241,355 |
|||||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
5 |
— |
6 |
14 |
— |
— |
29 |
15 |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
2,152 |
$ |
73,525 |
$ |
6,708 |
$ |
4,475 |
$ |
25,781 |
$ |
67,343 |
$ |
3,118 |
$ |
35,747 |
$ |
567,063 |
$ |
241,370 |
|||||||||||||||||||||||
|
Units Outstanding |
65 |
2,943 |
293 |
222 |
1,067 |
3,476 |
99 |
1,694 |
50,020 |
13,576 |
|||||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
139 |
5,088 |
251 |
169 |
1,141 |
3,025 |
122 |
1,421 |
44,371 |
13,321 |
|||||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
15.49 |
$ |
14.45 |
$ |
26.68 |
$ |
26.42 |
$ |
22.60 |
$ |
22.26 |
$ |
25.56 |
$ |
25.15 |
$ |
12.78 |
$ |
18.12 |
|||||||||||||||||||||||
|
Investment in Portfolio shares,
at Cost |
$ |
1,894 |
$ |
73,131 |
$ |
4,693 |
$ |
3,163 |
$ |
20,621 |
$ |
56,732 |
$ |
2,652 |
$ |
34,752 |
$ |
572,114 |
$ |
171,477 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-12
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
MFS Variable Insurance Trust II |
Oppenheimer Variable Account Funds |
||||||||||||||||||||||||||||||||||||||
|
MFS VIT II
Emerging Markets Equity SC |
MFS VIT II
International Value SC |
MFS VIT II
MA Investors Growth Stock IC |
MFS VIT II
MA Investors Growth Stock SC |
Oppenheimer
Capital Appreciation Fund/VA |
Oppenheimer
Capital Appreciation Fund/VA SC |
Oppenheimer
Discovery Mid Cap Growth Fund/VA |
Oppenheimer
Discovery Mid Cap Growth Fund/VA SC |
Oppenheimer
Global Fund/VA |
|||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair value |
$ |
537 |
$ |
30,515 |
$ |
1,987 |
$ |
50,659 |
$ |
8,632 |
$ |
58,337 |
$ |
2,782 |
$ |
919 |
$ |
9,090 |
|||||||||||||||||||||
|
Receivable from Protective Life Insurance
Company |
— |
104 |
8 |
— |
— |
— |
— |
1 |
|||||||||||||||||||||||||||||||
|
Total Assets |
537 |
30,619 |
1,987 |
50,667 |
8,632 |
58,337 |
2,782 |
919 |
9,091 |
||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance Company |
— |
104 |
7 |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||
|
Net Assets |
$ |
537 |
$ |
30,515 |
$ |
1,987 |
$ |
50,660 |
$ |
8,632 |
$ |
58,337 |
$ |
2,782 |
$ |
919 |
$ |
9,091 |
|||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
537 |
30,515 |
1,987 |
50,660 |
8,623 |
58,337 |
2,782 |
919 |
9,063 |
||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
— |
— |
9 |
— |
— |
— |
28 |
||||||||||||||||||||||||||||||
|
Net Assets |
$ |
537 |
$ |
30,515 |
$ |
1,987 |
$ |
50,660 |
$ |
8,632 |
$ |
58,337 |
$ |
2,782 |
$ |
919 |
$ |
9,091 |
|||||||||||||||||||||
|
Units Outstanding |
72 |
2,166 |
202 |
5,131 |
343 |
3,174 |
127 |
46 |
266 |
||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
47 |
1,379 |
121 |
3,123 |
156 |
1,065 |
36 |
12 |
239 |
||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
11.42 |
$ |
22.13 |
$ |
16.38 |
$ |
16.22 |
$ |
55.49 |
$ |
54.80 |
$ |
76.85 |
$ |
73.88 |
$ |
38.00 |
|||||||||||||||||||||
|
Investment in Portfolio shares, at Cost |
$ |
671 |
$ |
22,482 |
$ |
2,155 |
$ |
55,165 |
$ |
6,455 |
$ |
49,000 |
$ |
1,875 |
$ |
546 |
$ |
6,426 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-13
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
Oppenheimer Variable Account Funds |
PIMCO Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||||||
|
Oppenheimer
Global Fund/VA SC |
Oppenheimer
Global Strategic Income Fund/VA |
Oppenheimer
Global Strategic Income Fund/VA SC |
Oppenheimer
Main Street Fund/VA |
Oppenheimer
Main Street Fund/VA SC |
Oppenheimer
Money Fund/VA |
PIMCO VIT
All Asset Advisor |
PIMCO VIT
Global Diversified Allocation Portfolio |
PIMCO VIT
Long-Term US Government Advisor |
PIMCO VIT
Low Duration Advisor |
||||||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair
value |
$ |
269,963 |
$ |
13,345 |
$ |
388,479 |
$ |
10,993 |
$ |
35,737 |
$ |
2,546,031 |
$ |
724 |
$ |
4,545 |
$ |
16,833 |
$ |
88,159 |
|||||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
15 |
1 |
72 |
— |
649 |
10,677 |
— |
— |
9 |
27 |
|||||||||||||||||||||||||||||||||
|
Total Assets |
269,978 |
13,346 |
388,551 |
10,993 |
36,386 |
2,556,708 |
724 |
4,545 |
16,842 |
88,186 |
|||||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
15 |
27 |
73 |
12 |
649 |
10,669 |
— |
— |
9 |
27 |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
269,963 |
$ |
13,319 |
$ |
388,478 |
$ |
10,981 |
$ |
35,737 |
$ |
2,546,039 |
$ |
724 |
$ |
4,545 |
$ |
16,833 |
$ |
88,159 |
|||||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
269,921 |
13,259 |
388,445 |
10,947 |
35,737 |
2,546,035 |
724 |
4,545 |
16,833 |
88,159 |
|||||||||||||||||||||||||||||||||
|
Annuity period |
42 |
60 |
33 |
34 |
— |
4 |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
269,963 |
$ |
13,319 |
$ |
388,478 |
$ |
10,981 |
$ |
35,737 |
$ |
2,546,039 |
$ |
724 |
$ |
4,545 |
$ |
16,833 |
$ |
88,159 |
|||||||||||||||||||||||
|
Units Outstanding |
10,419 |
648 |
26,621 |
519 |
1,969 |
443,743 |
76 |
443 |
1,300 |
8,535 |
|||||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
7,182 |
2,735 |
77,696 |
376 |
1,233 |
2,546,031 |
79 |
500 |
1,446 |
8,601 |
|||||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
37.59 |
$ |
4.88 |
$ |
5.00 |
$ |
29.24 |
$ |
28.98 |
$ |
1.00 |
$ |
9.19 |
$ |
9.09 |
$ |
11.64 |
$ |
10.25 |
|||||||||||||||||||||||
|
Investment in Portfolio shares,
at Cost |
$ |
208,494 |
$ |
13,532 |
$ |
425,370 |
$ |
8,392 |
$ |
32,490 |
$ |
2,546,031 |
$ |
859 |
$ |
5,045 |
$ |
17,722 |
$ |
90,643 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-14
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF ASSETS AND LIABILITIES, CONTINUED
As of December 31, 2015
($ in thousands, except Fair Value per Share)
|
PIMCO Variable Insurance Trust |
Royce Capital Fund |
Rydex Variable Trust |
The
Universal Institutional Funds, Inc. |
Van Eck
Worldwide Insurance Trust |
|||||||||||||||||||||||||||||||||||||||
|
PIMCO VIT
Real Return Advisor |
PIMCO VIT
Short-Term Advisor |
PIMCO VIT
Total Return Advisor |
Royce Capital
Fund Micro-Cap SC |
Royce Capital
Fund Small-Cap SC |
Rydex
Commodities Strategy |
Rydex
Inverse Government Long Bond |
Rydex
Inverse S&P 500 Strategy |
UIF Global
Real Estate II |
Van Eck
Global Hard Asset |
||||||||||||||||||||||||||||||||||
|
Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Investments in subaccounts at fair
value |
$ |
373,368 |
$ |
71,672 |
$ |
861,568 |
$ |
15,408 |
$ |
110,724 |
$ |
8 |
$ |
6 |
$ |
— |
$ |
9,253 |
$ |
174 |
|||||||||||||||||||||||
|
Receivable from Protective Life
Insurance Company |
119 |
5 |
228 |
1 |
8 |
— |
— |
— |
3 |
— |
|||||||||||||||||||||||||||||||||
|
Total Assets |
373,487 |
71,677 |
861,796 |
15,409 |
110,732 |
8 |
6 |
— |
9,256 |
174 |
|||||||||||||||||||||||||||||||||
|
Liabilities |
|||||||||||||||||||||||||||||||||||||||||||
|
Payable to Protective Life Insurance
Company |
119 |
5 |
227 |
1 |
8 |
— |
— |
— |
3 |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
373,368 |
$ |
71,672 |
$ |
861,569 |
$ |
15,408 |
$ |
110,724 |
$ |
8 |
$ |
6 |
$ |
— |
$ |
9,253 |
$ |
174 |
|||||||||||||||||||||||
|
Analysis of Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Accumulation period |
373,368 |
71,672 |
861,547 |
15,408 |
110,724 |
8 |
6 |
— |
9,253 |
174 |
|||||||||||||||||||||||||||||||||
|
Annuity period |
— |
— |
22 |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||
|
Net Assets |
$ |
373,368 |
$ |
71,672 |
$ |
861,569 |
$ |
15,408 |
$ |
110,724 |
$ |
8 |
$ |
6 |
$ |
— |
$ |
9,253 |
$ |
174 |
|||||||||||||||||||||||
|
Units Outstanding |
36,629 |
7,184 |
76,559 |
1,365 |
7,845 |
2 |
1 |
— |
678 |
7 |
|||||||||||||||||||||||||||||||||
|
Shares Owned in each Portfolio |
31,297 |
6,979 |
81,434 |
1,675 |
13,389 |
2 |
— |
— |
909 |
10 |
|||||||||||||||||||||||||||||||||
|
Fair Value per Share |
$ |
11.93 |
$ |
10.27 |
$ |
10.58 |
$ |
9.20 |
$ |
8.27 |
$ |
4.74 |
$ |
35.71 |
$ |
15.95 |
$ |
10.18 |
$ |
16.88 |
|||||||||||||||||||||||
|
Investment in Portfolio shares,
at Cost |
$ |
425,798 |
$ |
71,459 |
$ |
917,875 |
$ |
18,284 |
$ |
133,965 |
$ |
15 |
$ |
8 |
$ |
— |
$ |
7,255 |
$ |
164 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-15
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
($ in thousands)
|
American Funds Insurance Series |
|||||||||||||||||||||||||||||||||||||||||||
|
American
Funds Asset Allocation Class 2 |
American
Funds Asset Allocation Class 4 |
American
Funds Blue Chip Income & Growth Class 2 |
American
Funds Blue Chip Income & Growth Class 4 |
American
Funds Global Growth Class 2 |
American
Funds Global Growth Class 4 |
American
Funds Global Small Capitalization Class 2 |
American
Funds Global Small Capitalization Class 4 |
American
Funds Growth Class 2 |
American
Funds Growth Class 4 |
||||||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
1,062 |
$ |
8 |
$ |
36 |
$ |
3 |
$ |
69 |
$ |
11 |
$ |
— |
$ |
— |
$ |
7 |
$ |
1 |
|||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
639 |
1 |
4 |
— |
15 |
3 |
— |
— |
2 |
1 |
|||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
423 |
7 |
32 |
3 |
54 |
8 |
— |
— |
5 |
— |
|||||||||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
743 |
— |
— |
(2 |
) |
— |
(1 |
) |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||
|
Capital gain distributions |
4,567 |
— |
|||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
5,310 |
— |
— |
(2 |
) |
— |
(1 |
) |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(5,592 |
) |
(9 |
) |
(32 |
) |
(3 |
) |
20 |
(4 |
) |
(2 |
) |
— |
9 |
4 |
|||||||||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
(282 |
) |
(9 |
) |
(32 |
) |
(5 |
) |
20 |
(5 |
) |
(2 |
) |
— |
9 |
4 |
|||||||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
141 |
$ |
(2 |
) |
$ |
— |
$ |
(2 |
) |
$ |
74 |
$ |
3 |
$ |
(2 |
) |
$ |
— |
$ |
14 |
$ |
4 |
||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-16
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
American Funds Insurance Series |
Calvert
Variable Series, Inc. |
Fidelity Variable Insurance Products |
|||||||||||||||||||||||||||||||||||||
|
American
Funds International Class 2 |
American
Funds International Class 4 |
American
Funds New World Class 2 |
American
Funds New World Class 4 |
Calvert
VP SRI Balanced |
Fidelity
Contrafund Portfolio SC2 |
Fidelity
Equity Income SC2 |
Fidelity
Freedom Fund - 2015 Maturity SC2 |
Fidelity
Freedom Fund - 2020 Maturity SC2 |
|||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
5 |
$ |
— |
$ |
1 |
$ |
— |
$ |
2 |
$ |
1,748 |
$ |
244 |
$ |
17 |
$ |
34 |
|||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
1 |
— |
— |
— |
20 |
2,757 |
90 |
11 |
21 |
||||||||||||||||||||||||||||||
|
Net investment income (loss) |
4 |
— |
1 |
— |
(18 |
) |
(1,009 |
) |
154 |
6 |
13 |
||||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
— |
— |
— |
— |
1 |
1,841 |
75 |
7 |
43 |
||||||||||||||||||||||||||||||
|
Capital gain distributions |
— |
— |
— |
— |
6 |
23,403 |
837 |
5 |
9 |
||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
— |
— |
— |
— |
7 |
25,244 |
912 |
12 |
52 |
||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(12 |
) |
— |
(1 |
) |
— |
(37 |
) |
(30,822 |
) |
(1,509 |
) |
(41 |
) |
(97 |
) |
|||||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
(12 |
) |
— |
(1 |
) |
— |
(30 |
) |
(5,578 |
) |
(597 |
) |
(29 |
) |
(45 |
) |
|||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
(8 |
) |
$ |
— |
$ |
— |
$ |
— |
$ |
(48 |
) |
$ |
(6,587 |
) |
$ |
(443 |
) |
$ |
(23 |
) |
$ |
(32 |
) |
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-17
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Fidelity Variable Insurance Products |
Franklin Templeton Variable Insurance Products Trust |
||||||||||||||||||||||||||||||||||||||
|
Fidelity
Growth Portfolio SC2 |
Fidelity
Index 500 Portfolio SC2 |
Fidelity
Investment Grade Bonds SC2 |
Fidelity
Mid Cap SC2 |
Franklin
Flex Cap Growth VIP CL 2 |
Franklin
Income VIP CL 2 |
Franklin
Rising Dividend VIP CL 2 |
Franklin
Mutual Shares VIP CL 2 |
Franklin
Small Cap Value VIP CL 2 |
|||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
1 |
$ |
4,996 |
$ |
4,745 |
$ |
501 |
$ |
— |
$ |
8,077 |
$ |
5,142 |
$ |
17,936 |
$ |
327 |
|||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
31 |
2,254 |
1,993 |
3,117 |
238 |
1,812 |
3,537 |
7,198 |
534 |
||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(30 |
) |
2,742 |
2,752 |
(2,616 |
) |
(238 |
) |
6,265 |
1,605 |
10,738 |
(207 |
) |
||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
138 |
(10,276 |
) |
(14 |
) |
(17,740 |
) |
(1,979 |
) |
(1,421 |
) |
(1,875 |
) |
10,758 |
(1,676 |
) |
|||||||||||||||||||||||
|
Capital gain distributions |
101 |
97 |
130 |
38,372 |
13,404 |
— |
38,056 |
39,575 |
7,531 |
||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
239 |
(10,179 |
) |
116 |
20,632 |
11,425 |
(1,421 |
) |
36,181 |
50,333 |
5,855 |
||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(24 |
) |
(10,810 |
) |
(6,646 |
) |
(27,331 |
) |
(10,830 |
) |
(19,105 |
) |
(56,571 |
) |
(101,302 |
) |
(9,851 |
) |
|||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
215 |
(20,989 |
) |
(6,530 |
) |
(6,699 |
) |
595 |
(20,526 |
) |
(20,390 |
) |
(50,969 |
) |
(3,996 |
) |
|||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
185 |
$ |
(18,247 |
) |
$ |
(3,778 |
) |
$ |
(9,315 |
) |
$ |
357 |
$ |
(14,261 |
) |
$ |
(18,785 |
) |
$ |
(40,231 |
) |
$ |
(4,203 |
) |
||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-18
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Franklin Templeton Variable Insurance Products Trust |
Goldman Sachs Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||
|
Franklin
Small-Mid Cap Growth VIP CL 2 |
Franklin US
Government Securities VIP CL 2 |
Templeton
Developing Markets VIP CL 2 |
Templeton
Foreign VIP CL 2 |
Templeton
Global Bond VIP Fund CL 2 |
Templeton
Growth VIP CL 2 |
Goldman
Sachs Global Trends Allocation Fund SC |
Goldman
Sachs Large Cap Value |
Goldman
Sachs Large Cap Value Fund SC |
|||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
— |
$ |
15,151 |
$ |
29 |
$ |
3,815 |
$ |
27,594 |
$ |
3,878 |
$ |
6 |
$ |
786 |
$ |
1,642 |
|||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
315 |
6,274 |
18 |
1,153 |
4,094 |
1,499 |
78 |
680 |
1,615 |
||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(315 |
) |
8,877 |
11 |
2,662 |
23,500 |
2,379 |
(72 |
) |
106 |
27 |
||||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
(2,327 |
) |
(798 |
) |
(140 |
) |
(1,214 |
) |
(486 |
) |
(842 |
) |
6 |
246 |
135 |
||||||||||||||||||||||||
|
Capital gain distributions |
7,344 |
— |
185 |
3,897 |
1,792 |
— |
147 |
6,344 |
16,089 |
||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
5,017 |
(798 |
) |
45 |
2,683 |
1,306 |
(842 |
) |
153 |
6,590 |
16,224 |
||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(5,621 |
) |
(11,319 |
) |
(522 |
) |
(13,718 |
) |
(44,454 |
) |
(12,275 |
) |
(468 |
) |
(9,864 |
) |
(24,674 |
) |
|||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
(604 |
) |
(12,117 |
) |
(477 |
) |
(11,035 |
) |
(43,148 |
) |
(13,117 |
) |
(315 |
) |
(3,274 |
) |
(8,450 |
) |
|||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
(919 |
) |
$ |
(3,240 |
) |
$ |
(466 |
) |
$ |
(8,373 |
) |
$ |
(19,648 |
) |
$ |
(10,738 |
) |
$ |
(387 |
) |
$ |
(3,168 |
) |
$ |
(8,423 |
) |
||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-19
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Goldman Sachs Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs Mid Cap Value |
Goldman
Sachs Mid Cap Value SC |
Goldman
Sachs Small Cap Equity Insights |
Goldman
Sachs Small Cap Equity Insights SC |
Goldman
Sachs Strategic Growth |
Goldman
Sachs Strategic Growth SC |
Goldman
Sachs Strategic International Equity |
Goldman
Sachs Strategic International Equity SC |
Goldman
Sachs US Equity Insights |
Goldman
Sachs US Equity Insights SC |
||||||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
33 |
$ |
95 |
$ |
81 |
$ |
6 |
$ |
127 |
$ |
188 |
$ |
553 |
$ |
721 |
$ |
449 |
$ |
8 |
|||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and
administrative charges |
85 |
1,460 |
359 |
173 |
436 |
2,002 |
372 |
490 |
464 |
9 |
|||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(52 |
) |
(1,365 |
) |
(278 |
) |
(167 |
) |
(309 |
) |
(1,814 |
) |
181 |
231 |
(15 |
) |
(1 |
) |
|||||||||||||||||||||||||
|
Net Realized and Unrealized Gains
(Losses) on Investments |
|||||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on
redemption of investment shares |
59 |
(3,032 |
) |
230 |
538 |
414 |
1,101 |
(543 |
) |
800 |
1,953 |
55 |
|||||||||||||||||||||||||||||||
|
Capital gain distributions |
588 |
6,077 |
3,419 |
2,460 |
2,168 |
10,685 |
— |
— |
1,985 |
45 |
|||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on
investments |
647 |
3,045 |
3,649 |
2,998 |
2,582 |
11,786 |
(543 |
) |
800 |
3,938 |
100 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(1,441 |
) |
(12,479 |
) |
(4,166 |
) |
(3,357 |
) |
(1,366 |
) |
(10,824 |
) |
669 |
(1,285 |
) |
(4,419 |
) |
(114 |
) |
||||||||||||||||||||||||
|
Net realized and unrealized gain
(loss) on investments |
(794 |
) |
(9,434 |
) |
(517 |
) |
(359 |
) |
1,216 |
962 |
126 |
(485 |
) |
(481 |
) |
(14 |
) |
||||||||||||||||||||||||||
|
Net Increase (Decrease) in Net
Assets Resulting from Operations |
$ |
(846 |
) |
$ |
(10,799 |
) |
$ |
(795 |
) |
$ |
(526 |
) |
$ |
907 |
$ |
(852 |
) |
$ |
307 |
$ |
(254 |
) |
$ |
(496 |
) |
$ |
(15 |
) |
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-20
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Goldman Sachs
Variable Insurance Trust |
Guggenheim Variable Fund |
Invesco Variable
Insurance Funds |
|||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs VIT Core Fixed Income Fund SC |
Goldman
Sachs VIT Growth Opportunities SC |
Guggenheim
Floating Rate Strategies (Series F) |
Guggenheim
Global Managed Futures Strategy |
Guggenheim
Long Short Equity |
Guggenheim
Macro Opportunities Strategies (Series M) |
Guggenheim
Multi-Hedge Strategies |
Invesco VI
American Franchise I |
Invesco VI
American Franchise II |
|||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
47 |
$ |
— |
$ |
20 |
$ |
6 |
$ |
— |
$ |
2 |
$ |
3 |
$ |
— |
$ |
— |
|||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and
administrative charges |
18 |
800 |
8 |
2 |
2 |
1 |
4 |
73 |
36 |
||||||||||||||||||||||||||||||
|
Net investment income (loss) |
29 |
(800 |
) |
12 |
4 |
(2 |
) |
1 |
(1 |
) |
(73 |
) |
(36 |
) |
|||||||||||||||||||||||||
|
Net Realized and Unrealized Gains
(Losses) on Investments |
|||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption
of investment shares |
— |
(339 |
) |
— |
— |
— |
— |
— |
159 |
400 |
|||||||||||||||||||||||||||||
|
Capital gain distributions |
— |
5,017 |
1 |
8 |
— |
— |
— |
31 |
19 |
||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
— |
4,678 |
1 |
8 |
— |
— |
— |
190 |
419 |
||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(95 |
) |
(8,137 |
) |
(31 |
) |
(22 |
) |
1 |
(4 |
) |
3 |
108 |
(246 |
) |
||||||||||||||||||||||||
|
Net realized and unrealized gain (loss)
on investments |
(95 |
) |
(3,459 |
) |
(30 |
) |
(14 |
) |
1 |
(4 |
) |
3 |
298 |
173 |
|||||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
(66 |
) |
$ |
(4,259 |
) |
$ |
(18 |
) |
$ |
(10 |
) |
$ |
(1 |
) |
$ |
(3 |
) |
$ |
2 |
$ |
225 |
$ |
137 |
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-21
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Invesco Variable Insurance Funds |
|||||||||||||||||||||||||||||||||||||||||||
|
Invesco VI
American Value II |
Invesco VI
Balanced Risk Allocation II |
Invesco VI
Comstock I |
Invesco VI
Comstock II |
Invesco VI
Equity and Income II |
Invesco VI
Global Real Estate II |
Invesco VI
Government Securities II |
Invesco VI
Growth & Income I |
Invesco VI
Growth & Income II |
Invesco VI
International Growth II |
||||||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
2 |
$ |
2,985 |
$ |
646 |
$ |
2,889 |
$ |
3,967 |
$ |
106 |
$ |
1,833 |
$ |
1,091 |
$ |
11,158 |
$ |
535 |
|||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and
administrative charges |
579 |
1,039 |
420 |
1,973 |
2,435 |
107 |
833 |
473 |
6,562 |
618 |
|||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(577 |
) |
1,946 |
226 |
916 |
1,532 |
(1 |
) |
1,000 |
618 |
4,596 |
(83 |
) |
||||||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains
(Losses) on Investments |
|||||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on
redemption of investment shares |
2,331 |
(64 |
) |
2,472 |
9,039 |
3,893 |
371 |
— |
673 |
(3,489 |
) |
(1,247 |
) |
||||||||||||||||||||||||||||||
|
Capital gain distributions |
3,492 |
6,729 |
91 |
477 |
15,328 |
— |
34 |
5,671 |
65,289 |
— |
|||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on
investments |
5,823 |
6,665 |
2,563 |
9,516 |
19,221 |
371 |
34 |
6,344 |
61,800 |
(1,247 |
) |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(10,106 |
) |
(13,203 |
) |
(5,164 |
) |
(24,308 |
) |
(30,910 |
) |
(756 |
) |
(1,768 |
) |
(8,515 |
) |
(104,153 |
) |
(2,781 |
) |
|||||||||||||||||||||||
|
Net realized and unrealized gain
(loss) on investments |
(4,283 |
) |
(6,538 |
) |
(2,601 |
) |
(14,792 |
) |
(11,689 |
) |
(385 |
) |
(1,734 |
) |
(2,171 |
) |
(42,353 |
) |
(4,028 |
) |
|||||||||||||||||||||||
|
Net Increase (Decrease) in Net
Assets Resulting from Operations |
$ |
(4,860 |
) |
$ |
(4,592 |
) |
$ |
(2,375 |
) |
$ |
(13,876 |
) |
$ |
(10,157 |
) |
$ |
(386 |
) |
$ |
(734 |
) |
$ |
(1,553 |
) |
$ |
(37,757 |
) |
$ |
(4,111 |
) |
|||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-22
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Invesco Variable
Insurance Funds |
Legg Mason Partners Variable Equity Trust |
Lord Abbett Series Fund, Inc. |
|||||||||||||||||||||||||||||||||||||
|
Invesco VI
Mid-Cap Growth II |
Invesco VI
Small Cap Equity II |
ClearBridge
Variable Mid Cap Core II |
ClearBridge
Variable Small Cap Growth II |
QS Legg Mason
Dynamic Multi-Strategy VIT II |
Lord Abbett
Bond Debenture VC |
Lord Abbett
Calibrated Dividend Growth VC |
Lord Abbett
Classic Stock VC |
Lord Abbett
Growth & Income VC |
|||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
— |
$ |
— |
$ |
38 |
$ |
— |
$ |
322 |
$ |
26,109 |
$ |
835 |
$ |
187 |
$ |
1,129 |
|||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and
administrative charges |
420 |
122 |
672 |
149 |
604 |
6,981 |
464 |
270 |
1,083 |
||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(420 |
) |
(122 |
) |
(634 |
) |
(149 |
) |
(282 |
) |
19,128 |
371 |
(83 |
) |
46 |
||||||||||||||||||||||||
|
Net Realized and Unrealized Gains
(Losses) on Investments |
|||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption
of investment shares |
2,481 |
(107 |
) |
(1,944 |
) |
(826 |
) |
13 |
685 |
(975 |
) |
(1,394 |
) |
6,367 |
|||||||||||||||||||||||||
|
Capital gain distributions |
2,618 |
1,213 |
2,972 |
304 |
417 |
3,974 |
4,022 |
3,910 |
4,834 |
||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
5,099 |
1,106 |
1,028 |
(522 |
) |
430 |
4,659 |
3,047 |
2,516 |
11,201 |
|||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(4,657 |
) |
(1,814 |
) |
(876 |
) |
(333 |
) |
(2,930 |
) |
(41,288 |
) |
(5,114 |
) |
(3,527 |
) |
(15,186 |
) |
|||||||||||||||||||||
|
Net realized and unrealized gain (loss)
on investments |
442 |
(708 |
) |
152 |
(855 |
) |
(2,500 |
) |
(36,629 |
) |
(2,067 |
) |
(1,011 |
) |
(3,985 |
) |
|||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
22 |
$ |
(830 |
) |
$ |
(482 |
) |
$ |
(1,004 |
) |
$ |
(2,782 |
) |
$ |
(17,501 |
) |
$ |
(1,696 |
) |
$ |
(1,094 |
) |
$ |
(3,939 |
) |
|||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-23
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Lord Abbett Series Fund, Inc. |
MFS Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||||||
|
Lord Abbett
Growth Opportunities VC |
Lord Abbett
International Opportunities VC |
Lord Abbett
Mid Cap Stock VC |
Lord Abbett
Series Fundamental Equity VC |
MFS
Growth Series IC |
MFS
Growth Series SC |
MFS
Investors Growth Stock IC |
MFS
Investors Growth Stock SC |
MFS
Investors Trust IC |
MFS
Investors Trust SC |
||||||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
— |
$ |
227 |
$ |
406 |
$ |
1,511 |
$ |
8 |
$ |
— |
$ |
19 |
$ |
344 |
$ |
77 |
$ |
1,055 |
|||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
472 |
282 |
759 |
2,278 |
72 |
1,007 |
7 |
144 |
115 |
1,549 |
|||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(472 |
) |
(55 |
) |
(353 |
) |
(767 |
) |
(64 |
) |
(1,007 |
) |
12 |
200 |
(38 |
) |
(494 |
) |
|||||||||||||||||||||||||
|
Net Realized and Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
(959 |
) |
472 |
4,253 |
(15,262 |
) |
165 |
8,249 |
119 |
19,461 |
226 |
4,251 |
|||||||||||||||||||||||||||||||
|
Capital gain distributions |
4,103 |
2,111 |
4,184 |
12,737 |
281 |
5,851 |
201 |
5,685 |
901 |
16,591 |
|||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
3,144 |
2,583 |
8,437 |
(2,525 |
) |
446 |
14,100 |
320 |
25,146 |
1,127 |
20,842 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(2,974 |
) |
207 |
(11,472 |
) |
(9,803 |
) |
(67 |
) |
(9,093 |
) |
(309 |
) |
(24,624 |
) |
(1,168 |
) |
(24,268 |
) |
||||||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
170 |
2,790 |
(3,035 |
) |
(12,328 |
) |
379 |
5,007 |
11 |
522 |
(41 |
) |
(3,426 |
) |
|||||||||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
(302 |
) |
$ |
2,735 |
$ |
(3,388 |
) |
$ |
(13,095 |
) |
$ |
315 |
$ |
4,000 |
$ |
23 |
$ |
722 |
$ |
(79 |
) |
$ |
(3,920 |
) |
||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-24
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
MFS Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||||
|
MFS New
Discovery IC |
MFS New
Discovery SC |
MFS
Research IC |
MFS
Research SC |
MFS Total
Return IC |
MFS Total
Return SC |
MFS
Utilities IC |
MFS
Utilities SC |
MFS VIT
Total Return Bond SC |
MFS VIT
Value SC |
||||||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
— |
$ |
— |
$ |
53 |
$ |
30 |
$ |
724 |
$ |
2,068 |
$ |
172 |
$ |
1,631 |
$ |
21,440 |
$ |
8,642 |
|||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
34 |
1,273 |
98 |
70 |
358 |
913 |
57 |
570 |
6,827 |
4,280 |
|||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(34 |
) |
(1,273 |
) |
(45 |
) |
(40 |
) |
366 |
1,155 |
115 |
1,061 |
14,613 |
4,362 |
|||||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
(2 |
) |
(1,635 |
) |
142 |
252 |
750 |
2,852 |
302 |
4,495 |
151 |
30,241 |
|||||||||||||||||||||||||||||||
|
Capital gain distributions |
75 |
4,091 |
541 |
497 |
1,029 |
3,272 |
284 |
2,862 |
— |
24,362 |
|||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
73 |
2,456 |
683 |
749 |
1,779 |
6,124 |
586 |
7,357 |
151 |
54,603 |
|||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(104 |
) |
(4,166 |
) |
(668 |
) |
(788 |
) |
(2,570 |
) |
(8,870 |
) |
(1,364 |
) |
(15,569 |
) |
(23,916 |
) |
(73,304 |
) |
|||||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
(31 |
) |
(1,710 |
) |
15 |
(39 |
) |
(791 |
) |
(2,746 |
) |
(778 |
) |
(8,212 |
) |
(23,765 |
) |
(18,701 |
) |
||||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
(65 |
) |
$ |
(2,983 |
) |
$ |
(30 |
) |
$ |
(79 |
) |
$ |
(425 |
) |
$ |
(1,591 |
) |
$ |
(663 |
) |
$ |
(7,151 |
) |
$ |
(9,152 |
) |
$ |
(14,339 |
) |
|||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-25
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
MFS Variable Insurance Trust II |
Oppenheimer Variable Account Funds |
||||||||||||||||||||||||||||||||||||||
|
MFS VIT II
Emerging Markets Equity SC |
MFS VIT II
International Value SC |
MFS VIT II
MA Investors Growth Stock IC |
MFS VIT II
MA Investors Growth Stock SC |
Oppenheimer
Capital Appreciation Fund/VA |
Oppenheimer
Capital Appreciation Fund/VA SC |
Oppenheimer
Discovery Mid Cap Growth Fund/VA |
Oppenheimer
Discovery Mid Cap Growth Fund/VA SC |
Oppenheimer
Global Fund/VA |
|||||||||||||||||||||||||||||||
|
Dividend income |
$ |
5 |
$ |
1,631 |
$ |
11 |
$ |
270 |
$ |
9 |
$ |
— |
$ |
— |
$ |
— |
$ |
129 |
|||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
9 |
762 |
22 |
395 |
125 |
483 |
42 |
10 |
128 |
||||||||||||||||||||||||||||||
|
Net investment income (loss) |
(4 |
) |
869 |
(11 |
) |
(125 |
) |
(116 |
) |
(483 |
) |
(42 |
) |
(10 |
) |
1 |
|||||||||||||||||||||||
|
Net Realized And Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
(87 |
) |
1,980 |
3 |
(266 |
) |
307 |
(530 |
) |
77 |
75 |
343 |
|||||||||||||||||||||||||||
|
Capital gain distributions |
— |
933 |
125 |
3,411 |
1,648 |
9,341 |
260 |
81 |
642 |
||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
(87 |
) |
2,913 |
128 |
3,145 |
1,955 |
8,811 |
337 |
156 |
985 |
|||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(18 |
) |
(2,010 |
) |
(168 |
) |
(4,505 |
) |
(1,614 |
) |
(8,494 |
) |
(144 |
) |
(94 |
) |
(660 |
) |
|||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
(105 |
) |
903 |
(40 |
) |
(1,360 |
) |
341 |
317 |
193 |
62 |
325 |
|||||||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
(109 |
) |
$ |
1,772 |
$ |
(51 |
) |
$ |
(1,485 |
) |
$ |
225 |
$ |
(166 |
) |
$ |
151 |
$ |
52 |
$ |
326 |
|||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-26
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Oppenheimer Variable Account Funds |
PIMCO Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||||||
|
Oppenheimer
Global Fund/VA SC |
Oppenheimer
Global Strategic Income Fund/VA |
Oppenheimer
Global Strategic Income Fund/VA SC |
Oppenheimer
Main Street Fund/VA |
Oppenheimer
Main Street Fund/VA SC |
Oppenheimer
Money Fund/VA |
PIMCO VIT
All Asset Advisor |
PIMCO VIT
Global Diversified Allocation Portfolio |
PIMCO VIT
Long-Term US Government Advisor |
PIMCO VIT
Low Duration Advisor |
||||||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
4,174 |
$ |
878 |
$ |
22,764 |
$ |
106 |
$ |
131 |
$ |
112 |
$ |
26 |
$ |
100 |
$ |
301 |
$ |
2,896 |
|||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and
administrative charges |
3,977 |
203 |
4,551 |
154 |
258 |
11,763 |
9 |
37 |
186 |
1,021 |
|||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
197 |
675 |
18,213 |
(48 |
) |
(127 |
) |
(11,651 |
) |
17 |
63 |
115 |
1,875 |
||||||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains
(Losses) on Investments |
|||||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption
of investment shares |
(2,862 |
) |
98 |
(74 |
) |
346 |
(232 |
) |
— |
(26 |
) |
2 |
(40 |
) |
(26 |
) |
|||||||||||||||||||||||||||
|
Capital gain distributions |
25,711 |
— |
— |
1,736 |
3,067 |
— |
— |
209 |
— |
— |
|||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
22,849 |
98 |
(74 |
) |
2,082 |
2,835 |
— |
(26 |
) |
211 |
(40 |
) |
(26 |
) |
|||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(17,509 |
) |
(1,264 |
) |
(32,464 |
) |
(1,804 |
) |
(2,922 |
) |
— |
(72 |
) |
(479 |
) |
(563 |
) |
(2,691 |
) |
||||||||||||||||||||||||
|
Net realized and unrealized gain (loss)
on investments |
5,340 |
(1,166 |
) |
(32,538 |
) |
278 |
(87 |
) |
— |
(98 |
) |
(268 |
) |
(603 |
) |
(2,717 |
) |
||||||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
5,537 |
$ |
(491 |
) |
$ |
(14,325 |
) |
$ |
230 |
$ |
(214 |
) |
$ |
(11,651 |
) |
$ |
(81 |
) |
$ |
(205 |
) |
$ |
(488 |
) |
$ |
(842 |
) |
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-27
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF OPERATIONS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
PIMCO Variable Insurance Trust |
Royce Capital Fund |
Rydex Variable Trust |
The
Universal Institutional Funds, Inc. |
Van Eck
Worldwide Insurance Trust |
|||||||||||||||||||||||||||||||||||||||
|
PIMCO VIT
Real Return Advisor |
PIMCO VIT
Short-Term Advisor |
PIMCO VIT
Total Return Advisor |
Royce Capital
Fund Micro-Cap SC |
Royce Capital
Fund Small-Cap SC |
Rydex
Commodities Strategy |
Rydex
Inverse Government Long Bond |
Rydex
Inverse S&P 500 Strategy |
UIF Global
Real Estate II |
Van Eck
Global Hard Asset |
||||||||||||||||||||||||||||||||||
|
Investment Income |
|||||||||||||||||||||||||||||||||||||||||||
|
Dividend income |
$ |
15,621 |
$ |
603 |
$ |
42,574 |
$ |
— |
$ |
459 |
$ |
— |
$ |
— |
$ |
— |
$ |
218 |
$ |
— |
|||||||||||||||||||||||
|
Expenses |
|||||||||||||||||||||||||||||||||||||||||||
|
Mortality and expense risk and administrative
charges |
4,227 |
860 |
9,845 |
216 |
1,959 |
— |
— |
— |
127 |
4 |
|||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
11,394 |
(257 |
) |
32,729 |
(216 |
) |
(1,500 |
) |
— |
— |
— |
91 |
(4 |
) |
|||||||||||||||||||||||||||||
|
Net Realized and Unrealized Gains (Losses)
on Investments |
|||||||||||||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on redemption of
investment shares |
(966 |
) |
117 |
(708 |
) |
(643 |
) |
(12,343 |
) |
— |
— |
— |
184 |
5 |
|||||||||||||||||||||||||||||
|
Capital gain distributions |
— |
38 |
9,292 |
961 |
26,712 |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||
|
Net realized gain (loss) on investments |
(966 |
) |
155 |
8,584 |
318 |
14,369 |
— |
— |
— |
184 |
5 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(25,792 |
) |
23 |
(48,511 |
) |
(3,167 |
) |
(35,729 |
) |
(3 |
) |
— |
— |
(552 |
) |
(97 |
) |
||||||||||||||||||||||||||
|
Net realized and unrealized gain (loss) on
investments |
(26,758 |
) |
178 |
(39,927 |
) |
(2,849 |
) |
(21,360 |
) |
(3 |
) |
— |
— |
(368 |
) |
(92 |
) |
||||||||||||||||||||||||||
|
Net Increase (Decrease) in Net Assets
Resulting from Operations |
$ |
(15,364 |
) |
$ |
(79 |
) |
$ |
(7,198 |
) |
$ |
(3,065 |
) |
$ |
(22,860 |
) |
$ |
(3 |
) |
$ |
— |
$ |
— |
$ |
(277 |
) |
$ |
(96 |
) |
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-28
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 2015
($ in thousands)
|
American Funds Insurance Series |
|||||||||||||||||||||||||||||||||||||||||||
|
American
Funds Asset Allocation Class 2 |
American
Funds Asset Allocation Class 4 |
American
Funds Blue Chip Income & Growth Class 2 |
American
Funds Blue Chip Income & Growth Class 4 |
American
Funds Global Growth Class 2 |
American
Funds Global Growth Class 4 |
American
Funds Global Small Capitalization Class 2 |
American
Funds Global Small Capitalization Class 4 |
American
Funds Growth Class 2 |
American
Funds Growth Class 4 |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
423 |
$ |
7 |
$ |
32 |
$ |
3 |
$ |
54 |
$ |
8 |
$ |
— |
$ |
— |
$ |
5 |
$ |
— |
|||||||||||||||||||||||
|
Net realized gain (loss) on investments |
5,310 |
— |
— |
(2 |
) |
— |
(1 |
) |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(5,592 |
) |
(9 |
) |
(32 |
) |
(3 |
) |
20 |
(4 |
) |
(2 |
) |
— |
9 |
4 |
|||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
141 |
(2 |
) |
— |
(2 |
) |
74 |
3 |
(2 |
) |
— |
14 |
4 |
||||||||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
2,469 |
692 |
2,169 |
223 |
8,242 |
1,529 |
111 |
9 |
1,522 |
200 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(481 |
) |
(1 |
) |
(1 |
) |
— |
(23 |
) |
(3 |
) |
— |
— |
(2 |
) |
— |
|||||||||||||||||||||||||||
|
Contract owners' benefits |
(5,455 |
) |
(12 |
) |
(6 |
) |
(2 |
) |
(32 |
) |
(8 |
) |
(3 |
) |
— |
— |
(1 |
) |
|||||||||||||||||||||||||
|
Transfer (to) from other portfolios |
(180 |
) |
31 |
158 |
(1 |
) |
1,393 |
72 |
17 |
— |
135 |
8 |
|||||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(3,647 |
) |
710 |
2,320 |
220 |
9,580 |
1,590 |
125 |
9 |
1,655 |
207 |
||||||||||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(3,506 |
) |
708 |
2,320 |
218 |
9,654 |
1,593 |
123 |
9 |
1,669 |
211 |
||||||||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
66,817 |
— |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
63,311 |
$ |
708 |
$ |
2,320 |
$ |
218 |
$ |
9,654 |
$ |
1,593 |
$ |
123 |
$ |
9 |
$ |
1,669 |
$ |
211 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-29
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
American Funds Insurance Series |
Calvert
Variable Series, Inc. |
Fidelity Variable Insurance Products |
|||||||||||||||||||||||||||||||||||||
|
American
Funds International Class 2 |
American
Funds International Class 4 |
American
Funds New World Class 2 |
American
Funds New World Class 4 |
Calvert
VP SRI Balanced |
Fidelity
Contrafund Portfolio SC2 |
Fidelity
Equity Income SC2 |
Fidelity
Freedom Fund - 2015 Maturity SC2 |
Fidelity
Freedom Fund - 2020 Maturity SC2 |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
4 |
$ |
— |
$ |
1 |
$ |
— |
$ |
(18 |
) |
$ |
(1,009 |
) |
$ |
154 |
$ |
6 |
$ |
13 |
|||||||||||||||||||
|
Net realized gain (loss) on investments |
— |
— |
— |
— |
7 |
25,244 |
912 |
12 |
52 |
||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(12 |
) |
— |
(1 |
) |
— |
(37 |
) |
(30,822 |
) |
(1,509 |
) |
(41 |
) |
(97 |
) |
|||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting
from operations |
(8 |
) |
— |
— |
— |
(48 |
) |
(6,587 |
) |
(443 |
) |
(23 |
) |
(32 |
) |
||||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
406 |
4 |
242 |
— |
19,085 |
4 |
— |
— |
|||||||||||||||||||||||||||||||
|
Contract maintenance fees |
— |
— |
— |
(1 |
) |
(2,375 |
) |
(61 |
) |
(7 |
) |
(17 |
) |
||||||||||||||||||||||||||
|
Contract owners' benefits |
(3 |
) |
— |
— |
— |
(98 |
) |
(15,788 |
) |
(1,212 |
) |
(35 |
) |
(165 |
) |
||||||||||||||||||||||||
|
Transfer (to) from other portfolios |
25 |
— |
19 |
— |
(71,571 |
) |
80 |
223 |
348 |
||||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting
from variable annuity contract transactions |
428 |
4 |
261 |
— |
(99 |
) |
(70,649 |
) |
(1,189 |
) |
181 |
166 |
|||||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
420 |
4 |
261 |
— |
(147 |
) |
(77,236 |
) |
(1,632 |
) |
158 |
134 |
|||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
— |
— |
— |
— |
1,498 |
261,613 |
9,403 |
889 |
1,963 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
420 |
$ |
4 |
$ |
261 |
$ |
— |
$ |
1,351 |
$ |
184,377 |
$ |
7,771 |
$ |
1,047 |
$ |
2,097 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-30
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Fidelity Variable Insurance Products |
Franklin Templeton Variable Insurance Products Trust |
||||||||||||||||||||||||||||||||||||||
|
Fidelity
Growth Portfolio SC2 |
Fidelity
Index 500 Portfolio SC2 |
Fidelity
Investment Grade Bonds SC2 |
Fidelity
Mid Cap SC2 |
Franklin
Flex Cap Growth VIP CL 2 |
Franklin
Income VIP CL 2 |
Franklin
Rising Dividend VIP CL 2 |
Franklin
Mutual Shares VIP CL 2 |
Franklin
Small Cap Value VIP CL 2 |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(30 |
) |
$ |
2,742 |
$ |
2,752 |
$ |
(2,616 |
) |
$ |
(238 |
) |
$ |
6,265 |
$ |
10,738 |
$ |
1,605 |
$ |
(207 |
) |
|||||||||||||||||
|
Net realized gain (loss) on investments |
239 |
(10,179 |
) |
116 |
20,632 |
11,425 |
(1,421 |
) |
50,333 |
36,181 |
5,855 |
||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(24 |
) |
(10,810 |
) |
(6,646 |
) |
(27,331 |
) |
(10,830 |
) |
(19,105 |
) |
(101,302 |
) |
(56,571 |
) |
(9,851 |
) |
|||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
operations |
185 |
(18,247 |
) |
(3,778 |
) |
(9,315 |
) |
357 |
(14,261 |
) |
(40,231 |
) |
(18,785 |
) |
(4,203 |
) |
|||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
2 |
213,353 |
22,998 |
26,068 |
1,113 |
20,073 |
30,521 |
18,296 |
1,505 |
||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(10 |
) |
(929 |
) |
(1,951 |
) |
(3,006 |
) |
(194 |
) |
(1,332 |
) |
(6,632 |
) |
(3,217 |
) |
(440 |
) |
|||||||||||||||||||||
|
Contract owners' benefits |
(364 |
) |
(10,024 |
) |
(11,393 |
) |
(16,136 |
) |
(1,626 |
) |
(16,174 |
) |
(41,250 |
) |
(22,106 |
) |
(2,679 |
) |
|||||||||||||||||||||
|
Transfer (to) from other portfolios |
(42 |
) |
(87,735 |
) |
30,911 |
(151,593 |
) |
(1,461 |
) |
(13,434 |
) |
(186,308 |
) |
(119,953 |
) |
(1,437 |
) |
||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
variable annuity contract transactions |
(414 |
) |
114,665 |
40,565 |
(144,667 |
) |
(2,168 |
) |
(10,867 |
) |
(203,669 |
) |
(126,980 |
) |
(3,051 |
) |
|||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(229 |
) |
96,418 |
36,787 |
(153,982 |
) |
(1,811 |
) |
(25,128 |
) |
(243,900 |
) |
(145,765 |
) |
(7,254 |
) |
|||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
3,191 |
135,088 |
159,057 |
324,649 |
20,782 |
175,785 |
728,537 |
374,563 |
47,346 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
2,962 |
$ |
231,506 |
$ |
195,844 |
$ |
170,667 |
$ |
18,971 |
$ |
150,657 |
$ |
484,637 |
$ |
228,798 |
$ |
40,092 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-31
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Franklin Templeton Variable Insurance Products Trust |
Goldman Sachs Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||
|
Franklin
Small-Mid Cap Growth VIP CL 2 |
Franklin US
Government Securities VIP CL 2 |
Templeton
Developing Markets VIP CL 2 |
Templeton
Foreign VIP CL 2 |
Templeton
Global Bond VIP Fund CL 2 |
Templeton
Growth VIP CL 2 |
Goldman
Sachs Global Trends Allocation Fund SC |
Goldman
Sachs Large Cap Value |
Goldman
Sachs Large Cap Value Fund SC |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(315 |
) |
$ |
8,877 |
$ |
11 |
$ |
2,662 |
$ |
23,500 |
$ |
2,379 |
$ |
(72 |
) |
$ |
106 |
$ |
27 |
|||||||||||||||||||
|
Net realized gain (loss) on investments |
5,017 |
(798 |
) |
45 |
2,683 |
1,306 |
(842 |
) |
153 |
6,590 |
16,224 |
||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
(5,621 |
) |
(11,319 |
) |
(522 |
) |
(13,718 |
) |
(44,454 |
) |
(12,275 |
) |
(468 |
) |
(9,864 |
) |
(24,674 |
) |
|||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
operations |
(919 |
) |
(3,240 |
) |
(466 |
) |
(8,373 |
) |
(19,648 |
) |
(10,738 |
) |
(387 |
) |
(3,168 |
) |
(8,423 |
) |
|||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
2,662 |
14,883 |
1,788 |
6,035 |
22,443 |
2,449 |
501 |
219 |
47 |
||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(238 |
) |
(6,961 |
) |
(14 |
) |
(1,015 |
) |
(3,963 |
) |
(1,164 |
) |
(69 |
) |
(78 |
) |
(1,639 |
) |
|||||||||||||||||||||
|
Contract owners' benefits |
(1,884 |
) |
(35,440 |
) |
(81 |
) |
(8,142 |
) |
(20,873 |
) |
(10,390 |
) |
(404 |
) |
(8,001 |
) |
(11,806 |
) |
|||||||||||||||||||||
|
Transfer (to) from other portfolios |
(8,807 |
) |
(38,571 |
) |
(998 |
) |
2,509 |
23,212 |
3,903 |
2,750 |
(1,116 |
) |
(17,360 |
) |
|||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
variable annuity contract transactions |
(8,267 |
) |
(66,089 |
) |
695 |
(613 |
) |
20,819 |
(5,202 |
) |
2,778 |
(8,976 |
) |
(30,758 |
) |
||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(9,186 |
) |
(69,329 |
) |
229 |
(8,986 |
) |
1,171 |
(15,940 |
) |
2,391 |
(12,144 |
) |
(39,181 |
) |
||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
27,779 |
623,015 |
1,265 |
107,207 |
347,037 |
141,369 |
4,444 |
64,132 |
170,959 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
18,593 |
$ |
553,686 |
$ |
1,494 |
$ |
98,221 |
$ |
348,208 |
$ |
125,429 |
$ |
6,835 |
$ |
51,988 |
$ |
131,778 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-32
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Goldman Sachs Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs Mid Cap Value |
Goldman
Sachs Mid Cap Value SC |
Goldman
Sachs Small Cap Equity Insights |
Goldman
Sachs Small Cap Equity Insights SC |
Goldman
Sachs Strategic Growth |
Goldman
Sachs Strategic Growth SC |
Goldman
Sachs Strategic International Equity |
Goldman
Sachs Strategic International Equity SC |
Goldman
Sachs US Equity Insights |
Goldman
Sachs US Equity Insights SC |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(52 |
) |
$ |
(1,365 |
) |
$ |
(278 |
) |
$ |
(167 |
) |
$ |
(309 |
) |
$ |
(1,814 |
) |
$ |
181 |
$ |
231 |
$ |
(15 |
) |
$ |
(1 |
) |
|||||||||||||||
|
Net realized gain (loss) on investments |
647 |
3,045 |
3,649 |
2,998 |
2,582 |
11,786 |
(543 |
) |
800 |
3,938 |
100 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(1,441 |
) |
(12,479 |
) |
(4,166 |
) |
(3,357 |
) |
(1,366 |
) |
(10,824 |
) |
669 |
(1,285 |
) |
(4,419 |
) |
(114 |
) |
||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
(846 |
) |
(10,799 |
) |
(795 |
) |
(526 |
) |
907 |
(852 |
) |
307 |
(254 |
) |
(496 |
) |
(15 |
) |
|||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
43 |
9,597 |
44 |
3 |
93 |
7,852 |
72 |
2,550 |
98 |
1 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(9 |
) |
(1,386 |
) |
(56 |
) |
(238 |
) |
(65 |
) |
(1,823 |
) |
(127 |
) |
(595 |
) |
(20 |
) |
(8 |
) |
|||||||||||||||||||||||
|
Contract owners' benefits |
(1,616 |
) |
(6,734 |
) |
(4,001 |
) |
(2,120 |
) |
(5,382 |
) |
(9,709 |
) |
(4,976 |
) |
(4,967 |
) |
(4,934 |
) |
(124 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
132 |
(66,681 |
) |
(744 |
) |
(1,449 |
) |
(686 |
) |
(14,196 |
) |
58 |
(19 |
) |
(352 |
) |
(36 |
) |
|||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(1,450 |
) |
(65,204 |
) |
(4,757 |
) |
(3,804 |
) |
(6,040 |
) |
(17,876 |
) |
(4,973 |
) |
(3,031 |
) |
(5,208 |
) |
(167 |
) |
|||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(2,296 |
) |
(76,003 |
) |
(5,552 |
) |
(4,330 |
) |
(5,133 |
) |
(18,728 |
) |
(4,666 |
) |
(3,285 |
) |
(5,704 |
) |
(182 |
) |
|||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
9,659 |
152,268 |
31,751 |
23,079 |
40,289 |
176,080 |
35,657 |
51,151 |
37,542 |
852 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
7,363 |
$ |
76,265 |
$ |
26,199 |
$ |
18,749 |
$ |
35,156 |
$ |
157,352 |
$ |
30,991 |
$ |
47,866 |
$ |
31,838 |
$ |
670 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-33
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Goldman Sachs
Variable Insurance Trust |
Guggenheim Variable Fund |
Invesco Variable
Insurance Funds |
|||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs VIT Growth Opportunities SC |
Goldman
Sachs VIT Core Fixed Income Fund SC |
Guggenheim
Floating Rate Strategies (Series F) |
Guggenheim
Global Managed Futures Strategy |
Guggenheim
Long Short Equity |
Guggenheim
Macro Opportunities Strategies (Series M) |
Guggenheim
Multi-Hedge Strategies |
Invesco VI
American Franchise I |
Invesco VI
American Franchise II |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(800 |
) |
$ |
29 |
$ |
12 |
$ |
4 |
$ |
(2 |
) |
$ |
1 |
$ |
(1 |
) |
$ |
(73 |
) |
$ |
(36 |
) |
||||||||||||||||
|
Net realized gain (loss) on investments |
4,678 |
— |
1 |
8 |
— |
— |
— |
190 |
419 |
||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(8,137 |
) |
(95 |
) |
(31 |
) |
(22 |
) |
1 |
(4 |
) |
3 |
108 |
(246 |
) |
||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
(4,259 |
) |
(66 |
) |
(18 |
) |
(10 |
) |
(1 |
) |
(3 |
) |
2 |
225 |
137 |
||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
811 |
9,673 |
484 |
85 |
92 |
99 |
339 |
73 |
6 |
||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(648 |
) |
(27 |
) |
(1 |
) |
— |
— |
— |
— |
(3 |
) |
(12 |
) |
|||||||||||||||||||||||||
|
Contract owners' benefits |
(4,009 |
) |
(43 |
) |
(22 |
) |
— |
(5 |
) |
— |
(7 |
) |
(854 |
) |
(635 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
(7,117 |
) |
1,508 |
637 |
105 |
100 |
31 |
108 |
319 |
(80 |
) |
||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(10,963 |
) |
11,111 |
1,098 |
190 |
187 |
130 |
440 |
(465 |
) |
(721 |
) |
|||||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(15,222 |
) |
11,045 |
1,080 |
180 |
186 |
127 |
442 |
(240 |
) |
(584 |
) |
|||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
75,575 |
— |
547 |
165 |
52 |
4 |
182 |
6,276 |
3,775 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
60,353 |
$ |
11,045 |
$ |
1,627 |
$ |
345 |
$ |
238 |
$ |
131 |
$ |
624 |
$ |
6,036 |
$ |
3,191 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-34
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Invesco Variable Insurance Funds |
|||||||||||||||||||||||||||||||||||||||||||
|
Invesco VI
American Value II |
Invesco VI
Balanced Risk Allocation II |
Invesco VI
Comstock I |
Invesco VI
Comstock II |
Invesco VI
Equity and Income II |
Invesco VI
Global Real Estate II |
Invesco VI
Government Securities II |
Invesco VI
Growth & Income I |
Invesco VI
Growth & Income II |
Invesco VI
International Growth II |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(577 |
) |
$ |
1,946 |
$ |
226 |
$ |
916 |
$ |
1,532 |
$ |
(1 |
) |
$ |
1,000 |
$ |
618 |
$ |
4,596 |
$ |
(83 |
) |
||||||||||||||||||||
|
Net realized gain (loss) on investments |
5,823 |
6,665 |
2,563 |
9,516 |
19,221 |
371 |
34 |
6,344 |
61,800 |
(1,247 |
) |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(10,106 |
) |
(13,203 |
) |
(5,164 |
) |
(24,308 |
) |
(30,910 |
) |
(756 |
) |
(1,768 |
) |
(8,515 |
) |
(104,153 |
) |
(2,781 |
) |
|||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
(4,860 |
) |
(4,592 |
) |
(2,375 |
) |
(13,876 |
) |
(10,157 |
) |
(386 |
) |
(734 |
) |
(1,553 |
) |
(37,757 |
) |
(4,111 |
) |
|||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
7,656 |
3,710 |
156 |
5,016 |
14,658 |
2,551 |
9,720 |
92 |
37,241 |
6,173 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(682 |
) |
(833 |
) |
(13 |
) |
(1,426 |
) |
(1,963 |
) |
(80 |
) |
(920 |
) |
(13 |
) |
(6,426 |
) |
(709 |
) |
|||||||||||||||||||||||
|
Contract owners' benefits |
(2,163 |
) |
(4,604 |
) |
(5,485 |
) |
(16,738 |
) |
(17,477 |
) |
(327 |
) |
(10,594 |
) |
(4,950 |
) |
(35,812 |
) |
(2,736 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
(50,096 |
) |
12,672 |
(980 |
) |
(23,095 |
) |
(59,978 |
) |
(11,605 |
) |
1,432 |
(1,179 |
) |
(181,824 |
) |
(22,717 |
) |
|||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(45,285 |
) |
10,945 |
(6,322 |
) |
(36,243 |
) |
(64,760 |
) |
(9,461 |
) |
(362 |
) |
(6,050 |
) |
(186,821 |
) |
(19,989 |
) |
||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(50,145 |
) |
6,353 |
(8,697 |
) |
(50,119 |
) |
(74,917 |
) |
(9,847 |
) |
(1,096 |
) |
(7,603 |
) |
(224,578 |
) |
(24,100 |
) |
||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
78,129 |
69,261 |
38,137 |
208,968 |
239,404 |
12,807 |
98,609 |
41,653 |
636,165 |
59,535 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
27,984 |
$ |
75,614 |
$ |
29,440 |
$ |
158,849 |
$ |
164,487 |
$ |
2,960 |
$ |
97,513 |
$ |
34,050 |
$ |
411,587 |
$ |
35,435 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-35
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Invesco Variable
Insurance Funds |
Legg Mason Partners Variable Equity Trust |
Lord Abbett Series Fund, Inc. |
|||||||||||||||||||||||||||||||||||||
|
Invesco VI
Mid-Cap Growth II |
Invesco VI
Small Cap Equity II |
ClearBridge
Variable Mid Cap Core II |
ClearBridge
Variable Small Cap Growth II |
QS Legg Mason
Dynamic Multi-Strategy VIT II |
Lord Abbett
Bond Debenture VC |
Lord Abbett
Calibrated Dividend Growth VC |
Lord Abbett
Classic Stock VC |
Lord Abbett
Growth & Income VC |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(420 |
) |
$ |
(122 |
) |
$ |
(634 |
) |
$ |
(149 |
) |
$ |
(282 |
) |
$ |
19,128 |
$ |
371 |
$ |
(83 |
) |
$ |
46 |
|||||||||||||||
|
Net realized gain (loss) on investments |
5,099 |
1,106 |
1,028 |
(522 |
) |
430 |
4,659 |
3,047 |
2,516 |
11,201 |
|||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(4,657 |
) |
(1,814 |
) |
(876 |
) |
(333 |
) |
(2,930 |
) |
(41,288 |
) |
(5,114 |
) |
(3,527 |
) |
(15,186 |
) |
|||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
22 |
(830 |
) |
(482 |
) |
(1,004 |
) |
(2,782 |
) |
(17,501 |
) |
(1,696 |
) |
(1,094 |
) |
(3,939 |
) |
||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
1,969 |
1,733 |
4,199 |
1,328 |
1,967 |
29,881 |
8,236 |
1,552 |
266 |
||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(342 |
) |
(139 |
) |
(609 |
) |
(113 |
) |
(482 |
) |
(6,870 |
) |
(254 |
) |
(244 |
) |
(488 |
) |
|||||||||||||||||||||
|
Contract owners' benefits |
(2,569 |
) |
(477 |
) |
(3,128 |
) |
(513 |
) |
(1,447 |
) |
(38,869 |
) |
(5,805 |
) |
(1,493 |
) |
(13,968 |
) |
|||||||||||||||||||||
|
Transfer (to) from other portfolios |
(6,517 |
) |
(11,559 |
) |
(21,876 |
) |
(2,661 |
) |
3,637 |
77,805 |
(5,413 |
) |
(4,817 |
) |
(4,644 |
) |
|||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(7,459 |
) |
(10,442 |
) |
(21,414 |
) |
(1,959 |
) |
3,675 |
61,947 |
(3,236 |
) |
(5,002 |
) |
(18,834 |
) |
|||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(7,437 |
) |
(11,272 |
) |
(21,896 |
) |
(2,963 |
) |
893 |
44,446 |
(4,932 |
) |
(6,096 |
) |
(22,773 |
) |
|||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
40,027 |
16,478 |
59,161 |
11,731 |
38,387 |
574,288 |
49,855 |
25,074 |
111,740 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
32,590 |
$ |
5,206 |
$ |
37,265 |
$ |
8,768 |
$ |
39,280 |
$ |
618,734 |
$ |
44,923 |
$ |
18,978 |
$ |
88,967 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-36
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Lord Abbett Series Fund, Inc. |
MFS Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||||||
|
Lord Abbett
Growth Opportunities VC |
Lord Abbett
International Opportunities VC |
Lord Abbett
Mid Cap Stock VC |
Lord Abbett
Series Fundamental Equity VC |
MFS
Growth Series IC |
MFS
Growth Series SC |
MFS
Investors Growth Stock IC |
MFS
Investors Growth Stock SC |
MFS
Investors Trust IC |
MFS
Investors Trust SC |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(472 |
) |
$ |
(55 |
) |
$ |
(353 |
) |
$ |
(767 |
) |
$ |
(64 |
) |
$ |
(1,007 |
) |
$ |
12 |
$ |
200 |
$ |
(38 |
) |
$ |
(494 |
) |
|||||||||||||||
|
Net realized gain (loss) on investments |
3,144 |
2,583 |
8,437 |
(2,525 |
) |
446 |
14,100 |
320 |
25,146 |
1,127 |
20,842 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(2,974 |
) |
207 |
(11,472 |
) |
(9,803 |
) |
(67 |
) |
(9,093 |
) |
(309 |
) |
(24,624 |
) |
(1,168 |
) |
(24,268 |
) |
||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
(302 |
) |
2,735 |
(3,388 |
) |
(13,095 |
) |
315 |
4,000 |
23 |
722 |
(79 |
) |
(3,920 |
) |
||||||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
6,826 |
4 |
1,882 |
12,063 |
11 |
1,119 |
— |
58 |
40 |
1,612 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(510 |
) |
(311 |
) |
(377 |
) |
(2,180 |
) |
(4 |
) |
(1,098 |
) |
— |
(166 |
) |
(4 |
) |
(1,568 |
) |
||||||||||||||||||||||||
|
Contract owners' benefits |
(3,622 |
) |
(2,866 |
) |
(9,988 |
) |
(10,908 |
) |
(544 |
) |
(5,138 |
) |
(130 |
) |
(1,669 |
) |
(1,099 |
) |
(6,842 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
7,429 |
1,129 |
(5,159 |
) |
(84,266 |
) |
208 |
(70,921 |
) |
(2,313 |
) |
(67,145 |
) |
— |
(110,282 |
) |
|||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
10,123 |
(2,044 |
) |
(13,642 |
) |
(85,291 |
) |
(329 |
) |
(76,038 |
) |
(2,443 |
) |
(68,922 |
) |
(1,063 |
) |
(117,080 |
) |
||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
9,821 |
691 |
(17,030 |
) |
(98,386 |
) |
(14 |
) |
(72,038 |
) |
(2,420 |
) |
(68,200 |
) |
(1,142 |
) |
(121,000 |
) |
|||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
28,558 |
27,249 |
83,064 |
223,533 |
5,404 |
130,103 |
2,420 |
68,200 |
8,995 |
191,030 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
38,379 |
$ |
27,940 |
$ |
66,034 |
$ |
125,147 |
$ |
5,390 |
$ |
58,065 |
$ |
— |
$ |
— |
$ |
7,853 |
$ |
70,030 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-37
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
MFS Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||||
|
MFS New
Discovery IC |
MFS New
Discovery SC |
MFS
Research IC |
MFS
Research SC |
MFS Total
Return IC |
MFS Total
Return SC |
MFS
Utilities IC |
MFS
Utilities SC |
MFS VIT
Total Return Bond SC |
MFS VIT
Value SC |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(34 |
) |
$ |
(1,273 |
) |
$ |
(45 |
) |
$ |
(40 |
) |
$ |
366 |
$ |
1,155 |
$ |
115 |
$ |
1,061 |
$ |
14,613 |
$ |
4,362 |
|||||||||||||||||||
|
Net realized gain (loss) on investments |
73 |
2,456 |
683 |
749 |
1,779 |
6,124 |
586 |
7,357 |
151 |
54,603 |
|||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(104 |
) |
(4,166 |
) |
(668 |
) |
(788 |
) |
(2,570 |
) |
(8,870 |
) |
(1,364 |
) |
(15,569 |
) |
(23,916 |
) |
(73,304 |
) |
|||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
(65 |
) |
(2,983 |
) |
(30 |
) |
(79 |
) |
(425 |
) |
(1,591 |
) |
(663 |
) |
(7,151 |
) |
(9,152 |
) |
(14,339 |
) |
|||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
1 |
911 |
24 |
3 |
150 |
525 |
3 |
726 |
4,457 |
3,492 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(1 |
) |
(1,244 |
) |
(4 |
) |
(47 |
) |
(10 |
) |
(594 |
) |
(1 |
) |
(427 |
) |
(7,536 |
) |
(4,183 |
) |
|||||||||||||||||||||||
|
Contract owners' benefits |
(350 |
) |
(7,340 |
) |
(797 |
) |
(634 |
) |
(3,626 |
) |
(8,214 |
) |
(738 |
) |
(3,639 |
) |
(35,380 |
) |
(21,554 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
(27 |
) |
(10,770 |
) |
(43 |
) |
(2,448 |
) |
(88 |
) |
(25,271 |
) |
(573 |
) |
(32,046 |
) |
(126,783 |
) |
(238,815 |
) |
|||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(377 |
) |
(18,443 |
) |
(820 |
) |
(3,126 |
) |
(3,574 |
) |
(33,554 |
) |
(1,309 |
) |
(35,386 |
) |
(165,242 |
) |
(261,060 |
) |
|||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(442 |
) |
(21,426 |
) |
(850 |
) |
(3,205 |
) |
(3,999 |
) |
(35,145 |
) |
(1,972 |
) |
(42,537 |
) |
(174,394 |
) |
(275,399 |
) |
|||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
2,594 |
94,951 |
7,558 |
7,680 |
29,780 |
102,488 |
5,090 |
78,284 |
741,457 |
516,769 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
2,152 |
$ |
73,525 |
$ |
6,708 |
$ |
4,475 |
$ |
25,781 |
$ |
67,343 |
$ |
3,118 |
$ |
35,747 |
$ |
567,063 |
$ |
241,370 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-38
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
MFS Variable Insurance Trust II |
Oppenheimer Variable Account Funds |
||||||||||||||||||||||||||||||||||||||
|
MFS VIT II
Emerging Markets Equity SC |
MFS VIT II
International Value SC |
MFS VIT II
MA Investors Growth Stock IC |
MFS VIT II
MA Investors Growth Stock SC |
Oppenheimer
Capital Appreciation Fund/VA |
Oppenheimer
Capital Appreciation Fund/VA SC |
Oppenheimer
Discovery Mid Cap Growth Fund/VA |
Oppenheimer
Discovery Mid Cap Growth Fund/VA SC |
Oppenheimer
Global Fund/VA |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(4 |
) |
$ |
869 |
$ |
(11 |
) |
$ |
(125 |
) |
$ |
(116 |
) |
$ |
(483 |
) |
$ |
(42 |
) |
$ |
(10 |
) |
$ |
1 |
||||||||||||||
|
Net realized gain (loss) on investments |
(87 |
) |
2,913 |
128 |
3,145 |
1,955 |
8,811 |
337 |
156 |
985 |
|||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(18 |
) |
(2,010 |
) |
(168 |
) |
(4,505 |
) |
(1,614 |
) |
(8,494 |
) |
(144 |
) |
(94 |
) |
(660 |
) |
|||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
(109 |
) |
1,772 |
(51 |
) |
(1,485 |
) |
225 |
(166 |
) |
151 |
52 |
326 |
||||||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
69 |
1,615 |
2 |
10 |
8 |
6,936 |
2 |
3 |
41 |
||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(8 |
) |
(969 |
) |
(1 |
) |
(479 |
) |
(5 |
) |
(555 |
) |
(2 |
) |
(5 |
) |
(3 |
) |
|||||||||||||||||||||
|
Contract owners' benefits |
(21 |
) |
(2,994 |
) |
(227 |
) |
(4,159 |
) |
(1,183 |
) |
(4,023 |
) |
(254 |
) |
(124 |
) |
(1,266 |
) |
|||||||||||||||||||||
|
Transfer (to) from other portfolios |
(635 |
) |
(58,082 |
) |
2,264 |
56,773 |
(230 |
) |
16,140 |
(22 |
) |
(19 |
) |
(214 |
) |
||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(595 |
) |
(60,430 |
) |
2,038 |
52,145 |
(1,410 |
) |
18,498 |
(276 |
) |
(145 |
) |
(1,442 |
) |
||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(704 |
) |
(58,658 |
) |
1,987 |
50,660 |
(1,185 |
) |
18,332 |
(125 |
) |
(93 |
) |
(1,116 |
) |
||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
1,241 |
89,173 |
— |
— |
9,817 |
40,005 |
2,907 |
1,012 |
10,207 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
537 |
$ |
30,515 |
$ |
1,987 |
$ |
50,660 |
$ |
8,632 |
$ |
58,337 |
$ |
2,782 |
$ |
919 |
$ |
9,091 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-39
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
Oppenheimer Variable Account Funds |
PIMCO Variable Insurance Trust |
||||||||||||||||||||||||||||||||||||||||||
|
Oppenheimer
Global Fund/VA SC |
Oppenheimer
Global Strategic Income Fund/VA |
Oppenheimer
Global Strategic Income Fund/VA SC |
Oppenheimer
Main Street Fund/VA |
Oppenheimer
Main Street Fund/VA SC |
Oppenheimer
Money Fund/VA |
PIMCO VIT
All Asset Advisor |
PIMCO VIT
Global Diversified Allocation Portfolio |
PIMCO VIT
Long-Term US Government Advisor |
PIMCO VIT
Low Duration Advisor |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
197 |
$ |
675 |
$ |
18,213 |
$ |
(48 |
) |
$ |
(127 |
) |
$ |
(11,651 |
) |
$ |
17 |
$ |
63 |
$ |
115 |
$ |
1,875 |
||||||||||||||||||||
|
Net realized gain (loss) on
investments |
22,849 |
98 |
(74 |
) |
2,082 |
2,835 |
— |
(26 |
) |
211 |
(40 |
) |
(26 |
) |
|||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(17,509 |
) |
(1,264 |
) |
(32,464 |
) |
(1,804 |
) |
(2,922 |
) |
— |
(72 |
) |
(479 |
) |
(563 |
) |
(2,691 |
) |
||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
5,537 |
(491 |
) |
(14,325 |
) |
230 |
(214 |
) |
(11,651 |
) |
(81 |
) |
(205 |
) |
(488 |
) |
(842 |
) |
|||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
12,728 |
127 |
8,889 |
46 |
9,377 |
5,646 |
459 |
623 |
1,694 |
7,129 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(3,536 |
) |
(7 |
) |
(4,622 |
) |
(5 |
) |
(226 |
) |
(15,095 |
) |
(5 |
) |
(31 |
) |
(170 |
) |
(922 |
) |
|||||||||||||||||||||||
|
Contract owners' benefits |
(22,155 |
) |
(2,401 |
) |
(27,267 |
) |
(1,378 |
) |
(1,577 |
) |
(74,530 |
) |
(17 |
) |
(80 |
) |
(777 |
) |
(6,485 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
(84,862 |
) |
23 |
77 |
(115 |
) |
8,929 |
2,193,675 |
(519 |
) |
2,939 |
2,680 |
5,344 |
||||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(97,825 |
) |
(2,258 |
) |
(22,923 |
) |
(1,452 |
) |
16,503 |
2,109,696 |
(82 |
) |
3,451 |
3,427 |
5,066 |
||||||||||||||||||||||||||||
|
Total increase (decrease) in
net assets |
(92,288 |
) |
(2,749 |
) |
(37,248 |
) |
(1,222 |
) |
16,289 |
2,098,045 |
(163 |
) |
3,246 |
2,939 |
4,224 |
||||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
362,251 |
16,068 |
425,726 |
12,203 |
19,448 |
447,994 |
887 |
1,299 |
13,894 |
83,935 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
269,963 |
$ |
13,319 |
$ |
388,478 |
$ |
10,981 |
$ |
35,737 |
$ |
2,546,039 |
$ |
724 |
$ |
4,545 |
$ |
16,833 |
$ |
88,159 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-40
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2015
($ in thousands)
|
PIMCO Variable Insurance Trust |
Royce Capital Fund |
Rydex Variable Trust |
The
Universal Institutional Funds, Inc. |
Van Eck
Worldwide Insurance Trust |
|||||||||||||||||||||||||||||||||||||||
|
PIMCO VIT
Real Return Advisor |
PIMCO VIT
Short-Term Advisor |
PIMCO VIT
Total Return Advisor |
Royce Capital
Fund Micro-Cap SC |
Royce Capital
Fund Small-Cap SC |
Rydex
Commodities Strategy |
Rydex
Inverse Government Long Bond |
Rydex
Inverse S&P 500 Strategy |
UIF Global
Real Estate II |
Van Eck
Global Hard Asset |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
11,394 |
$ |
(257 |
) |
$ |
32,729 |
$ |
(216 |
) |
$ |
(1,500 |
) |
$ |
— |
$ |
— |
$ |
— |
$ |
91 |
$ |
(4 |
) |
|||||||||||||||||||
|
Net realized gain (loss) on
investments |
(966 |
) |
155 |
8,584 |
318 |
14,369 |
— |
— |
— |
184 |
5 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(25,792 |
) |
23 |
(48,511 |
) |
(3,167 |
) |
(35,729 |
) |
(3 |
) |
— |
— |
(552 |
) |
(97 |
) |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
(15,364 |
) |
(79 |
) |
(7,198 |
) |
(3,065 |
) |
(22,860 |
) |
(3 |
) |
— |
— |
(277 |
) |
(96 |
) |
|||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
16,006 |
2,442 |
34,826 |
1,535 |
12,255 |
— |
— |
— |
5 |
— |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(4,430 |
) |
(806 |
) |
(9,775 |
) |
(193 |
) |
(1,840 |
) |
— |
— |
— |
(99 |
) |
— |
|||||||||||||||||||||||||||
|
Contract owners' benefits |
(19,879 |
) |
(5,597 |
) |
(49,384 |
) |
(1,067 |
) |
(9,070 |
) |
— |
— |
— |
(639 |
) |
(2 |
) |
||||||||||||||||||||||||||
|
Transfer (to) from other portfolios |
60,090 |
(4,062 |
) |
54,506 |
282 |
(65,877 |
) |
2 |
— |
— |
(208 |
) |
31 |
||||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
51,787 |
(8,023 |
) |
30,173 |
557 |
(64,532 |
) |
2 |
— |
— |
(941 |
) |
29 |
||||||||||||||||||||||||||||||
|
Total increase (decrease) in
net assets |
36,423 |
(8,102 |
) |
22,975 |
(2,508 |
) |
(87,392 |
) |
(1 |
) |
— |
— |
(1,218 |
) |
(67 |
) |
|||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
336,945 |
79,774 |
838,594 |
17,916 |
198,116 |
9 |
6 |
— |
10,471 |
241 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
373,368 |
$ |
71,672 |
$ |
861,569 |
$ |
15,408 |
$ |
110,724 |
$ |
8 |
$ |
6 |
$ |
— |
$ |
9,253 |
$ |
174 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-41
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS
For the Year Ended December 31, 2014
($ in thousands)
|
Goldman Sachs Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs Large Cap Value |
Goldman
Sachs Strategic International Equity |
Goldman
Sachs US Equity Insights |
Goldman
Sachs Small Cap Equity Insights |
Goldman
Sachs Strategic Growth |
Goldman
Sachs Mid Cap Value |
Goldman
Sachs Strategic Growth SC |
Goldman
Sachs Large Cap Value Fund SC |
Goldman
Sachs Strategic International Equity SC |
Goldman
Sachs Small Cap Equity Insights SC |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
82 |
$ |
977 |
$ |
6 |
$ |
(160 |
) |
$ |
(323 |
) |
$ |
(5 |
) |
$ |
(1,858 |
) |
$ |
— |
$ |
1,359 |
$ |
(77 |
) |
||||||||||||||||||
|
Net realized gain (loss) on investments |
13,800 |
(904 |
) |
4,773 |
4,954 |
10,739 |
1,939 |
38,784 |
36,536 |
1,930 |
3,849 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(6,393 |
) |
(3,473 |
) |
449 |
(3,089 |
) |
(5,672 |
) |
(753 |
) |
(17,879 |
) |
(17,794 |
) |
(8,126 |
) |
(2,491 |
) |
||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
7,489 |
(3,400 |
) |
5,228 |
1,705 |
4,744 |
1,181 |
19,047 |
18,742 |
(4,837 |
) |
1,281 |
|||||||||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
195 |
57 |
129 |
41 |
199 |
27 |
5,653 |
145 |
921 |
4 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(85 |
) |
(133 |
) |
(22 |
) |
(58 |
) |
(68 |
) |
(10 |
) |
(1,638 |
) |
(1,617 |
) |
(553 |
) |
(227 |
) |
|||||||||||||||||||||||
|
Surrenders |
(10,288 |
) |
(6,022 |
) |
(4,707 |
) |
(4,589 |
) |
(5,791 |
) |
(1,745 |
) |
(7,961 |
) |
(12,942 |
) |
(6,138 |
) |
(2,716 |
) |
|||||||||||||||||||||||
|
Death benefits |
(2,128 |
) |
(920 |
) |
(982 |
) |
(734 |
) |
(831 |
) |
(189 |
) |
(1,787 |
) |
(1,596 |
) |
(504 |
) |
(220 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
(2,712 |
) |
(233 |
) |
(1,018 |
) |
(778 |
) |
(1,669 |
) |
(392 |
) |
(8,322 |
) |
(13,636 |
) |
(315 |
) |
(382 |
) |
|||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(15,018 |
) |
(7,251 |
) |
(6,600 |
) |
(6,118 |
) |
(8,160 |
) |
(2,309 |
) |
(14,055 |
) |
(29,646 |
) |
(6,589 |
) |
(3,541 |
) |
|||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(7,529 |
) |
(10,651 |
) |
(1,372 |
) |
(4,413 |
) |
(3,416 |
) |
(1,128 |
) |
4,992 |
(10,904 |
) |
(11,426 |
) |
(2,260 |
) |
||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
71,661 |
46,308 |
38,914 |
36,164 |
43,705 |
10,787 |
171,088 |
181,863 |
62,577 |
25,339 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
64,132 |
$ |
35,657 |
$ |
37,542 |
$ |
31,751 |
$ |
40,289 |
$ |
9,659 |
$ |
176,080 |
$ |
170,959 |
$ |
51,151 |
$ |
23,079 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-42
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
Goldman Sachs Variable Insurance Trust |
Calvert
Variable Series, Inc. |
MFS Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||||
|
Goldman
Sachs US Equity Insights SC |
Goldman
Sachs VIT Growth Opportunities SC |
Goldman
Sachs Mid Cap Value SC |
Goldman
Sachs Global Markets Navigator SC |
Calvert
VP SRI Balanced |
MFS
Growth Series IC |
MFS
Research IC |
MFS
Investors Trust IC |
MFS
Total Return IC |
MFS New
Discovery IC |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(2 |
) |
$ |
(848 |
) |
$ |
(567 |
) |
$ |
(56 |
) |
$ |
— |
$ |
(69 |
) |
$ |
(41 |
) |
$ |
(39 |
) |
$ |
178 |
$ |
(41 |
) |
|||||||||||||||
|
Net realized gain (loss) on investments |
125 |
16,332 |
27,378 |
52 |
118 |
686 |
866 |
1,143 |
2,189 |
781 |
|||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(2 |
) |
(8,577 |
) |
(12,690 |
) |
128 |
8 |
(223 |
) |
(192 |
) |
(290 |
) |
(195 |
) |
(1,037 |
) |
|||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
121 |
6,907 |
14,121 |
124 |
126 |
394 |
633 |
814 |
2,172 |
(297 |
) |
||||||||||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
1 |
413 |
7,966 |
419 |
— |
23 |
20 |
71 |
23 |
— |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(7 |
) |
(576 |
) |
(1,491 |
) |
(47 |
) |
(1 |
) |
(4 |
) |
(5 |
) |
(5 |
) |
(12 |
) |
(1 |
) |
|||||||||||||||||||||||
|
Surrenders |
(64 |
) |
(4,011 |
) |
(5,621 |
) |
(415 |
) |
(311 |
) |
(671 |
) |
(862 |
) |
(1,165 |
) |
(4,432 |
) |
(414 |
) |
|||||||||||||||||||||||
|
Death benefits |
— |
(689 |
) |
(1,113 |
) |
— |
(26 |
) |
(141 |
) |
(110 |
) |
(236 |
) |
(897 |
) |
(47 |
) |
|||||||||||||||||||||||||
|
Transfer (to) from other portfolios |
(90 |
) |
(1,871 |
) |
(2,575 |
) |
1,097 |
(20 |
) |
123 |
71 |
(38 |
) |
(622 |
) |
(347 |
) |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(160 |
) |
(6,734 |
) |
(2,834 |
) |
1,054 |
(358 |
) |
(670 |
) |
(886 |
) |
(1,373 |
) |
(5,940 |
) |
(809 |
) |
||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(39 |
) |
173 |
11,287 |
1,178 |
(232 |
) |
(276 |
) |
(253 |
) |
(559 |
) |
(3,768 |
) |
(1,106 |
) |
||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
891 |
75,402 |
140,981 |
3,266 |
1,730 |
5,680 |
7,811 |
9,554 |
33,548 |
3,700 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
852 |
$ |
75,575 |
$ |
152,268 |
$ |
4,444 |
$ |
1,498 |
$ |
5,404 |
$ |
7,558 |
$ |
8,995 |
$ |
29,780 |
$ |
2,594 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-43
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
MFS Variable Insurance Trust |
|||||||||||||||||||||||||||||||||||||||
|
MFS
Utilities IC |
MFS
Investors Growth Stock IC |
MFS
Growth Series SC |
MFS
Research SC |
MFS
Investors Trust SC |
MFS
Total Return SC |
MFS New
Discovery SC |
MFS
Utilities SC |
MFS
Investors Growth Stock SC |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
39 |
$ |
(20 |
) |
$ |
(1,153 |
) |
$ |
(39 |
) |
$ |
(509 |
) |
$ |
646 |
$ |
(1,368 |
) |
$ |
586 |
$ |
(433 |
) |
|||||||||||||||
|
Net realized gain (loss) on investments |
392 |
173 |
7,540 |
732 |
14,186 |
4,615 |
25,941 |
4,248 |
8,439 |
||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
131 |
77 |
694 |
(141 |
) |
(336 |
) |
1,683 |
(41,787 |
) |
3,195 |
(1,579 |
) |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
operations |
562 |
230 |
7,081 |
552 |
13,341 |
6,944 |
(17,214 |
) |
8,029 |
6,427 |
|||||||||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
41 |
13 |
15,921 |
369 |
18,770 |
3,018 |
6,929 |
6,391 |
598 |
||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(1 |
) |
(1 |
) |
(1,286 |
) |
(51 |
) |
(1,918 |
) |
(651 |
) |
(1,128 |
) |
(732 |
) |
(645 |
) |
|||||||||||||||||||||
|
Surrenders |
(593 |
) |
(327 |
) |
(3,868 |
) |
(687 |
) |
(6,277 |
) |
(10,240 |
) |
(6,595 |
) |
(5,427 |
) |
(7,605 |
) |
|||||||||||||||||||||
|
Death benefits |
(90 |
) |
(70 |
) |
(803 |
) |
(106 |
) |
(1,558 |
) |
(1,983 |
) |
(889 |
) |
(709 |
) |
(559 |
) |
|||||||||||||||||||||
|
Transfer (to) from other portfolios |
48 |
(15 |
) |
5,244 |
593 |
5,415 |
1,354 |
(44,552 |
) |
(4,433 |
) |
(907 |
) |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
variable annuity contract transactions |
(595 |
) |
(400 |
) |
15,208 |
118 |
14,432 |
(8,502 |
) |
(46,235 |
) |
(4,910 |
) |
(9,118 |
) |
||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(33 |
) |
(170 |
) |
22,289 |
670 |
27,773 |
(1,558 |
) |
(63,449 |
) |
3,119 |
(2,691 |
) |
|||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
5,123 |
2,590 |
107,814 |
7,010 |
163,257 |
104,046 |
158,400 |
75,165 |
70,891 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
5,090 |
$ |
2,420 |
$ |
130,103 |
$ |
7,680 |
$ |
191,030 |
$ |
102,488 |
$ |
94,951 |
$ |
78,284 |
$ |
68,200 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-44
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
MFS Variable
Insurance Trust |
MFS Variable
Insurance Trust II |
Oppenheimer Variable Account Funds |
|||||||||||||||||||||||||||||||||||||||||
|
MFS VIT
Research Bond SC |
MFS VIT
Value SC |
MFS VIT II
Emerging Markets Equity SC |
MFS VIT II
International Value SC |
Oppenheimer
Money Fund/VA |
Oppenheimer
Discovery Mid Cap Growth Fund/VA |
Oppenheimer
Capital Appreciation Fund/VA |
Oppenheimer
Main Street Fund/VA |
Oppenheimer
Global Strategic Income Fund/VA |
Oppenheimer
Global Fund/VA |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
12,205 |
$ |
1,446 |
$ |
(29 |
) |
$ |
1,070 |
$ |
(3,060 |
) |
$ |
(43 |
) |
$ |
(87 |
) |
$ |
(61 |
) |
$ |
503 |
$ |
(20 |
) |
|||||||||||||||||
|
Net realized gain (loss) on investments |
358 |
24,314 |
(403 |
) |
63 |
— |
164 |
711 |
826 |
164 |
979 |
||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
17,795 |
10,730 |
58 |
(3,960 |
) |
1 |
(6 |
) |
625 |
338 |
(393 |
) |
(847 |
) |
|||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
30,358 |
36,490 |
(374 |
) |
(2,827 |
) |
(3,059 |
) |
115 |
1,249 |
1,103 |
274 |
112 |
||||||||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
55,291 |
33,951 |
1,051 |
21,940 |
5,743 |
4 |
52 |
49 |
45 |
29 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(7,315 |
) |
(4,958 |
) |
(56 |
) |
(1,196 |
) |
(3,254 |
) |
(2 |
) |
(6 |
) |
(6 |
) |
(8 |
) |
(4 |
) |
|||||||||||||||||||||||
|
Surrenders |
(28,864 |
) |
(18,827 |
) |
(145 |
) |
(1,925 |
) |
(53,605 |
) |
(417 |
) |
(1,213 |
) |
(1,413 |
) |
(1,958 |
) |
(1,426 |
) |
|||||||||||||||||||||||
|
Death benefits |
(6,780 |
) |
(4,343 |
) |
(20 |
) |
(851 |
) |
(5,592 |
) |
(80 |
) |
(252 |
) |
(363 |
) |
(421 |
) |
(210 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
56,188 |
2,638 |
(3,682 |
) |
(13,689 |
) |
391,573 |
(56 |
) |
(45 |
) |
(162 |
) |
(45 |
) |
(376 |
) |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
68,520 |
8,461 |
(2,852 |
) |
4,279 |
334,865 |
(551 |
) |
(1,464 |
) |
(1,895 |
) |
(2,387 |
) |
(1,987 |
) |
|||||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
98,878 |
44,951 |
(3,226 |
) |
1,452 |
331,806 |
(436 |
) |
(215 |
) |
(792 |
) |
(2,113 |
) |
(1,875 |
) |
|||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
642,579 |
471,818 |
4,467 |
87,721 |
116,188 |
3,343 |
10,032 |
12,995 |
18,181 |
12,082 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
741,457 |
$ |
516,769 |
$ |
1,241 |
$ |
89,173 |
$ |
447,994 |
$ |
2,907 |
$ |
9,817 |
$ |
12,203 |
$ |
16,068 |
$ |
10,207 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-45
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
Oppenheimer Variable Account Funds |
Van Eck
Worldwide Insurance Trust |
Invesco Variable Insurance Funds |
|||||||||||||||||||||||||||||||||||||||||
|
Oppenheimer
Discovery Mid Cap Growth Fund/VA SC |
Oppenheimer
Capital Appreciation Fund/VA SC |
Oppenheimer
Main Street Fund/VA SC |
Oppenheimer
Global Strategic Income Fund/VA SC |
Oppenheimer
Global Fund/VA SC |
Van Eck
Global Hard Asset |
Invesco VI
American Franchise I |
Invesco VI
Comstock I |
Invesco VI
Growth & Income I |
Invesco VI
Mid-Cap Growth II |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(10 |
) |
$ |
(283 |
) |
$ |
(118 |
) |
$ |
12,348 |
$ |
(896 |
) |
$ |
(5 |
) |
$ |
(75 |
) |
$ |
24 |
$ |
216 |
$ |
(450 |
) |
||||||||||||||||
|
Net realized gain (loss) on investments |
38 |
4,798 |
1,190 |
300 |
31,362 |
6 |
201 |
2,977 |
7,635 |
2,013 |
|||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
20 |
570 |
375 |
(6,553 |
) |
(30,976 |
) |
(63 |
) |
300 |
92 |
(4,121 |
) |
828 |
|||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
48 |
5,085 |
1,447 |
6,095 |
(510 |
) |
(62 |
) |
426 |
3,093 |
3,730 |
2,391 |
|||||||||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
4 |
598 |
912 |
9,093 |
9,305 |
— |
14 |
84 |
75 |
915 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(4 |
) |
(344 |
) |
(157 |
) |
(4,215 |
) |
(3,362 |
) |
— |
(3 |
) |
(15 |
) |
(15 |
) |
(316 |
) |
||||||||||||||||||||||||
|
Surrenders |
(89 |
) |
(3,917 |
) |
(1,530 |
) |
(27,667 |
) |
(21,747 |
) |
(9 |
) |
(918 |
) |
(5,816 |
) |
(6,263 |
) |
(2,639 |
) |
|||||||||||||||||||||||
|
Death benefits |
(16 |
) |
(350 |
) |
(76 |
) |
(4,404 |
) |
(3,674 |
) |
— |
(176 |
) |
(1,430 |
) |
(1,227 |
) |
(401 |
) |
||||||||||||||||||||||||
|
Transfer (to) from other portfolios |
45 |
(950 |
) |
(92 |
) |
19,731 |
(16,781 |
) |
(14 |
) |
(57 |
) |
(1,004 |
) |
(1,099 |
) |
(2,562 |
) |
|||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
(60 |
) |
(4,963 |
) |
(943 |
) |
(7,462 |
) |
(36,259 |
) |
(23 |
) |
(1,140 |
) |
(8,181 |
) |
(8,529 |
) |
(5,003 |
) |
|||||||||||||||||||||||
|
Total increase (decrease) in net assets |
(12 |
) |
122 |
504 |
(1,367 |
) |
(36,769 |
) |
(85 |
) |
(714 |
) |
(5,088 |
) |
(4,799 |
) |
(2,612 |
) |
|||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
1,024 |
39,883 |
18,944 |
427,093 |
399,020 |
326 |
6,990 |
43,225 |
46,452 |
42,639 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
1,012 |
$ |
40,005 |
$ |
19,448 |
$ |
425,726 |
$ |
362,251 |
$ |
241 |
$ |
6,276 |
$ |
38,137 |
$ |
41,653 |
$ |
40,027 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-46
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
Invesco Variable Insurance Funds |
The
Universal Institutional Funds, Inc. |
||||||||||||||||||||||||||||||||||||||||||||||
|
Invesco VI
Equity and Income II |
Invesco VI
American Franchise II |
Invesco VI
Comstock II |
Invesco VI
Growth & Income II |
Invesco VI
American Value II |
Invesco VI
Balanced Risk Allocation II |
Invesco VI
Government Securities II |
Invesco VI
International Growth II |
Invesco VI
Global Real Estate II |
Invesco VI
Small Cap Equity II |
UIF
Global Real Estate II |
|||||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
1,172 |
$ |
(40 |
) |
$ |
105 |
$ |
2,577 |
$ |
(484 |
) |
$ |
(1,003 |
) |
$ |
2,034 |
$ |
640 |
$ |
30 |
$ |
(119 |
) |
$ |
(58 |
) |
||||||||||||||||||||
|
Net realized gain (loss) on
investments |
16,777 |
442 |
11,306 |
82,038 |
4,399 |
3,960 |
23 |
(32 |
) |
(62 |
) |
613 |
316 |
||||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(1,841 |
) |
(140 |
) |
4,239 |
(39,501 |
) |
64 |
(1 |
) |
994 |
(3,358 |
) |
1,100 |
(888 |
) |
983 |
||||||||||||||||||||||||||||||
|
Net increase (decrease) in
net assets resulting from operations |
16,108 |
262 |
15,650 |
45,114 |
3,979 |
2,956 |
3,051 |
(2,750 |
) |
1,068 |
(394 |
) |
1,241 |
||||||||||||||||||||||||||||||||||
|
From Variable Annuity
Contract Transactions |
|||||||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
9,535 |
44 |
4,210 |
31,639 |
13,622 |
1,712 |
697 |
20,350 |
1,628 |
3,669 |
9 |
||||||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(1,815 |
) |
(11 |
) |
(1,371 |
) |
(5,917 |
) |
(806 |
) |
(715 |
) |
(827 |
) |
(1,003 |
) |
(111 |
) |
(150 |
) |
(84 |
) |
|||||||||||||||||||||||||
|
Surrenders |
(19,651 |
) |
(666 |
) |
(18,657 |
) |
(32,714 |
) |
(1,764 |
) |
(6,811 |
) |
(11,693 |
) |
(2,257 |
) |
(589 |
) |
(365 |
) |
(1,011 |
) |
|||||||||||||||||||||||||
|
Death benefits |
(3,360 |
) |
(116 |
) |
(2,999 |
) |
(6,035 |
) |
(480 |
) |
(267 |
) |
(1,660 |
) |
(646 |
) |
(34 |
) |
(103 |
) |
(96 |
) |
|||||||||||||||||||||||||
|
Transfer (to) from other
portfolios |
2,519 |
(64 |
) |
(9,360 |
) |
(5,848 |
) |
7,396 |
2,065 |
3,504 |
(35,310 |
) |
3,004 |
2,140 |
162 |
||||||||||||||||||||||||||||||||
|
Net increase (decrease) in
net assets resulting from variable annuity contract transactions |
(12,772 |
) |
(813 |
) |
(28,177 |
) |
(18,875 |
) |
17,968 |
(4,016 |
) |
(9,979 |
) |
(18,866 |
) |
3,898 |
5,191 |
(1,020 |
) |
||||||||||||||||||||||||||||
|
Total increase (decrease) in
net assets |
3,336 |
(551 |
) |
(12,527 |
) |
26,239 |
21,947 |
(1,060 |
) |
(6,928 |
) |
(21,616 |
) |
4,966 |
4,797 |
221 |
|||||||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
236,068 |
4,326 |
221,495 |
609,926 |
56,182 |
70,321 |
105,537 |
81,151 |
7,841 |
11,681 |
10,250 |
||||||||||||||||||||||||||||||||||||
|
End of period |
$ |
239,404 |
$ |
3,775 |
$ |
208,968 |
$ |
636,165 |
$ |
78,129 |
$ |
69,261 |
$ |
98,609 |
$ |
59,535 |
$ |
12,807 |
$ |
16,478 |
$ |
10,471 |
|||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-47
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
Lord Abbett Series Fund, Inc. |
Fidelity Variable Insurance Products |
||||||||||||||||||||||||||||||||||||||||||||||
|
Lord Abbett
Growth & Income VC |
Lord Abbett
Bond Debenture VC |
Lord Abbett
Mid Cap Stock VC |
Lord Abbett
Growth Opportunities VC |
Lord Abbett
Calibrated Dividend Growth VC |
Lord Abbett
International Opportunities VC |
Lord Abbett
Classic Stock VC |
Lord Abbett
Series Fundamental Equity VC |
Fidelity
Index 500 Portfolio SC2 |
Fidelity
Growth Portfolio SC2 |
Fidelity
Contrafund Portfolio SC2 |
|||||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(509 |
) |
$ |
20,774 |
$ |
(486 |
) |
$ |
(281 |
) |
$ |
313 |
$ |
103 |
$ |
(117 |
) |
$ |
(1,609 |
) |
$ |
822 |
$ |
(34 |
) |
$ |
(980 |
) |
||||||||||||||||||
|
Net realized gain (loss) on
investments |
8,400 |
17,366 |
5,002 |
6,174 |
7,637 |
4,241 |
3,151 |
39,251 |
2,122 |
383 |
15,018 |
||||||||||||||||||||||||||||||||||||
|
Net unrealized appreciation
(depreciation) on investments |
(675 |
) |
(20,764 |
) |
3,807 |
(4,538 |
) |
(3,061 |
) |
(6,244 |
) |
(1,455 |
) |
(27,933 |
) |
6,761 |
(26 |
) |
9,319 |
||||||||||||||||||||||||||||
|
Net increase (decrease) in
net assets resulting from operations |
7,216 |
17,376 |
8,323 |
1,355 |
4,889 |
(1,900 |
) |
1,579 |
9,709 |
9,705 |
323 |
23,357 |
|||||||||||||||||||||||||||||||||||
|
From Variable Annuity
Contract Transactions |
|||||||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
236 |
23,029 |
1,576 |
388 |
1,046 |
4 |
1,060 |
10,032 |
51,320 |
2 |
14,942 |
||||||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(469 |
) |
(5,354 |
) |
(348 |
) |
(223 |
) |
(230 |
) |
(266 |
) |
(239 |
) |
(2,244 |
) |
(643 |
) |
(9 |
) |
(2,209 |
) |
|||||||||||||||||||||||||
|
Surrenders |
(16,782 |
) |
(35,191 |
) |
(11,805 |
) |
(3,719 |
) |
(7,528 |
) |
(3,012 |
) |
(1,469 |
) |
(9,621 |
) |
(7,560 |
) |
(757 |
) |
(18,151 |
) |
|||||||||||||||||||||||||
|
Death benefits |
(2,546 |
) |
(5,913 |
) |
(1,709 |
) |
(291 |
) |
(1,164 |
) |
(303 |
) |
(317 |
) |
(1,972 |
) |
(1,083 |
) |
(13 |
) |
(1,991 |
) |
|||||||||||||||||||||||||
|
Transfer (to) from other
portfolios |
(4,956 |
) |
34,003 |
(2,482 |
) |
(1,180 |
) |
(2,355 |
) |
806 |
(701 |
) |
(4,227 |
) |
13,346 |
350 |
(2,971 |
) |
|||||||||||||||||||||||||||||
|
Net increase (decrease) in
net assets resulting from variable annuity contract transactions |
(24,517 |
) |
10,574 |
(14,768 |
) |
(5,025 |
) |
(10,231 |
) |
(2,771 |
) |
(1,666 |
) |
(8,032 |
) |
55,380 |
(427 |
) |
(10,380 |
) |
|||||||||||||||||||||||||||
|
Total increase (decrease) in
net assets |
(17,301 |
) |
27,950 |
(6,445 |
) |
(3,670 |
) |
(5,342 |
) |
(4,671 |
) |
(87 |
) |
1,677 |
65,085 |
(104 |
) |
12,977 |
|||||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
129,041 |
546,338 |
89,509 |
32,228 |
55,197 |
31,920 |
25,161 |
221,856 |
70,003 |
3,295 |
248,636 |
||||||||||||||||||||||||||||||||||||
|
End of period |
$ |
111,740 |
$ |
574,288 |
$ |
83,064 |
$ |
28,558 |
$ |
49,855 |
$ |
27,249 |
$ |
25,074 |
$ |
223,533 |
$ |
135,088 |
$ |
3,191 |
$ |
261,613 |
|||||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-48
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
Fidelity Variable Insurance Products |
Franklin Templeton Variable Insurance Products Trust |
||||||||||||||||||||||||||||||||||||||||||
|
Fidelity
Mid Cap SC2 |
Fidelity
Equity Income SC2 |
Fidelity
Investment Grade Bonds SC2 |
Fidelity
Freedom Fund - 2015 Maturity SC2 |
Fidelity
Freedom Fund - 2020 Maturity SC2 |
Franklin
Flex Cap Growth VIP CL 2 |
Franklin
Income VIP CL 2 |
Franklin
Rising Dividend VIP CL 2 |
Franklin
Small-Mid Cap Growth VIP CL 2 |
Franklin
Small Cap Value VIP CL 2 |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(3,268 |
) |
$ |
141 |
$ |
1,325 |
$ |
2 |
$ |
5 |
$ |
(235 |
) |
$ |
9,617 |
$ |
820 |
$ |
(312 |
) |
$ |
(265 |
) |
|||||||||||||||||||
|
Net realized gain (loss) on investments |
11,441 |
385 |
272 |
105 |
85 |
3,324 |
1,661 |
19,152 |
5,171 |
5,561 |
|||||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation)
on investments |
(1,813 |
) |
196 |
5,105 |
(74 |
) |
(19 |
) |
(2,303 |
) |
(3,721 |
) |
2,665 |
(3,591 |
) |
(6,331 |
) |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from operations |
6,360 |
722 |
6,702 |
33 |
71 |
786 |
7,557 |
22,637 |
1,268 |
(1,035 |
) |
||||||||||||||||||||||||||||||||
|
From Variable Annuity Contract
Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
27,446 |
5 |
4,952 |
1 |
4 |
612 |
16,807 |
14,704 |
1,805 |
1,327 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(3,086 |
) |
(56 |
) |
(1,461 |
) |
(5 |
) |
(14 |
) |
(165 |
) |
(1,780 |
) |
(3,353 |
) |
(216 |
) |
(421 |
) |
|||||||||||||||||||||||
|
Surrenders |
(14,409 |
) |
(1,102 |
) |
(9,648 |
) |
(270 |
) |
(67 |
) |
(2,102 |
) |
(22,805 |
) |
(23,694 |
) |
(1,482 |
) |
(2,571 |
) |
|||||||||||||||||||||||
|
Death benefits |
(2,833 |
) |
(201 |
) |
(1,722 |
) |
— |
(57 |
) |
(170 |
) |
(3,181 |
) |
(3,728 |
) |
(131 |
) |
(639 |
) |
||||||||||||||||||||||||
|
Transfer (to) from other portfolios |
2,456 |
(457 |
) |
9,090 |
49 |
179 |
(62 |
) |
(65,304 |
) |
(1,885 |
) |
(545 |
) |
(5,298 |
) |
|||||||||||||||||||||||||||
|
Net increase (decrease) in net assets
resulting from variable annuity contract transactions |
9,574 |
(1,811 |
) |
1,211 |
(225 |
) |
45 |
(1,887 |
) |
(76,263 |
) |
(17,956 |
) |
(569 |
) |
(7,602 |
) |
||||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
15,934 |
(1,089 |
) |
7,913 |
(192 |
) |
116 |
(1,101 |
) |
(68,706 |
) |
4,681 |
699 |
(8,637 |
) |
||||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
308,715 |
10,492 |
151,144 |
1,081 |
1,847 |
21,883 |
244,491 |
369,882 |
27,080 |
55,983 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
324,649 |
$ |
9,403 |
$ |
159,057 |
$ |
889 |
$ |
1,963 |
$ |
20,782 |
$ |
175,785 |
$ |
374,563 |
$ |
27,779 |
$ |
47,346 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-49
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
Franklin Templeton Variable Insurance Products Trust |
American
Funds Insurance Series |
Legg Mason Partners Variable Equity Trust |
|||||||||||||||||||||||||||||||||||||||||
|
Franklin US
Government Securities VIP CL 2 |
Templeton
Growth VIP CL 2 |
Templeton
Foreign VIP CL 2 |
Templeton
Global Bond VIP Fund CL 2 |
Templeton
Developing Markets VIP CL 2 |
Franklin
Mutual Shares VIP CL 2 |
American
Funds Asset Allocation Class 2 |
ClearBridge
Variable Mid Cap Core II |
ClearBridge
Variable Small Cap Growth II |
QS Legg Mason
Dynamic Multi-Strategy VIT II |
||||||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
9,644 |
$ |
538 |
$ |
1,137 |
$ |
13,143 |
$ |
46 |
$ |
7,130 |
$ |
314 |
$ |
(628 |
) |
$ |
(116 |
) |
$ |
(76 |
) |
||||||||||||||||||||
|
Net realized gain (loss) on investments |
(169 |
) |
7,255 |
3,714 |
87 |
(358 |
) |
27,765 |
5,559 |
7,773 |
1,296 |
447 |
|||||||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on
investments |
3,929 |
(13,897 |
) |
(19,858 |
) |
(11,293 |
) |
(83 |
) |
673 |
(3,006 |
) |
(5,275 |
) |
(1,583 |
) |
1,354 |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting
from operations |
13,404 |
(6,104 |
) |
(15,007 |
) |
1,937 |
(395 |
) |
35,568 |
2,867 |
1,870 |
(403 |
) |
1,725 |
|||||||||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
41,038 |
2,380 |
3,095 |
28,577 |
677 |
33,930 |
29 |
3,086 |
1,089 |
1,340 |
|||||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(6,270 |
) |
(1,184 |
) |
(1,020 |
) |
(3,285 |
) |
(49 |
) |
(6,809 |
) |
(433 |
) |
(552 |
) |
(75 |
) |
(409 |
) |
|||||||||||||||||||||||
|
Surrenders |
(29,273 |
) |
(10,944 |
) |
(10,126 |
) |
(20,193 |
) |
(171 |
) |
(41,307 |
) |
(3,881 |
) |
(2,539 |
) |
(473 |
) |
(904 |
) |
|||||||||||||||||||||||
|
Death benefits |
(6,399 |
) |
(2,111 |
) |
(1,202 |
) |
(3,486 |
) |
(10 |
) |
(7,326 |
) |
(867 |
) |
(508 |
) |
(45 |
) |
(99 |
) |
|||||||||||||||||||||||
|
Transfer (to) from other portfolios |
50,285 |
(17,585 |
) |
(8,686 |
) |
27,919 |
(3,001 |
) |
(33,056 |
) |
(1,268 |
) |
903 |
520 |
6,133 |
||||||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting
from variable annuity contract transactions |
49,381 |
(29,444 |
) |
(17,939 |
) |
29,532 |
(2,554 |
) |
(54,568 |
) |
(6,420 |
) |
390 |
1,016 |
6,061 |
||||||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
62,785 |
(35,548 |
) |
(32,946 |
) |
31,469 |
(2,949 |
) |
(19,000 |
) |
(3,553 |
) |
2,260 |
613 |
7,786 |
||||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
560,230 |
176,917 |
140,153 |
315,568 |
4,214 |
747,537 |
70,370 |
56,901 |
11,118 |
30,601 |
|||||||||||||||||||||||||||||||||
|
End of period |
$ |
623,015 |
$ |
141,369 |
$ |
107,207 |
$ |
347,037 |
$ |
1,265 |
$ |
728,537 |
$ |
66,817 |
$ |
59,161 |
$ |
11,731 |
$ |
38,387 |
|||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-50
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
PIMCO Variable Insurance Trust |
Royce Capital Fund |
||||||||||||||||||||||||||||||||||||||
|
PIMCO VIT
Long-Term US Government Advisor |
PIMCO VIT
Low Duration Advisor |
PIMCO VIT
Real Return Advisor |
PIMCO VIT
Short-Term Advisor |
PIMCO VIT
Total Return Advisor |
PIMCO VIT
All Asset Advisor |
PIMCO VIT
Global Diversified Allocation Portfolio |
Royce
Capital Fund Micro-Cap SC |
Royce
Capital Fund Small-Cap SC |
|||||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
119 |
$ |
(178 |
) |
$ |
429 |
$ |
(518 |
) |
$ |
7,972 |
$ |
152 |
$ |
32 |
$ |
(283 |
) |
$ |
(2,300 |
) |
|||||||||||||||||
|
Net realized gain (loss) on investments |
(22 |
) |
48 |
(259 |
) |
109 |
(41 |
) |
(310 |
) |
21 |
2,135 |
32,417 |
||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on investments |
2,380 |
(280 |
) |
5,426 |
(96 |
) |
16,664 |
227 |
(11 |
) |
(3,565 |
) |
(32,863 |
) |
|||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
operations |
2,477 |
(410 |
) |
5,596 |
(505 |
) |
24,595 |
69 |
42 |
(1,713 |
) |
(2,746 |
) |
||||||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
971 |
3,188 |
14,306 |
2,529 |
23,192 |
694 |
185 |
1,675 |
11,067 |
||||||||||||||||||||||||||||||
|
Contract maintenance fees |
(123 |
) |
(805 |
) |
(3,527 |
) |
(802 |
) |
(8,111 |
) |
(77 |
) |
(11 |
) |
(226 |
) |
(1,963 |
) |
|||||||||||||||||||||
|
Surrenders |
(494 |
) |
(6,897 |
) |
(15,930 |
) |
(6,391 |
) |
(44,209 |
) |
(181 |
) |
(57 |
) |
(1,187 |
) |
(8,754 |
) |
|||||||||||||||||||||
|
Death benefits |
(248 |
) |
(1,073 |
) |
(2,808 |
) |
(640 |
) |
(8,240 |
) |
(73 |
) |
— |
(172 |
) |
(1,603 |
) |
||||||||||||||||||||||
|
Transfer (to) from other portfolios |
247 |
3,713 |
21,348 |
2,676 |
32,869 |
(5,958 |
) |
525 |
(10,452 |
) |
(7,371 |
) |
|||||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from variable
annuity contract transactions |
353 |
(1,874 |
) |
13,389 |
(2,628 |
) |
(4,499 |
) |
(5,595 |
) |
642 |
(10,362 |
) |
(8,624 |
) |
||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
2,830 |
(2,284 |
) |
18,985 |
(3,133 |
) |
20,096 |
(5,526 |
) |
684 |
(12,075 |
) |
(11,370 |
) |
|||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||||||
|
Beginning of period |
11,064 |
86,219 |
317,960 |
82,907 |
818,498 |
6,413 |
615 |
29,991 |
209,486 |
||||||||||||||||||||||||||||||
|
End of period |
$ |
13,894 |
$ |
83,935 |
$ |
336,945 |
$ |
79,774 |
$ |
838,594 |
$ |
887 |
$ |
1,299 |
$ |
17,916 |
$ |
198,116 |
|||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-51
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
STATEMENT OF CHANGES IN NET ASSETS, CONTINUED
For the Year Ended December 31, 2014
($ in thousands)
|
Guggenheim Variable Fund |
Rydex Variable Trust |
||||||||||||||||||||||||||||||||||
|
Guggenheim
Floating Rate Strategies (Series F) |
Guggenheim
Macro Opportunities Strategies (Series M) |
Guggenheim
Multi-Hedge Strategies |
Guggenheim
Global Managed Futures Strategy |
Guggenheim
Long Short Equity |
Rydex
Inverse S&P 500 Strategy |
Rydex
Inverse Government Long Bond |
Rydex
Commodities Strategy |
||||||||||||||||||||||||||||
|
From Operations |
|||||||||||||||||||||||||||||||||||
|
Net investment income (loss) |
$ |
(3 |
) |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
||||||||||||||||||
|
Net realized gain (loss) on investments |
— |
— |
— |
— |
— |
(5 |
) |
1 |
— |
||||||||||||||||||||||||||
|
Net unrealized appreciation (depreciation) on investments |
4 |
— |
7 |
14 |
2 |
— |
(4 |
) |
(4 |
) |
|||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from
operations |
1 |
— |
7 |
14 |
2 |
(5 |
) |
(3 |
) |
(4 |
) |
||||||||||||||||||||||||
|
From Variable Annuity Contract Transactions |
|||||||||||||||||||||||||||||||||||
|
Contract owners' net payments |
336 |
4 |
158 |
110 |
31 |
38 |
— |
4 |
|||||||||||||||||||||||||||
|
Contract maintenance fees |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Surrenders |
(3 |
) |
— |
(5 |
) |
— |
(2 |
) |
— |
— |
— |
||||||||||||||||||||||||
|
Death benefits |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Transfer (to) from other portfolios |
129 |
— |
22 |
41 |
21 |
(33 |
) |
2 |
2 |
||||||||||||||||||||||||||
|
Net increase (decrease) in net assets resulting from variable
annuity contract transactions |
462 |
4 |
175 |
151 |
50 |
5 |
2 |
6 |
|||||||||||||||||||||||||||
|
Total increase (decrease) in net assets |
463 |
4 |
182 |
165 |
52 |
— |
(1 |
) |
2 |
||||||||||||||||||||||||||
|
Net Assets |
|||||||||||||||||||||||||||||||||||
|
Beginning of period |
84 |
— |
— |
— |
— |
— |
7 |
7 |
|||||||||||||||||||||||||||
|
End of period |
$ |
547 |
$ |
4 |
$ |
182 |
$ |
165 |
$ |
52 |
$ |
— |
$ |
6 |
$ |
9 |
|||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
FSA-52
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
1. ORGANIZATION
The Protective Variable Annuity Separate Account ("Separate Account") was established by Protective Life Insurance Company ("Protective Life") under the provisions of Tennessee law and commenced operations on March 14, 1994. Protective Life is a wholly owned subsidiary of Protective Life Corporation ("PLC"). On February 1, 2015, PLC and its subsidiaries became wholly owned subsidiaries of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan. The Separate Account is an investment account to which net proceeds from individual flexible premium deferred variable annuity contracts ("Contracts") issued by Protective Life are allocated until maturity or termination of the Contracts. The following is a list of each variable annuity product funded by the Separate Account:
|
Dimensions II |
Protective Rewards |
||||||
|
Elements Access |
Protective Rewards B2A |
||||||
|
Elements Classic |
Protective Rewards Elite |
||||||
|
Elements Plus |
Protective Values |
||||||
|
Mileage Credit |
Protective Values Access |
||||||
|
Protective Access |
Protective Values Advantage |
||||||
|
Protective Access XL |
Protective Variable Annuity |
||||||
|
Protective Advantage |
Protective Variable Annuity (2012) L, B, C Series |
||||||
|
Protective Dimensions |
Protective Variable Annuity II |
||||||
|
Protective Investors Series |
Protective Variable Annuity II B Series |
||||||
Protective Life has structured the Separate Account into a unit investment trust form registered with the U.S. Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended. The Separate Account follows the accounting and reporting guidance in ASC Topic 946, "Financial Services — Investment Companies".
During the years ended December 31, 2015 and 2014, assets were invested in one hundred twenty three subaccounts.
American Funds Asset Allocation Class 2
American Funds Asset Allocation Class 4(c)
American Funds Blue Chip Income & Growth Class 2(c)
American Funds Blue Chip Income & Growth Class 4(c)
American Funds Global Growth Class 2(c)
American Funds Global Growth Class 4(c)
American Funds Global Small Cap Class 2(c)
American Funds Global Small Cap Class 4(c)
American Funds Growth Class 2(c)
American Funds Growth Class 4(c)
American Funds International Class 2(c)
American Funds International Class 4(c)
American Funds New World Class 2(c)
American Funds New World Class 4(c)
Calvert VP SRI Balanced
ClearBridge Variable Mid Cap Core II
ClearBridge Variable Small Cap Growth II
Fidelity Contrafund Portfolio SC2
Fidelity Equity Income SC2
Fidelity Freedom Fund - 2015 Maturity SC2
Fidelity Freedom Fund - 2020 Maturity SC2
Fidelity Growth Portfolio SC2
Fidelity Index 500 Portfolio SC2
Fidelity Investment Grade Bonds SC2
Fidelity Mid Cap SC2
Franklin Flex Cap Growth VIP CL 2
Franklin Income VIP CL 2
Franklin Mutual Shares VIP CL 2
Franklin Rising Dividend VIP CL 2
Franklin Small Cap Value VIP CL 2
Franklin Small-Mid Cap Growth VIP CL 2
Franklin US Government Securities VIP CL 2
Goldman Sachs Global Trends Allocation SC(d)
Goldman Sachs Large Cap Value
FSA-53
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
1. ORGANIZATION — (Continued)
Goldman Sachs Large Cap Value Fund SC
Goldman Sachs Mid Cap Value
Goldman Sachs Mid Cap Value SC
Goldman Sachs Small Cap Equity Insights
Goldman Sachs Small Cap Equity Insights SC
Goldman Sachs Strategic Growth
Goldman Sachs Strategic Growth SC
Goldman Sachs Strategic International Equity
Goldman Sachs Strategic International Equity SC
Goldman Sachs US Equity Insights
Goldman Sachs US Equity Insights SC
Goldman Sachs VIT Core Fixed Income SC(c)
Goldman Sachs VIT Growth Opportunities SC
Guggenheim Floating Rate Strategies (Series F)
Guggenheim Global Managed Futures Strategy
Guggenheim Long Short Equity
Guggenheim Macro Opportunities Strategies (Series M)
Guggenheim Multi-Hedge Strategies
Invesco VI American Franchise I
Invesco VI American Franchise II
Invesco VI American Value II
Invesco VI Balanced Risk Allocation II
Invesco VI Comstock I
Invesco VI Comstock II
Invesco VI Equity and Income II
Invesco VI Global Real Estate II
Invesco VI Government Securities II
Invesco VI Growth & Income I
Invesco VI Growth & Income II
Invesco VI International Growth II
Invesco VI Mid-Cap Growth II
Invesco VI Small Cap Equity II
Lord Abbett Bond Debenture VC
Lord Abbett Calibrated Dividend Growth VC
Lord Abbett Classic Stock VC
Lord Abbett Growth & Income VC
Lord Abbett Growth Opportunities VC
Lord Abbett International Opportunities VC
Lord Abbett Mid Cap Stock VC
Lord Abbett Series Fundamental Equity VC
MFS Growth Series IC
MFS Growth Series SC
MFS Investors Growth Stock IC(a)
MFS Investors Growth Stock SC(a)
MFS Investors Trust IC
MFS Investors Trust SC
MFS New Discovery IC
MFS New Discovery SC
MFS Research IC
MFS Research SC
MFS Total Return IC
MFS Total Return SC
MFS Utilities IC
MFS Utilities SC
MFS VIT Total Return Bond Series SC(d)
MFS VIT Value SC
MFS VIT II Emerging Markets Equity SC
MFS VIT II International Value SC
MFS VIT II MA Investors Growth Stock IC(b)
MFS VIT II MA Investors Growth Stock SC(b)
Oppenheimer Capital Appreciation Fund/VA
Oppenheimer Capital Appreciation Fund/VA SC
Oppenheimer Discovery Mid Cap Growth Fund/VA
Oppenheimer Discovery Mid Cap Growth Fund/VA SC
Oppenheimer Global Fund/VA
Oppenheimer Global Fund/VA SC
Oppenheimer Global Strategic Income Fund/VA
Oppenheimer Global Strategic Income Fund/VA SC
Oppenheimer Main Street Fund/VA
Oppenheimer Main Street Fund/VA SC
Oppenheimer Money Fund/VA
PIMCO VIT All Asset Advisor
PIMCO VIT Global Diversified Allocation Portfolio
PIMCO VIT Long-Term US Government Advisor
PIMCO VIT Low Duration Advisor
PIMCO VIT Real Return Advisor
PIMCO VIT Short-Term Advisor
PIMCO VIT Total Return Advisor
QS Legg Mason Dynamic Multi-Strategy VIT II
Royce Capital Fund Micro-Cap SC
Royce Capital Fund Small-Cap SC
Rydex Commodities Strategy
Rydex Inverse Government Long Bond
Rydex Inverse S&P 500 Strategy
FSA-54
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
1. ORGANIZATION — (Continued)
Templeton Developing Markets VIP CL 2
Templeton Foreign VIP CL 2
Templeton Global Bond VIP Fund CL 2
Templeton Growth VIP CL 2
UIF Global Real Estate II
Van Eck Global Hard Asset
(a) Subaccount closed, March 28, 2015.
(b) Subaccount opened, March 28, 2015.
(c) Subaccount opened, June 29, 2015.
(d) Subaccount name changed. See below.
|
Old Subaccount Name |
New Subaccount Name |
||||||
|
Goldman Sachs Global Markets Navigator SC |
Goldman Sachs Global Trends Allocation SC |
||||||
|
MFS VIT Research Bond SC |
MFS VIT Total Return Bond Series SC |
||||||
Gross premiums from the Contracts are allocated to the subaccounts in accordance with contract owner instructions and are recorded as variable annuity contract transactions in the statement of changes in net assets. Such amounts are used to provide account funds to pay contract values under the Contracts. The Separate Account's assets are the property of Protective Life and are segregated from Protective Life's other assets.
Contract owners may allocate some or all of the applicable gross premiums or transfer some or all of the contract value to the Guaranteed Account, which is part of Protective Life's General Account. The assets of Protective Life's General Account support its insurance and annuity obligations and are subject to Protective Life's general liabilities from business operations. The Guaranteed Account's balance as of December 31, 2015 was approximately $234.5 million.
2. SIGNIFICANT ACCOUNTING POLICIES
Investment Valuation
Investments are made and measured in shares and are valued at the net asset values of the respective fund portfolios ("Funds"), whose investments are stated at fair value. The net assets of each subaccount of the Separate Account reflect the investment management fees and other operating expenses incurred by the Funds. Transactions with the Funds are recorded on the trade date.
Net Realized Gains and Losses
Net realized gains and losses on investments include gains and losses on redemptions of the Funds' shares (determined for each product using the last-in-first-out (LIFO) basis) and capital gain distributions from the Funds.
Dividend Income and Capital Gain Distributions
Dividend income and capital gain distributions are recorded on the ex-dividend date and are reinvested in additional shares of the portfolio. Ordinary dividend and capital gain distributions are from net investment income and net realized gains, respectively, as recorded in the financial statements of the underlying investment company.
FSA-55
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
2. SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Accumulation Unit Value
The Accumulation Unit Value for each class of Accumulation Units in a subaccount at the end of every Valuation Date is the Accumulation Unit value for that class at the end of the previous Valuation Date times the net investment factor as defined in the underlying product prospectuses.
Net transfers (to) from Affiliate or Subaccounts
Net transfers (to) from affiliate or subaccounts include transfers of all or part of the contract owner's interest to or from another subaccount or to the general account of Protective Life.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make various estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Federal Income Taxes
The results of the operations of the Separate Account are included in the federal income tax return of PLC. Under the provisions of the contracts, Protective Life has the right to charge the Separate Account for federal income tax attributable to the Separate Account. No charge has been made against the Separate Account for such tax during the year ended December 31, 2015. Management will periodically review the application of this policy in the event of changes in tax law. Accordingly, a change may be made in future years to consider charges for any federal income taxes that would be attributable to the contracts.
Annuity Payouts
Net assets allocated to contracts in the annuity payout period are computed according to the Annuity 2000 Mortality Table. The assumed investment return is 5%. The mortality risk is fully borne by Protective Life and may result in additional amounts being transferred into the Separate Account by Protective Life to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to Protective Life for the calculated or excess differential. As of December 31, 2015, there are 27 contracts in the annuity payout phase with net assets of approximately $1.3 million.
Risks and Uncertainties
The Separate Account provides for various subaccount investment options in any combination of mutual funds, each of which bears exposure to the market, credit and liquidity risks of the underlying portfolio in which it invests. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances, the amounts reported in the Statement of Assets and Liabilities and the amounts reported in the Statements of Changes in Net Assets. Accordingly, these financial statements should be read in conjunction with the financial statements and footnotes of the underlying mutual funds identified in Note 1.
FSA-56
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Separate Account determines the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The Separate Account has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy as outlined within the applicable guidance. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. As there are no level 2 or level 3 assets in any period presented, disclosure of transfers between levels or disclosure of a reconciliation of level 3 assets is not required. In addition, there are no other financial assets or assets valued on a non-recurring basis.
Financial assets recorded at fair value in the Statement of Assets and Liabilities are categorized as follows:
Level 1: Unadjusted quoted prices for identical assets in an active market.
Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:
a) Quoted prices for similar assets in active markets
b) Quoted prices for identical or similar assets in non-active markets
c) Inputs other than quoted market prices that are observable
d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.
Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management's own assumptions about the assumptions a market participant would use in pricing the asset.
Determination of fair values
The valuation methodologies used to determine the fair values of assets and liabilities under the FASB guidance referenced in the Fair Value Measurements and Disclosures Topic reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Separate Account determines the fair values of certain financial assets based on quoted market prices. All of the investments in the subaccounts of the Separate Account are classified as Level 1 in the fair value hierarchy and consist of open-ended mutual funds. Participants may, without restriction, transact at the daily net asset value ("NAV") of the mutual funds. The NAV represents the daily per share value based on the fair value of the underlying portfolio of investments of the respective mutual funds.
FSA-57
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
4. CHANGES IN UNITS OUTSTANDING
The change in units outstanding for the years ended December 31, 2015 and 2014 were as follows:
|
(in thousands) |
2015 |
2014 |
|||||||||||||||||||||||||
|
Subaccount |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
|||||||||||||||||||||
|
American Funds Asset Allocation
Class 2 |
446 |
629 |
(183 |
) |
330 |
708 |
(378 |
) |
|||||||||||||||||||
|
American Funds Asset Allocation
Class 4 |
74 |
2 |
72 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Blue Chip Income &
Growth Class 2 |
249 |
2 |
247 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Blue Chip Income &
Growth Class 4 |
32 |
9 |
23 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Global Growth Class 2 |
1,001 |
1 |
1,000 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Global Growth Class 4 |
167 |
1 |
166 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Global Small Cap
Class 2 |
14 |
0 |
14 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Global Small Cap
Class 4 |
1 |
0 |
1 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Growth Class 2 |
168 |
0 |
168 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds Growth Class 4 |
21 |
0 |
21 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds International Class 2 |
48 |
0 |
48 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds International Class 4 |
0 |
0 |
0 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds New World Class 2 |
29 |
0 |
29 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
American Funds New World Class 4 |
0 |
0 |
0 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
Calvert VP SRI Balanced |
5 |
10 |
5 |
— |
18 |
(18 |
) |
||||||||||||||||||||
|
ClearBridge Variable Mid Cap Core II |
1,761 |
3,099 |
(1,338 |
) |
1,646 |
1,721 |
(75 |
) |
|||||||||||||||||||
|
ClearBridge Variable Small Cap
Growth II |
462 |
607 |
(145 |
) |
729 |
714 |
15 |
||||||||||||||||||||
|
Fidelity Contrafund Portfolio SC2 |
4,976 |
9,632 |
4,656 |
1,702 |
2,294 |
(592 |
) |
||||||||||||||||||||
|
Fidelity Equity Income SC2 |
17 |
80 |
(63 |
) |
4 |
109 |
(105 |
) |
|||||||||||||||||||
|
Fidelity Freedom Fund - 2015
Maturity SC2 |
17 |
6 |
11 |
16 |
33 |
(17 |
) |
||||||||||||||||||||
|
Fidelity Freedom Fund - 2020
Maturity SC2 |
24 |
14 |
10 |
30 |
25 |
5 |
|||||||||||||||||||||
|
Fidelity Growth Portfolio SC2 |
5 |
27 |
(22 |
) |
28 |
46 |
(18 |
) |
|||||||||||||||||||
|
Fidelity Index 500 Portfolio SC2 |
24,433 |
18,813 |
5,620 |
3,850 |
508 |
3,342 |
|||||||||||||||||||||
|
Fidelity Investment Grade Bonds SC2 |
3,978 |
205 |
3,773 |
772 |
562 |
210 |
|||||||||||||||||||||
|
Fidelity Mid Cap SC2 |
3,411 |
12,984 |
9,573 |
9,673 |
9,412 |
261 |
|||||||||||||||||||||
|
Franklin Flex Cap Growth VIP CL 2 |
895 |
1,042 |
(147 |
) |
306 |
438 |
(132 |
) |
|||||||||||||||||||
|
Franklin Income VIP CL 2 |
3,780 |
4,469 |
(689 |
) |
2,978 |
8,487 |
(5,509 |
) |
|||||||||||||||||||
|
Franklin Mutual Shares VIP CL 2 |
8,639 |
22,728 |
(14,089 |
) |
9,512 |
13,719 |
(4,207 |
) |
|||||||||||||||||||
|
Franklin Rising Dividend VIP CL 2 |
3,497 |
11,835 |
(8,338 |
) |
3,856 |
5,103 |
(1,247 |
) |
|||||||||||||||||||
|
Franklin Small Cap Value VIP CL 2 |
912 |
1,132 |
(220 |
) |
621 |
1,116 |
(495 |
) |
|||||||||||||||||||
FSA-58
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
4. CHANGES IN UNITS OUTSTANDING — (Continued)
|
(in thousands) |
2015 |
2014 |
|||||||||||||||||||||||||
|
Subaccount |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
|||||||||||||||||||||
|
Franklin Small-Mid Cap Growth VIP CL 2 |
334 |
868 |
(534 |
) |
439 |
483 |
(44 |
) |
|||||||||||||||||||
|
Franklin US Government Securities
VIP CL 2 |
1,164 |
7,341 |
(6,177 |
) |
5,777 |
643 |
5,134 |
||||||||||||||||||||
|
Goldman Sachs Global Trends
Allocation SC |
397 |
136 |
261 |
173 |
74 |
99 |
|||||||||||||||||||||
|
Goldman Sachs Large Cap Value |
19 |
368 |
(349 |
) |
5 |
641 |
(636 |
) |
|||||||||||||||||||
|
Goldman Sachs Large Cap Value
Fund SC |
106 |
2,023 |
(1,917 |
) |
207 |
2,250 |
(2,043 |
) |
|||||||||||||||||||
|
Goldman Sachs Mid Cap Value |
10 |
65 |
(55 |
) |
6 |
96 |
(90 |
) |
|||||||||||||||||||
|
Goldman Sachs Mid Cap Value SC |
1,021 |
5,122 |
(4,101 |
) |
1,977 |
2,273 |
(296 |
) |
|||||||||||||||||||
|
Goldman Sachs Small Cap Equity
Insights |
5 |
132 |
(127 |
) |
3 |
177 |
(174 |
) |
|||||||||||||||||||
|
Goldman Sachs Small Cap Equity
Insights SC |
4 |
201 |
(197 |
) |
4 |
203 |
(199 |
) |
|||||||||||||||||||
|
Goldman Sachs Strategic Growth |
38 |
281 |
(243 |
) |
4 |
380 |
(376 |
) |
|||||||||||||||||||
|
Goldman Sachs Strategic Growth SC |
4,805 |
6,002 |
(1,197 |
) |
452 |
1,229 |
(777 |
) |
|||||||||||||||||||
|
Goldman Sachs Strategic International
Equity |
23 |
332 |
(309 |
) |
14 |
463 |
(449 |
) |
|||||||||||||||||||
|
Goldman Sachs Strategic International
Equity SC |
534 |
888 |
(354 |
) |
207 |
799 |
(592 |
) |
|||||||||||||||||||
|
Goldman Sachs US Equity Insights |
7 |
151 |
(144 |
) |
4 |
218 |
(214 |
) |
|||||||||||||||||||
|
Goldman Sachs US Equity Insights SC |
1 |
9 |
(8 |
) |
2 |
10 |
(8 |
) |
|||||||||||||||||||
|
Goldman Sachs VIT Core Fixed
Income SC |
1,110 |
1 |
1,109 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
Goldman Sachs VIT Growth
Opportunities SC |
108 |
725 |
(617 |
) |
202 |
562 |
(360 |
) |
|||||||||||||||||||
|
Guggenheim Floating Rate Strategies
(Series F) |
111 |
5 |
106 |
54 |
9 |
45 |
|||||||||||||||||||||
|
Guggenheim Global Managed Futures
Strategy |
17 |
1 |
16 |
14 |
0 |
14 |
|||||||||||||||||||||
|
Guggenheim Long Short Equity |
18 |
1 |
17 |
5 |
0 |
5 |
|||||||||||||||||||||
|
Guggenheim Macro Opportunities
Strategies (Series M) |
13 |
1 |
12 |
0 |
0 |
0 |
|||||||||||||||||||||
|
Guggenheim Multi-Hedge Strategies |
43 |
1 |
42 |
18 |
11 |
7 |
|||||||||||||||||||||
|
Invesco VI American Franchise I |
53 |
108 |
(55 |
) |
2 |
148 |
(146 |
) |
|||||||||||||||||||
|
Invesco VI American Franchise II |
3 |
68 |
(65 |
) |
14 |
91 |
(77 |
) |
|||||||||||||||||||
|
Invesco VI American Value II |
395 |
3,124 |
(2,729 |
) |
2,216 |
1,217 |
999 |
||||||||||||||||||||
|
Invesco VI Balanced Risk Allocation II |
1,598 |
717 |
881 |
825 |
1,123 |
(298 |
) |
||||||||||||||||||||
|
Invesco VI Comstock I |
8 |
251 |
(243 |
) |
9 |
332 |
(323 |
) |
|||||||||||||||||||
|
Invesco VI Comstock II |
721 |
2,620 |
(1,899 |
) |
619 |
1,795 |
(1,176 |
) |
|||||||||||||||||||
FSA-59
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
4. CHANGES IN UNITS OUTSTANDING — (Continued)
|
(in thousands) |
2015 |
2014 |
|||||||||||||||||||||||||
|
Subaccount |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
|||||||||||||||||||||
|
Invesco VI Equity and Income II |
2,166 |
6,361 |
(4,195 |
) |
1,960 |
2,442 |
(482 |
) |
|||||||||||||||||||
|
Invesco VI Global Real Estate II |
372 |
(1,147 |
) |
(775 |
) |
851 |
527 |
324 |
|||||||||||||||||||
|
Invesco VI Government Securities II |
851 |
819 |
32 |
352 |
1,283 |
(931 |
) |
||||||||||||||||||||
|
Invesco VI Growth & Income I |
8 |
274 |
(266 |
) |
11 |
399 |
(388 |
) |
|||||||||||||||||||
|
Invesco VI Growth & Income II |
11,532 |
23,561 |
(12,029 |
) |
6,433 |
7,354 |
(921 |
) |
|||||||||||||||||||
|
Invesco VI International Growth II |
5,487 |
7,373 |
(1,886 |
) |
4,686 |
6,420 |
(1,734 |
) |
|||||||||||||||||||
|
Invesco VI Mid-Cap Growth II |
416 |
841 |
(425 |
) |
198 |
496 |
(298 |
) |
|||||||||||||||||||
|
Invesco VI Small Cap Equity II |
190 |
982 |
(792 |
) |
1,256 |
916 |
340 |
||||||||||||||||||||
|
Lord Abbett Bond Debenture VC |
6,386 |
689 |
5,697 |
2,372 |
878 |
1,494 |
|||||||||||||||||||||
|
Lord Abbett Calibrated Dividend
Growth VC |
776 |
837 |
(61 |
) |
167 |
634 |
(467 |
) |
|||||||||||||||||||
|
Lord Abbett Classic Stock VC |
920 |
1,311 |
(391 |
) |
354 |
484 |
(130 |
) |
|||||||||||||||||||
|
Lord Abbett Growth & Income VC |
52 |
1,119 |
(1,067 |
) |
20 |
1,431 |
(1,411 |
) |
|||||||||||||||||||
|
Lord Abbett Growth Opportunities VC |
2,637 |
1,972 |
665 |
107 |
309 |
(202 |
) |
||||||||||||||||||||
|
Lord Abbett International
Opportunities VC |
314 |
453 |
(139 |
) |
78 |
284 |
(206 |
) |
|||||||||||||||||||
|
Lord Abbett Mid Cap Stock VC |
31 |
684 |
(653 |
) |
99 |
812 |
(713 |
) |
|||||||||||||||||||
|
Lord Abbett Series Fundamental
Equity VC |
2,577 |
8,581 |
(6,004 |
) |
3,312 |
3,946 |
(634 |
) |
|||||||||||||||||||
|
MFS Growth Series IC |
16 |
23 |
(7 |
) |
20 |
44 |
(24 |
) |
|||||||||||||||||||
|
MFS Growth Series SC |
44 |
4,464 |
(4,420 |
) |
2,491 |
1,601 |
890 |
||||||||||||||||||||
|
MFS Investors Growth Stock IC |
1 |
216 |
(215 |
) |
5 |
43 |
(38 |
) |
|||||||||||||||||||
|
MFS Investors Growth Stock SC |
10 |
5,408 |
(5,398 |
) |
356 |
1,175 |
(819 |
) |
|||||||||||||||||||
|
MFS Investors Trust IC |
5 |
52 |
(47 |
) |
7 |
73 |
(66 |
) |
|||||||||||||||||||
|
MFS Investors Trust SC |
13 |
7,114 |
(7,101 |
) |
3,197 |
2,406 |
791 |
||||||||||||||||||||
|
MFS New Discovery IC |
1 |
12 |
(11 |
) |
3 |
26 |
(23 |
) |
|||||||||||||||||||
|
MFS New Discovery SC |
3,197 |
4,107 |
(910 |
) |
3,748 |
6,984 |
(3,236 |
) |
|||||||||||||||||||
|
MFS Research IC |
6 |
41 |
(35 |
) |
14 |
53 |
(39 |
) |
|||||||||||||||||||
|
MFS Research SC |
29 |
206 |
(177 |
) |
117 |
111 |
6 |
||||||||||||||||||||
|
MFS Total Return IC |
9 |
154 |
(145 |
) |
10 |
261 |
(251 |
) |
|||||||||||||||||||
|
MFS Total Return SC |
14 |
2,116 |
(2,102 |
) |
376 |
734 |
(358 |
) |
|||||||||||||||||||
|
MFS Utilities IC |
2 |
40 |
(38 |
) |
16 |
32 |
(16 |
) |
|||||||||||||||||||
|
MFS Utilities SC |
703 |
2,810 |
(2,107 |
) |
538 |
772 |
(234 |
) |
|||||||||||||||||||
|
MFS VIT Total Return Bond Series SC |
608 |
15,422 |
(14,814 |
) |
6,821 |
348 |
6,473 |
||||||||||||||||||||
|
MFS VIT Value SC |
29 |
15,889 |
(15,860 |
) |
6,292 |
6,046 |
246 |
||||||||||||||||||||
|
MFS VIT II Emerging Markets Equity SC |
19 |
90 |
(71 |
) |
618 |
951 |
(333 |
) |
|||||||||||||||||||
|
MFS VIT II International Value SC |
3,076 |
7,587 |
(4,511 |
) |
6,887 |
6,782 |
105 |
||||||||||||||||||||
|
MFS VIT II MA Investors Growth
Stock IC |
230 |
28 |
202 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
|
MFS VIT II MA Investors Growth
Stock SC |
6,323 |
1,192 |
5,131 |
N/A |
N/A |
N/A |
|||||||||||||||||||||
FSA-60
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
4. CHANGES IN UNITS OUTSTANDING — (Continued)
|
(in thousands) |
2015 |
2014 |
|||||||||||||||||||||||||
|
Subaccount |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
Units
Issued |
Units
Redeemed |
Net
Increase (Decrease) |
|||||||||||||||||||||
|
Oppenheimer Capital Appreciation
Fund/VA |
3 |
57 |
(54 |
) |
11 |
78 |
(67 |
) |
|||||||||||||||||||
|
Oppenheimer Capital Appreciation
Fund/VA SC |
2,470 |
1,415 |
1,055 |
129 |
405 |
(276 |
) |
||||||||||||||||||||
|
Oppenheimer Discovery Mid Cap Growth
Fund/VA |
2 |
14 |
(12 |
) |
6 |
34 |
(28 |
) |
|||||||||||||||||||
|
Oppenheimer Discovery Mid Cap Growth
Fund/VA SC |
4 |
12 |
(8 |
) |
8 |
11 |
(3 |
) |
|||||||||||||||||||
|
Oppenheimer Global Fund/VA |
3 |
43 |
(40 |
) |
5 |
64 |
(59 |
) |
|||||||||||||||||||
|
Oppenheimer Global Fund/VA SC |
8,499 |
14,147 |
(5,648 |
) |
5,203 |
7,076 |
(1,873 |
) |
|||||||||||||||||||
|
Oppenheimer Global Strategic Income
Fund/VA |
22 |
126 |
(104 |
) |
15 |
126 |
(111 |
) |
|||||||||||||||||||
|
Oppenheimer Global Strategic Income
Fund/VA SC |
815 |
2,239 |
(1,424 |
) |
1,052 |
1,000 |
52 |
||||||||||||||||||||
|
Oppenheimer Main Street Fund/VA |
4 |
71 |
(67 |
) |
6 |
100 |
(94 |
) |
|||||||||||||||||||
|
Oppenheimer Main Street Fund/VA SC |
1,708 |
786 |
922 |
248 |
298 |
(50 |
) |
||||||||||||||||||||
|
Oppenheimer Money Fund/VA |
540,398 |
212,858 |
327,540 |
277,903 |
226,477 |
51,426 |
|||||||||||||||||||||
|
PIMCO VIT All Asset Advisor |
30 |
38 |
(8 |
) |
622 |
1,144 |
(522 |
) |
|||||||||||||||||||
|
PIMCO VIT Global Diversified Allocation
Portfolio |
413 |
88 |
325 |
76 |
16 |
60 |
|||||||||||||||||||||
|
PIMCO VIT Long-Term US Government
Advisor |
492 |
242 |
250 |
218 |
192 |
26 |
|||||||||||||||||||||
|
PIMCO VIT Low Duration Advisor |
1,057 |
564 |
493 |
847 |
1,011 |
(164 |
) |
||||||||||||||||||||
|
PIMCO VIT Real Return Advisor |
5,668 |
445 |
5,223 |
2,105 |
694 |
1,411 |
|||||||||||||||||||||
|
PIMCO VIT Short-Term Advisor |
1,036 |
1,845 |
(809 |
) |
853 |
1,124 |
(271 |
) |
|||||||||||||||||||
|
PIMCO VIT Total Return Advisor |
4,946 |
2,067 |
2,879 |
3,126 |
3,350 |
(224 |
) |
||||||||||||||||||||
|
QS Legg Mason Dynamic Multi-Strategy
VIT II |
995 |
687 |
308 |
670 |
155 |
515 |
|||||||||||||||||||||
|
Royce Capital Fund Micro-Cap SC |
1,664 |
1,666 |
(2 |
) |
686 |
1,623 |
(937 |
) |
|||||||||||||||||||
|
Royce Capital Fund Small-Cap SC |
6,875 |
11,663 |
(4,788 |
) |
7,195 |
8,154 |
(959 |
) |
|||||||||||||||||||
|
Rydex Commodities Strategy |
1 |
0 |
1 |
1 |
1 |
0 |
|||||||||||||||||||||
|
Rydex Inverse Government Long Bond |
0 |
0 |
0 |
0 |
0 |
0 |
|||||||||||||||||||||
|
Rydex Inverse S&P 500 Strategy |
0 |
0 |
0 |
4 |
4 |
0 |
|||||||||||||||||||||
|
Templeton Developing Markets VIP CL 2 |
437 |
368 |
69 |
540 |
831 |
(291 |
) |
||||||||||||||||||||
|
Templeton Foreign VIP CL 2 |
1,796 |
1,870 |
(74 |
) |
437 |
1,802 |
(1,365 |
) |
|||||||||||||||||||
|
Templeton Global Bond VIP Fund CL 2 |
2,725 |
833 |
1,892 |
3,054 |
262 |
2,792 |
|||||||||||||||||||||
|
Templeton Growth VIP CL 2 |
1,515 |
1,950 |
(435 |
) |
254 |
2,315 |
(2,061 |
) |
|||||||||||||||||||
|
UIF Global Real Estate II |
92 |
164 |
(72 |
) |
105 |
183 |
(78 |
) |
|||||||||||||||||||
|
Van Eck Global Hard Asset |
1 |
0 |
1 |
1 |
1 |
0 |
|||||||||||||||||||||
FSA-61
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
5. INVESTMENTS
The cost of purchases and proceeds from sales of investments, including distributions received and reinvested, for the year ended December 31, 2015 are as follows:
|
(in thousands) |
Purchases |
Sales |
|||||||||
|
American Funds Asset Allocation Class 2 |
$ |
14,746 |
$ |
13,403 |
|||||||
|
American Funds Asset Allocation Class 4 |
736 |
20 |
|||||||||
|
American Funds Blue Chip Income & Growth Class 2 |
2,376 |
24 |
|||||||||
|
American Funds Blue Chip Income & Growth Class 4 |
305 |
83 |
|||||||||
|
American Funds Global Growth Class 2 |
9,643 |
9 |
|||||||||
|
American Funds Global Growth Class 4 |
1,612 |
14 |
|||||||||
|
American Funds Global Small Cap Class 2 |
128 |
3 |
|||||||||
|
American Funds Global Small Cap Class 4 |
9 |
0 |
|||||||||
|
American Funds Growth Class 2 |
1,662 |
2 |
|||||||||
|
American Funds Growth Class 4 |
209 |
2 |
|||||||||
|
American Funds International Class 2 |
432 |
0 |
|||||||||
|
American Funds International Class 4 |
4 |
0 |
|||||||||
|
American Funds New World Class 2 |
262 |
0 |
|||||||||
|
American Funds New World Class 4 |
0 |
0 |
|||||||||
|
Calvert VP SRI Balanced |
105 |
217 |
|||||||||
|
ClearBridge Variable Mid Cap Core II |
37,347 |
56,421 |
|||||||||
|
ClearBridge Variable Small Cap Growth II |
10,238 |
12,041 |
|||||||||
|
Fidelity Contrafund Portfolio SC2 |
123,340 |
171,595 |
|||||||||
|
Fidelity Equity Income SC2 |
1,473 |
1,672 |
|||||||||
|
Fidelity Freedom Fund - 2015 Maturity SC2 |
296 |
103 |
|||||||||
|
Fidelity Freedom Fund - 2020 Maturity SC2 |
409 |
221 |
|||||||||
|
Fidelity Growth Portfolio SC2 |
209 |
553 |
|||||||||
|
Fidelity Index 500 Portfolio SC2 |
445,640 |
328,135 |
|||||||||
|
Fidelity Investment Grade Bonds SC2 |
62,213 |
18,766 |
|||||||||
|
Fidelity Mid Cap SC2 |
106,600 |
215,511 |
|||||||||
|
Franklin Flex Cap Growth VIP CL 2 |
29,606 |
18,608 |
|||||||||
| Franklin Income VIP CL 2 |
69,554 |
74,157 |
|||||||||
|
Franklin Mutual Shares VIP CL 2 |
220,561 |
373,920 |
|||||||||
|
Franklin Rising Dividend VIP CL 2 |
115,305 |
202,624 |
|||||||||
|
Franklin Small Cap Value VIP CL 2 |
25,230 |
20,957 |
|||||||||
|
Franklin Small-Mid Cap Growth VIP CL 2 |
15,290 |
16,528 |
|||||||||
|
Franklin US Government Securities VIP CL 2 |
38,933 |
96,146 |
|||||||||
|
Goldman Sachs Global Trends Allocation SC |
4,584 |
1,731 |
|||||||||
|
Goldman Sachs Large Cap Value |
8,188 |
10,714 |
|||||||||
|
Goldman Sachs Large Cap Value Fund SC |
21,044 |
35,687 |
|||||||||
|
Goldman Sachs Mid Cap Value |
1,008 |
1,924 |
|||||||||
|
Goldman Sachs Mid Cap Value SC |
30,167 |
90,659 |
|||||||||
|
Goldman Sachs Small Cap Equity Insights |
3,833 |
5,448 |
|||||||||
|
Goldman Sachs Small Cap Equity Insights SC |
2,615 |
4,128 |
|||||||||
|
Goldman Sachs Strategic Growth |
3,380 |
7,563 |
|||||||||
FSA-62
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
5. INVESTMENTS — (Continued)
|
(in thousands) |
Purchases |
Sales |
|||||||||
|
Goldman Sachs Strategic Growth SC |
$ |
106,608 |
$ |
115,613 |
|||||||
|
Goldman Sachs Strategic International Equity |
1,214 |
6,007 |
|||||||||
|
Goldman Sachs Strategic International Equity SC |
11,017 |
13,817 |
|||||||||
|
Goldman Sachs US Equity Insights |
2,790 |
6,025 |
|||||||||
|
Goldman Sachs US Equity Insights SC |
85 |
209 |
|||||||||
|
Goldman Sachs VIT Core Fixed Income SC |
11,155 |
15 |
|||||||||
|
Goldman Sachs VIT Growth Opportunities SC |
8,736 |
15,482 |
|||||||||
|
Guggenheim Floating Rate Strategies (Series F) |
1,175 |
63 |
|||||||||
|
Guggenheim Global Managed Futures Strategy |
213 |
11 |
|||||||||
|
Guggenheim Long Short Equity |
198 |
13 |
|||||||||
|
Guggenheim Macro Opportunities Strategies (Series M) |
137 |
5 |
|||||||||
|
Guggenheim Multi-Hedge Strategies |
457 |
19 |
|||||||||
|
Invesco VI American Franchise I |
517 |
1,024 |
|||||||||
|
Invesco VI American Franchise II |
59 |
797 |
|||||||||
|
Invesco VI American Value II |
15,983 |
58,354 |
|||||||||
|
Invesco VI Balanced Risk Allocation II |
35,697 |
16,077 |
|||||||||
|
Invesco VI Comstock I |
1,089 |
7,096 |
|||||||||
|
Invesco VI Comstock II |
23,836 |
58,686 |
|||||||||
|
Invesco VI Equity and Income II |
66,432 |
114,331 |
|||||||||
|
Invesco VI Global Real Estate II |
5,332 |
14,795 |
|||||||||
|
Invesco VI Government Securities II |
17,485 |
16,848 |
|||||||||
|
Invesco VI Growth & Income I |
7,041 |
6,804 |
|||||||||
|
Invesco VI Growth & Income II |
292,600 |
409,536 |
|||||||||
|
Invesco VI International Growth II |
71,252 |
91,324 |
|||||||||
|
Invesco VI Mid-Cap Growth II |
10,723 |
15,983 |
|||||||||
|
Invesco VI Small Cap Equity II |
4,469 |
13,820 |
|||||||||
|
Lord Abbett Bond Debenture VC |
148,713 |
63,664 |
|||||||||
|
Lord Abbett Calibrated Dividend Growth VC |
22,274 |
21,120 |
|||||||||
|
Lord Abbett Classic Stock VC |
19,687 |
20,861 |
|||||||||
|
Lord Abbett Growth & Income VC |
8,376 |
22,331 |
|||||||||
|
Lord Abbett Growth Opportunities VC |
52,715 |
38,961 |
|||||||||
|
Lord Abbett International Opportunities VC |
8,366 |
8,353 |
|||||||||
|
Lord Abbett Mid Cap Stock VC |
7,945 |
17,760 |
|||||||||
|
Lord Abbett Series Fundamental Equity VC |
62,662 |
135,983 |
|||||||||
|
MFS Growth Series IC |
599 |
712 |
|||||||||
|
MFS Growth Series SC |
8,724 |
79,917 |
|||||||||
|
MFS Investors Growth Stock IC |
226 |
2,456 |
|||||||||
|
MFS Investors Growth Stock SC |
6,451 |
69,488 |
|||||||||
|
MFS Investors Trust IC |
1,125 |
1,303 |
|||||||||
|
MFS Investors Trust SC |
19,092 |
120,074 |
|||||||||
|
MFS New Discovery IC |
120 |
457 |
|||||||||
|
MFS New Discovery SC |
56,215 |
71,840 |
|||||||||
FSA-63
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
5. INVESTMENTS — (Continued)
|
(in thousands) |
Purchases |
Sales |
|||||||||
|
MFS Research IC |
$ |
741 |
$ |
1,065 |
|||||||
|
MFS Research SC |
1,389 |
4,057 |
|||||||||
|
MFS Total Return IC |
2,094 |
4,274 |
|||||||||
|
MFS Total Return SC |
7,020 |
36,147 |
|||||||||
|
MFS Utilities IC |
551 |
1,461 |
|||||||||
|
MFS Utilities SC |
19,000 |
50,464 |
|||||||||
|
MFS VIT Total Return Bond SC |
31,767 |
182,399 |
|||||||||
|
MFS VIT Value SC |
36,176 |
268,513 |
|||||||||
|
MFS VIT II Emerging Markets Equity SC |
185 |
784 |
|||||||||
|
MFS VIT II International Value SC |
44,986 |
103,613 |
|||||||||
|
MFS VIT II MA Investors Growth Stock Portfolio IC |
2,459 |
308 |
|||||||||
|
MFS VIT II MA Investors Growth Stock Portfolio SC |
67,806 |
12,376 |
|||||||||
|
Oppenheimer Capital Appreciation Fund/VA |
1,739 |
1,617 |
|||||||||
|
Oppenheimer Capital Appreciation Fund/VA SC |
58,448 |
31,091 |
|||||||||
|
Oppenheimer Discovery Mid Cap Growth Fund/VA |
313 |
371 |
|||||||||
|
Oppenheimer Discovery Mid Cap Growth Fund/VA SC |
171 |
245 |
|||||||||
|
Oppenheimer Global Fund/VA |
878 |
1,679 |
|||||||||
|
Oppenheimer Global Fund/VA SC |
179,271 |
251,187 |
|||||||||
|
Oppenheimer Global Strategic Income Fund/VA |
1,468 |
3,025 |
|||||||||
|
Oppenheimer Global Strategic Income Fund/VA SC |
44,806 |
49,515 |
|||||||||
|
Oppenheimer Main Street Fund/VA |
1,958 |
1,711 |
|||||||||
|
Oppenheimer Main Street Fund/VA SC |
38,066 |
18,623 |
|||||||||
|
Oppenheimer Money Fund/VA |
3,389,670 |
1,291,632 |
|||||||||
|
PIMCO VIT All Asset Advisor |
348 |
413 |
|||||||||
|
PIMCO VIT Global Diversified Allocation Portfolio |
4,775 |
1,052 |
|||||||||
|
PIMCO VIT Long-Term US Government Advisor |
8,341 |
4,799 |
|||||||||
|
PIMCO VIT Low Duration Advisor |
20,794 |
13,853 |
|||||||||
|
PIMCO VIT Real Return Advisor |
89,800 |
26,618 |
|||||||||
|
PIMCO VIT Short-Term Advisor |
16,216 |
24.459 |
|||||||||
|
PIMCO VIT Total Return Advisor |
153,279 |
81,085 |
|||||||||
|
QS Legg Mason Dynamic Multi-Strategy VIT II |
13,174 |
9,364 |
|||||||||
|
Royce Capital Fund Micro-Cap SC |
20,766 |
19,464 |
|||||||||
|
Royce Capital Fund Small-Cap SC |
135,575 |
174,894 |
|||||||||
|
Rydex Commodities Strategy |
3 |
0 |
|||||||||
|
Rydex Inverse Government Long Bond |
0 |
0 |
|||||||||
|
Rydex Inverse S&P 500 Strategy |
0 |
0 |
|||||||||
|
Templeton Developing Markets VIP CL 2 |
4,246 |
3,356 |
|||||||||
|
Templeton Foreign VIP CL 2 |
35,393 |
29,446 |
|||||||||
|
Templeton Global Bond VIP Fund CL 2 |
78,139 |
32,027 |
|||||||||
|
Templeton Growth VIP CL 2 |
30,239 |
33,063 |
|||||||||
|
UIF Global Real Estate II |
1,806 |
2,657 |
|||||||||
|
Van Eck Global Hard Asset |
44 |
20 |
|||||||||
FSA-64
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS
Protective Life sells a number of variable annuity products that are funded by the Separate Account. These products have unique combinations of features and fees that are charged against the contract owner's account. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. The following tables were developed by determining which products offered by Protective Life and funded by the Separate Account have the highest and lowest expense ratios. The summaries may not reflect or directly equate to the minimum and maximum contract charges offered by Protective Life, as contract owners may not have selected all available and applicable contract options for or during the periods presented.
A summary of the units outstanding, unit fair values, net assets for variable annuity contracts, net investment income ratios, the expense ratios, excluding expenses of the underlying funds, and total returns for each of the five years in the period ended December 31, 2015, were as follows:
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
American Funds Asset Allocation Class 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,745 |
$ |
14.85 |
$ |
20.68 |
$ |
63,311 |
1.63 |
% |
0.60 |
% |
1.70 |
% |
–0.32 |
% |
0.79 |
% |
||||||||||||||||||||||
|
2014 |
3,928 |
$ |
14.81 |
$ |
20.56 |
$ |
66,817 |
1.45 |
% |
0.60 |
% |
1.70 |
% |
3.61 |
% |
4.76 |
% |
||||||||||||||||||||||
|
2013 |
4,306 |
$ |
14.18 |
$ |
19.67 |
$ |
70,370 |
1.43 |
% |
0.60 |
% |
1.70 |
% |
21.59 |
% |
22.95 |
% |
||||||||||||||||||||||
|
2012 |
4,798 |
$ |
11.57 |
$ |
16.03 |
$ |
64,202 |
1.94 |
% |
0.60 |
% |
1.70 |
% |
14.21 |
% |
15.49 |
% |
||||||||||||||||||||||
|
2011 |
4,795 |
$ |
10.04 |
$ |
13.91 |
$ |
56,603 |
2.03 |
% |
0.60 |
% |
1.70 |
% |
–0.42 |
% |
0.69 |
% |
||||||||||||||||||||||
|
American Funds Asset Allocation
Class 4(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
72 |
$ |
9.77 |
$ |
9.77 |
$ |
708 |
2.37 |
% |
1.30 |
% |
1.30 |
% |
–0.18 |
% |
–0.18 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds Blue Chip Income &
Growth Class 2(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
247 |
$ |
9.41 |
$ |
9.41 |
$ |
2,320 |
3.11 |
% |
0.90 |
% |
0.90 |
% |
–2.97 |
% |
–2.97 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds Blue Chip Income &
Growth Class 4(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
23 |
$ |
9.37 |
$ |
9.37 |
$ |
218 |
2.92 |
% |
1.30 |
% |
1.30 |
% |
–3.25 |
% |
–3.25 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds Global Growth
Class 2(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,000 |
$ |
9.65 |
$ |
9.65 |
$ |
9,654 |
1.43 |
% |
0.90 |
% |
0.90 |
% |
–1.22 |
% |
–1.22 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
FSA-65
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
American Funds Global Growth
Class 4(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
166 |
$ |
9.61 |
$ |
9.61 |
$ |
1,593 |
1.43 |
% |
1.30 |
% |
1.30 |
% |
–1.56 |
% |
–1.56 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds Global Small Cap
Class 2(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
14 |
$ |
8.85 |
$ |
8.85 |
$ |
123 |
0.00 |
% |
0.90 |
% |
0.90 |
% |
–12.31 |
% |
–12.31 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds Global Small Cap
Class 4(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1 |
$ |
8.81 |
$ |
8.81 |
$ |
9 |
0.00 |
% |
1.30 |
% |
1.30 |
% |
–12.62 |
% |
–12.62 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds Growth Class 2(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
168 |
$ |
9.96 |
$ |
9.96 |
$ |
1,669 |
0.90 |
% |
0.90 |
% |
0.90 |
% |
0.92 |
% |
0.92 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds Growth Class 4(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
21 |
$ |
9.92 |
$ |
9.92 |
$ |
211 |
0.73 |
% |
1.30 |
% |
1.30 |
% |
0.59 |
% |
0.59 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds International Class 2(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
48 |
$ |
8.69 |
$ |
8.69 |
$ |
420 |
2.19 |
% |
0.90 |
% |
0.90 |
% |
–10.14 |
% |
–10.14 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds International Class 4(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
0 |
$ |
8.65 |
$ |
8.65 |
$ |
4 |
2.40 |
% |
1.30 |
% |
1.30 |
% |
–10.43 |
% |
–10.43 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
American Funds New World Class 2(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
29 |
$ |
9.08 |
$ |
9.08 |
$ |
261 |
0.45 |
% |
0.90 |
% |
0.90 |
% |
–6.63 |
% |
–6.63 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
FSA-66
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Calvert VP SRI Balanced |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
71 |
$ |
16.28 |
$ |
19.28 |
$ |
1,351 |
0.11 |
% |
0.70 |
% |
1.80 |
% |
–3.95 |
% |
–2.88 |
% |
||||||||||||||||||||||
|
2014 |
76 |
$ |
16.79 |
$ |
20.37 |
$ |
1,498 |
1.40 |
% |
0.70 |
% |
1.80 |
% |
7.63 |
% |
8.83 |
% |
||||||||||||||||||||||
|
2013 |
94 |
$ |
15.45 |
$ |
18.82 |
$ |
1,730 |
1.00 |
% |
0.70 |
% |
1.80 |
% |
15.88 |
% |
17.18 |
% |
||||||||||||||||||||||
|
2012 |
109 |
$ |
13.20 |
$ |
16.15 |
$ |
1,710 |
1.11 |
% |
0.70 |
% |
1.80 |
% |
8.52 |
% |
9.74 |
% |
||||||||||||||||||||||
|
2011 |
136 |
$ |
11.72 |
$ |
14.80 |
$ |
1,948 |
1.17 |
% |
0.70 |
% |
1.80 |
% |
2.69 |
% |
3.84 |
% |
||||||||||||||||||||||
|
ClearBridge Variable Mid Cap Core II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,038 |
$ |
15.02 |
$ |
20.90 |
$ |
37,265 |
0.08 |
% |
0.60 |
% |
1.75 |
% |
0.20 |
% |
1.38 |
% |
||||||||||||||||||||||
|
2014 |
3,376 |
$ |
14.99 |
$ |
20.61 |
$ |
59,161 |
0.09 |
% |
0.60 |
% |
1.75 |
% |
5.94 |
% |
7.18 |
% |
||||||||||||||||||||||
|
2013 |
3,451 |
$ |
14.15 |
$ |
19.23 |
$ |
56,901 |
0.06 |
% |
0.60 |
% |
1.75 |
% |
34.66 |
% |
36.23 |
% |
||||||||||||||||||||||
|
2012 |
2,844 |
$ |
10.51 |
$ |
14.12 |
$ |
35,819 |
0.88 |
% |
0.60 |
% |
1.75 |
% |
15.55 |
% |
16.90 |
% |
||||||||||||||||||||||
|
2011 |
1,524 |
$ |
9.10 |
$ |
12.08 |
$ |
17,750 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–5.77 |
% |
–4.72 |
% |
||||||||||||||||||||||
|
ClearBridge Variable Small Cap
Growth II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
455 |
$ |
15.31 |
$ |
22.25 |
$ |
8,768 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–6.26 |
% |
–5.17 |
% |
||||||||||||||||||||||
|
2014 |
600 |
$ |
16.34 |
$ |
23.46 |
$ |
11,731 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
1.97 |
% |
3.16 |
% |
||||||||||||||||||||||
|
2013 |
585 |
$ |
16.02 |
$ |
22.74 |
$ |
11,118 |
0.05 |
% |
0.60 |
% |
1.75 |
% |
44.06 |
% |
45.74 |
% |
||||||||||||||||||||||
|
2012 |
350 |
$ |
11.12 |
$ |
15.55 |
$ |
4,773 |
0.14 |
% |
0.60 |
% |
1.75 |
% |
16.88 |
% |
18.13 |
% |
||||||||||||||||||||||
|
2011 |
169 |
$ |
9.53 |
$ |
13.17 |
$ |
2,110 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–0.65 |
% |
0.30 |
% |
||||||||||||||||||||||
|
Fidelity Contrafund Portfolio SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
9,961 |
$ |
14.71 |
$ |
25.20 |
$ |
184,377 |
0.78 |
% |
0.60 |
% |
1.75 |
% |
–1.34 |
% |
–0.19 |
% |
||||||||||||||||||||||
|
2014 |
14,617 |
$ |
14.91 |
$ |
25.30 |
$ |
261,613 |
0.75 |
% |
0.60 |
% |
1.75 |
% |
9.70 |
% |
10.99 |
% |
||||||||||||||||||||||
|
2013 |
15,209 |
$ |
13.59 |
$ |
22.84 |
$ |
248,636 |
0.87 |
% |
0.60 |
% |
1.75 |
% |
28.67 |
% |
30.17 |
% |
||||||||||||||||||||||
|
2012 |
13,169 |
$ |
10.56 |
$ |
17.59 |
$ |
172,073 |
1.29 |
% |
0.60 |
% |
1.75 |
% |
14.11 |
% |
15.44 |
% |
||||||||||||||||||||||
|
2011 |
9,977 |
$ |
9.26 |
$ |
15.26 |
$ |
119,890 |
0.88 |
% |
0.60 |
% |
1.75 |
% |
–4.43 |
% |
–3.37 |
% |
||||||||||||||||||||||
|
Fidelity Equity Income SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
448 |
$ |
13.19 |
$ |
23.20 |
$ |
7,771 |
2.84 |
% |
0.60 |
% |
1.65 |
% |
–5.82 |
% |
–4.81 |
% |
||||||||||||||||||||||
|
2014 |
511 |
$ |
14.01 |
$ |
24.42 |
$ |
9,403 |
2.46 |
% |
0.60 |
% |
1.65 |
% |
6.69 |
% |
7.83 |
% |
||||||||||||||||||||||
|
2013 |
616 |
$ |
13.13 |
$ |
22.70 |
$ |
10,492 |
2.21 |
% |
0.60 |
% |
1.65 |
% |
25.72 |
% |
27.06 |
% |
||||||||||||||||||||||
|
2012 |
723 |
$ |
10.44 |
$ |
17.90 |
$ |
9,705 |
2.81 |
% |
0.60 |
% |
1.65 |
% |
15.12 |
% |
16.35 |
% |
||||||||||||||||||||||
|
2011 |
848 |
$ |
9.07 |
$ |
15.41 |
$ |
9,782 |
2.29 |
% |
0.60 |
% |
1.65 |
% |
–1.00 |
% |
0.05 |
% |
||||||||||||||||||||||
|
Fidelity Freedom Fund - 2015
Maturity SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
71 |
$ |
12.56 |
$ |
17.72 |
$ |
1,047 |
1.77 |
% |
0.60 |
% |
1.65 |
% |
–2.15 |
% |
–1.10 |
% |
||||||||||||||||||||||
|
2014 |
60 |
$ |
12.84 |
$ |
17.95 |
$ |
889 |
1.26 |
% |
0.60 |
% |
1.65 |
% |
2.73 |
% |
3.83 |
% |
||||||||||||||||||||||
|
2013 |
77 |
$ |
12.50 |
$ |
17.32 |
$ |
1,081 |
1.59 |
% |
0.70 |
% |
1.65 |
% |
12.22 |
% |
13.31 |
% |
||||||||||||||||||||||
|
2012 |
83 |
$ |
11.14 |
$ |
15.30 |
$ |
1,005 |
1.69 |
% |
0.70 |
% |
1.65 |
% |
10.06 |
% |
11.12 |
% |
||||||||||||||||||||||
|
2011 |
91 |
$ |
10.12 |
$ |
13.79 |
$ |
996 |
1.84 |
% |
0.70 |
% |
1.65 |
% |
–2.15 |
% |
–1.21 |
% |
||||||||||||||||||||||
|
Fidelity Freedom Fund - 2020
Maturity SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
133 |
$ |
12.49 |
$ |
18.90 |
$ |
2,097 |
1.70 |
% |
0.60 |
% |
1.65 |
% |
–2.10 |
% |
–1.06 |
% |
||||||||||||||||||||||
|
2014 |
123 |
$ |
12.76 |
$ |
19.14 |
$ |
1,963 |
1.37 |
% |
0.60 |
% |
1.65 |
% |
2.87 |
% |
3.97 |
% |
||||||||||||||||||||||
|
2013 |
118 |
$ |
12.41 |
$ |
18.45 |
$ |
1,847 |
1.48 |
% |
0.60 |
% |
1.65 |
% |
13.73 |
% |
14.94 |
% |
||||||||||||||||||||||
|
2012 |
134 |
$ |
10.91 |
$ |
16.09 |
$ |
1,803 |
1.82 |
% |
0.60 |
% |
1.65 |
% |
11.20 |
% |
12.39 |
% |
||||||||||||||||||||||
|
2011 |
139 |
$ |
9.81 |
$ |
14.34 |
$ |
1,670 |
1.95 |
% |
0.60 |
% |
1.65 |
% |
–2.87 |
% |
–1.83 |
% |
||||||||||||||||||||||
|
Fidelity Growth Portfolio SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
147 |
$ |
17.07 |
$ |
28.31 |
$ |
2,962 |
0.03 |
% |
0.60 |
% |
1.65 |
% |
5.14 |
% |
6.26 |
% |
||||||||||||||||||||||
|
2014 |
169 |
$ |
16.24 |
$ |
26.69 |
$ |
3,191 |
0.00 |
% |
0.60 |
% |
1.65 |
% |
9.18 |
% |
10.35 |
% |
||||||||||||||||||||||
|
2013 |
187 |
$ |
14.87 |
$ |
24.24 |
$ |
3,295 |
0.05 |
% |
0.70 |
% |
1.65 |
% |
33.76 |
% |
35.05 |
% |
||||||||||||||||||||||
|
2012 |
198 |
$ |
11.12 |
$ |
17.97 |
$ |
2,576 |
0.35 |
% |
0.70 |
% |
1.65 |
% |
12.51 |
% |
13.71 |
% |
||||||||||||||||||||||
|
2011 |
239 |
$ |
9.88 |
$ |
15.83 |
$ |
2,727 |
0.12 |
% |
0.70 |
% |
1.65 |
% |
–1.68 |
% |
–0.63 |
% |
||||||||||||||||||||||
FSA-67
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Fidelity Index 500 Portfolio SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
13,418 |
$ |
15.71 |
$ |
25.66 |
$ |
231,506 |
2.73 |
% |
0.60 |
% |
1.75 |
% |
–0.68 |
% |
0.48 |
% |
||||||||||||||||||||||
|
2014 |
7,798 |
$ |
15.82 |
$ |
25.59 |
$ |
135,088 |
2.18 |
% |
0.60 |
% |
1.75 |
% |
11.31 |
% |
12.61 |
% |
||||||||||||||||||||||
|
2013 |
4,456 |
$ |
14.21 |
$ |
22.77 |
$ |
70,003 |
1.75 |
% |
0.60 |
% |
1.75 |
% |
29.60 |
% |
31.12 |
% |
||||||||||||||||||||||
|
2012 |
3,870 |
$ |
10.96 |
$ |
17.40 |
$ |
47,691 |
2.07 |
% |
0.60 |
% |
1.75 |
% |
13.61 |
% |
14.94 |
% |
||||||||||||||||||||||
|
2011 |
3,075 |
$ |
9.65 |
$ |
15.17 |
$ |
34,615 |
1.92 |
% |
0.60 |
% |
1.75 |
% |
0.06 |
% |
1.18 |
% |
||||||||||||||||||||||
|
Fidelity Investment Grade Bonds SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
16,489 |
$ |
10.33 |
$ |
14.38 |
$ |
195,844 |
2.67 |
% |
0.60 |
% |
1.75 |
% |
–2.58 |
% |
–1.44 |
% |
||||||||||||||||||||||
|
2014 |
12,716 |
$ |
10.60 |
$ |
14.65 |
$ |
159,057 |
2.01 |
% |
0.60 |
% |
1.75 |
% |
3.77 |
% |
4.98 |
% |
||||||||||||||||||||||
|
2013 |
12,506 |
$ |
10.22 |
$ |
14.02 |
$ |
151,144 |
2.30 |
% |
0.60 |
% |
1.75 |
% |
–3.78 |
% |
–2.65 |
% |
||||||||||||||||||||||
|
2012 |
10,376 |
$ |
10.60 |
$ |
14.47 |
$ |
133,280 |
2.44 |
% |
0.60 |
% |
1.75 |
% |
3.75 |
% |
4.97 |
% |
||||||||||||||||||||||
|
2011 |
7,383 |
$ |
10.13 |
$ |
13.85 |
$ |
95,617 |
3.39 |
% |
0.60 |
% |
1.75 |
% |
5.22 |
% |
6.40 |
% |
||||||||||||||||||||||
|
Fidelity Mid Cap SC2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
9,433 |
$ |
13.40 |
$ |
26.98 |
$ |
170,667 |
0.20 |
% |
0.60 |
% |
1.75 |
% |
–3.35 |
% |
–2.22 |
% |
||||||||||||||||||||||
|
2014 |
19,006 |
$ |
13.87 |
$ |
27.71 |
$ |
324,649 |
0.02 |
% |
0.60 |
% |
1.75 |
% |
4.18 |
% |
5.40 |
% |
||||||||||||||||||||||
|
2013 |
18,745 |
$ |
13.31 |
$ |
26.41 |
$ |
308,715 |
0.30 |
% |
0.60 |
% |
1.75 |
% |
33.50 |
% |
35.06 |
% |
||||||||||||||||||||||
|
2012 |
14,980 |
$ |
9.97 |
$ |
19.65 |
$ |
194,319 |
0.53 |
% |
0.60 |
% |
1.75 |
% |
12.56 |
% |
13.87 |
% |
||||||||||||||||||||||
|
2011 |
6,959 |
$ |
8.86 |
$ |
17.33 |
$ |
93,489 |
0.03 |
% |
0.60 |
% |
1.75 |
% |
–12.36 |
% |
–11.39 |
% |
||||||||||||||||||||||
|
Franklin Flex Cap Growth VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,116 |
$ |
14.34 |
$ |
23.24 |
$ |
18,971 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
2.54 |
% |
3.74 |
% |
||||||||||||||||||||||
|
2014 |
1,263 |
$ |
13.99 |
$ |
22.45 |
$ |
20,782 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
4.25 |
% |
5.47 |
% |
||||||||||||||||||||||
|
2013 |
1,395 |
$ |
13.42 |
$ |
21.33 |
$ |
21,883 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
35.08 |
% |
36.66 |
% |
||||||||||||||||||||||
|
2012 |
1,289 |
$ |
9.93 |
$ |
15.64 |
$ |
15,148 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
7.35 |
% |
8.61 |
% |
||||||||||||||||||||||
|
2011 |
1,022 |
$ |
9.25 |
$ |
14.43 |
$ |
11,462 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–6.42 |
% |
–5.37 |
% |
||||||||||||||||||||||
|
Franklin Income VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
10,486 |
$ |
11.21 |
$ |
18.42 |
$ |
150,657 |
4.95 |
% |
0.60 |
% |
1.75 |
% |
–8.68 |
% |
–7.61 |
% |
||||||||||||||||||||||
|
2014 |
11,175 |
$ |
12.27 |
$ |
19.98 |
$ |
175,785 |
5.08 |
% |
0.60 |
% |
1.75 |
% |
2.79 |
% |
3.99 |
% |
||||||||||||||||||||||
|
2013 |
16,684 |
$ |
11.94 |
$ |
19.25 |
$ |
244,491 |
6.40 |
% |
0.60 |
% |
1.75 |
% |
11.95 |
% |
13.26 |
% |
||||||||||||||||||||||
|
2012 |
14,380 |
$ |
10.66 |
$ |
17.03 |
$ |
193,499 |
6.33 |
% |
0.60 |
% |
1.75 |
% |
10.68 |
% |
11.98 |
% |
||||||||||||||||||||||
|
2011 |
11,892 |
$ |
9.64 |
$ |
15.24 |
$ |
150,680 |
5.65 |
% |
0.60 |
% |
1.75 |
% |
0.65 |
% |
1.77 |
% |
||||||||||||||||||||||
|
Franklin Mutual Shares VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
33,349 |
$ |
12.82 |
$ |
20.63 |
$ |
484,637 |
2.96 |
% |
0.60 |
% |
1.75 |
% |
–6.60 |
% |
–5.51 |
% |
||||||||||||||||||||||
|
2014 |
47,438 |
$ |
13.71 |
$ |
21.87 |
$ |
728,537 |
2.04 |
% |
0.60 |
% |
1.75 |
% |
5.25 |
% |
6.48 |
% |
||||||||||||||||||||||
|
2013 |
51,645 |
$ |
13.01 |
$ |
20.58 |
$ |
747,537 |
2.13 |
% |
0.60 |
% |
1.75 |
% |
26.02 |
% |
27.49 |
% |
||||||||||||||||||||||
|
2012 |
48,673 |
$ |
10.32 |
$ |
16.18 |
$ |
557,517 |
2.18 |
% |
0.60 |
% |
1.75 |
% |
12.24 |
% |
13.56 |
% |
||||||||||||||||||||||
|
2011 |
37,146 |
$ |
9.18 |
$ |
14.27 |
$ |
380,902 |
2.58 |
% |
0.60 |
% |
1.75 |
% |
–2.72 |
% |
–1.63 |
% |
||||||||||||||||||||||
|
Franklin Rising Dividend VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
13,637 |
$ |
14.34 |
$ |
23.46 |
$ |
228,798 |
1.70 |
% |
0.60 |
% |
1.75 |
% |
–5.33 |
% |
–4.23 |
% |
||||||||||||||||||||||
|
2014 |
21,975 |
$ |
15.15 |
$ |
24.54 |
$ |
374,563 |
1.34 |
% |
0.60 |
% |
1.75 |
% |
6.82 |
% |
8.07 |
% |
||||||||||||||||||||||
|
2013 |
23,222 |
$ |
14.18 |
$ |
22.76 |
$ |
369,882 |
1.58 |
% |
0.60 |
% |
1.75 |
% |
27.42 |
% |
28.91 |
% |
||||||||||||||||||||||
|
2012 |
20,911 |
$ |
11.13 |
$ |
17.69 |
$ |
265,972 |
1.58 |
% |
0.60 |
% |
1.75 |
% |
10.00 |
% |
11.29 |
% |
||||||||||||||||||||||
|
2011 |
15,496 |
$ |
10.12 |
$ |
15.93 |
$ |
185,418 |
1.50 |
% |
0.60 |
% |
1.75 |
% |
4.20 |
% |
5.36 |
% |
||||||||||||||||||||||
|
Franklin Small Cap Value VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,388 |
$ |
13.53 |
$ |
18.23 |
$ |
40,092 |
0.75 |
% |
0.60 |
% |
1.75 |
% |
–9.01 |
% |
–7.94 |
% |
||||||||||||||||||||||
|
2014 |
2,608 |
$ |
14.87 |
$ |
19.80 |
$ |
47,346 |
0.63 |
% |
0.60 |
% |
1.75 |
% |
–1.19 |
% |
–0.03 |
% |
||||||||||||||||||||||
|
2013 |
3,103 |
$ |
15.05 |
$ |
19.81 |
$ |
55,983 |
1.31 |
% |
0.60 |
% |
1.75 |
% |
33.86 |
% |
35.42 |
% |
||||||||||||||||||||||
|
2012 |
3,283 |
$ |
11.24 |
$ |
14.63 |
$ |
44,387 |
0.78 |
% |
0.60 |
% |
1.75 |
% |
16.31 |
% |
17.68 |
% |
||||||||||||||||||||||
|
2011 |
2,636 |
$ |
9.66 |
$ |
12.43 |
$ |
31,288 |
0.67 |
% |
0.60 |
% |
1.75 |
% |
–5.39 |
% |
–4.34 |
% |
||||||||||||||||||||||
|
Franklin Small-Mid Cap Growth VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,078 |
$ |
13.71 |
$ |
25.50 |
$ |
18,593 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–4.36 |
% |
–3.24 |
% |
||||||||||||||||||||||
|
2014 |
1,612 |
$ |
14.34 |
$ |
26.40 |
$ |
27,779 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
5.59 |
% |
6.83 |
% |
||||||||||||||||||||||
|
2013 |
1,656 |
$ |
13.58 |
$ |
24.77 |
$ |
27,080 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
35.74 |
% |
37.33 |
% |
||||||||||||||||||||||
|
2012 |
1,496 |
$ |
10.00 |
$ |
18.07 |
$ |
18,474 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
8.91 |
% |
10.19 |
% |
||||||||||||||||||||||
|
2011 |
1,210 |
$ |
9.19 |
$ |
16.43 |
$ |
14,220 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–6.44 |
% |
–5.40 |
% |
||||||||||||||||||||||
FSA-68
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Franklin US Government Securities
VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
50,826 |
$ |
9.83 |
$ |
12.76 |
$ |
553,686 |
2.58 |
% |
0.60 |
% |
1.75 |
% |
–1.28 |
% |
–0.13 |
% |
||||||||||||||||||||||
|
2014 |
57,003 |
$ |
9.96 |
$ |
12.78 |
$ |
623,015 |
2.66 |
% |
0.60 |
% |
1.75 |
% |
1.58 |
% |
2.76 |
% |
||||||||||||||||||||||
|
2013 |
51,869 |
$ |
9.81 |
$ |
12.44 |
$ |
560,230 |
2.77 |
% |
0.60 |
% |
1.75 |
% |
–3.95 |
% |
–2.82 |
% |
||||||||||||||||||||||
|
2012 |
37,852 |
$ |
10.19 |
$ |
12.80 |
$ |
434,100 |
2.55 |
% |
0.60 |
% |
1.75 |
% |
0.10 |
% |
1.27 |
% |
||||||||||||||||||||||
|
2011 |
22,659 |
$ |
10.10 |
$ |
12.64 |
$ |
270,669 |
3.14 |
% |
0.60 |
% |
1.75 |
% |
3.89 |
% |
5.05 |
% |
||||||||||||||||||||||
|
Goldman Sachs Global Trends
Allocation SC(a) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
660 |
$ |
9.87 |
$ |
10.39 |
$ |
6,835 |
0.11 |
% |
1.00 |
% |
1.75 |
% |
–7.46 |
% |
–6.76 |
% |
||||||||||||||||||||||
|
2014 |
399 |
$ |
10.59 |
$ |
11.17 |
$ |
4,444 |
0.04 |
% |
1.00 |
% |
1.75 |
% |
2.13 |
% |
2.91 |
% |
||||||||||||||||||||||
|
2013 |
300 |
$ |
10.85 |
$ |
10.89 |
$ |
3,266 |
0.11 |
% |
1.00 |
% |
1.75 |
% |
3.73 |
% |
4.04 |
% |
||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Goldman Sachs Large Cap Value |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,092 |
$ |
17.20 |
$ |
33.07 |
$ |
51,988 |
1.35 |
% |
0.60 |
% |
1.80 |
% |
–6.13 |
% |
–4.99 |
% |
||||||||||||||||||||||
|
2014 |
2,441 |
$ |
18.20 |
$ |
35.04 |
$ |
64,132 |
1.29 |
% |
0.60 |
% |
1.80 |
% |
10.91 |
% |
12.26 |
% |
||||||||||||||||||||||
|
2013 |
3,077 |
$ |
16.29 |
$ |
31.42 |
$ |
71,661 |
1.15 |
% |
0.60 |
% |
1.80 |
% |
30.84 |
% |
32.43 |
% |
||||||||||||||||||||||
|
2012 |
3,810 |
$ |
12.36 |
$ |
23.88 |
$ |
66,725 |
1.32 |
% |
0.60 |
% |
1.80 |
% |
16.98 |
% |
18.41 |
% |
||||||||||||||||||||||
|
2011 |
4,851 |
$ |
10.49 |
$ |
20.30 |
$ |
71,380 |
1.13 |
% |
0.60 |
% |
1.80 |
% |
–8.72 |
% |
–7.61 |
% |
||||||||||||||||||||||
|
Goldman Sachs Large Cap Value
Fund SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
9,046 |
$ |
12.69 |
$ |
21.42 |
$ |
131,778 |
1.08 |
% |
0.70 |
% |
1.75 |
% |
–6.25 |
% |
–5.25 |
% |
||||||||||||||||||||||
|
2014 |
10,963 |
$ |
13.51 |
$ |
22.63 |
$ |
170,959 |
1.07 |
% |
0.70 |
% |
1.75 |
% |
10.64 |
% |
11.82 |
% |
||||||||||||||||||||||
|
2013 |
13,006 |
$ |
12.19 |
$ |
20.26 |
$ |
181,863 |
0.93 |
% |
0.70 |
% |
1.75 |
% |
30.61 |
% |
32.00 |
% |
||||||||||||||||||||||
|
2012 |
15,251 |
$ |
9.31 |
$ |
15.36 |
$ |
162,251 |
1.18 |
% |
0.70 |
% |
1.75 |
% |
16.74 |
% |
17.99 |
% |
||||||||||||||||||||||
|
2011 |
14,330 |
$ |
7.96 |
$ |
13.03 |
$ |
128,115 |
1.30 |
% |
0.70 |
% |
1.75 |
% |
–8.84 |
% |
–7.91 |
% |
||||||||||||||||||||||
|
Goldman Sachs Mid Cap Value |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
302 |
$ |
22.45 |
$ |
25.68 |
$ |
7,363 |
0.38 |
% |
0.60 |
% |
1.80 |
% |
–10.87 |
% |
–9.79 |
% |
||||||||||||||||||||||
|
2014 |
357 |
$ |
25.19 |
$ |
28.49 |
$ |
9,659 |
0.94 |
% |
0.60 |
% |
1.80 |
% |
11.53 |
% |
12.89 |
% |
||||||||||||||||||||||
|
2013 |
447 |
$ |
22.59 |
$ |
25.27 |
$ |
10,787 |
0.78 |
% |
0.60 |
% |
1.80 |
% |
30.51 |
% |
32.10 |
% |
||||||||||||||||||||||
|
2012 |
567 |
$ |
17.31 |
$ |
19.15 |
$ |
10,377 |
1.06 |
% |
0.60 |
% |
1.80 |
% |
16.33 |
% |
17.76 |
% |
||||||||||||||||||||||
|
2011 |
748 |
$ |
14.88 |
$ |
16.28 |
$ |
11,673 |
0.71 |
% |
0.60 |
% |
1.80 |
% |
–8.06 |
% |
–6.94 |
% |
||||||||||||||||||||||
|
Goldman Sachs Mid Cap Value SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
4,977 |
$ |
10.59 |
$ |
16.08 |
$ |
76,265 |
0.08 |
% |
0.70 |
% |
1.75 |
% |
–11.11 |
% |
–10.16 |
% |
||||||||||||||||||||||
|
2014 |
9,078 |
$ |
11.82 |
$ |
17.90 |
$ |
152,268 |
0.79 |
% |
0.70 |
% |
1.75 |
% |
11.31 |
% |
12.49 |
% |
||||||||||||||||||||||
|
2013 |
9,374 |
$ |
10.54 |
$ |
15.91 |
$ |
140,981 |
0.66 |
% |
0.70 |
% |
1.75 |
% |
30.24 |
% |
31.63 |
% |
||||||||||||||||||||||
|
2012 |
7,795 |
$ |
10.50 |
$ |
12.09 |
$ |
90,337 |
1.27 |
% |
0.70 |
% |
1.75 |
% |
16.12 |
% |
17.36 |
% |
||||||||||||||||||||||
|
2011 |
4,180 |
$ |
9.05 |
$ |
10.30 |
$ |
42,503 |
0.90 |
% |
0.70 |
% |
1.75 |
% |
–8.18 |
% |
–7.25 |
% |
||||||||||||||||||||||
|
Goldman Sachs Small Cap Equity
Insights |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
712 |
$ |
16.78 |
$ |
42.48 |
$ |
26,200 |
0.28 |
% |
0.60 |
% |
1.80 |
% |
–3.89 |
% |
–2.71 |
% |
||||||||||||||||||||||
|
2014 |
839 |
$ |
17.44 |
$ |
43.95 |
$ |
31,751 |
0.73 |
% |
0.60 |
% |
1.80 |
% |
5.01 |
% |
6.29 |
% |
||||||||||||||||||||||
|
2013 |
1,013 |
$ |
16.59 |
$ |
41.63 |
$ |
36,164 |
0.94 |
% |
0.60 |
% |
1.80 |
% |
33.19 |
% |
34.81 |
% |
||||||||||||||||||||||
|
2012 |
1,245 |
$ |
12.44 |
$ |
31.08 |
$ |
32,802 |
1.10 |
% |
0.60 |
% |
1.80 |
% |
10.80 |
% |
12.15 |
% |
||||||||||||||||||||||
|
2011 |
1,524 |
$ |
11.22 |
$ |
27.90 |
$ |
35,850 |
0.75 |
% |
0.60 |
% |
1.80 |
% |
–1.13 |
% |
0.07 |
% |
||||||||||||||||||||||
|
Goldman Sachs Small Cap Equity
Insights SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,030 |
$ |
16.93 |
$ |
27.22 |
$ |
18,749 |
0.03 |
% |
0.70 |
% |
1.65 |
% |
–4.10 |
% |
–3.18 |
% |
||||||||||||||||||||||
|
2014 |
1,227 |
$ |
17.64 |
$ |
28.14 |
$ |
23,079 |
0.50 |
% |
0.70 |
% |
1.65 |
% |
4.93 |
% |
5.94 |
% |
||||||||||||||||||||||
|
2013 |
1,426 |
$ |
16.79 |
$ |
26.59 |
$ |
25,339 |
0.70 |
% |
0.70 |
% |
1.65 |
% |
33.15 |
% |
34.44 |
% |
||||||||||||||||||||||
|
2012 |
1,679 |
$ |
12.60 |
$ |
19.80 |
$ |
22,221 |
0.91 |
% |
0.70 |
% |
1.65 |
% |
10.65 |
% |
11.72 |
% |
||||||||||||||||||||||
|
2011 |
1,906 |
$ |
11.37 |
$ |
17.74 |
$ |
22,611 |
0.54 |
% |
0.70 |
% |
1.65 |
% |
–1.24 |
% |
–0.29 |
% |
||||||||||||||||||||||
FSA-69
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Goldman Sachs Strategic Growth |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,322 |
$ |
17.38 |
$ |
39.36 |
$ |
35,156 |
0.34 |
% |
0.60 |
% |
1.80 |
% |
1.54 |
% |
2.78 |
% |
||||||||||||||||||||||
|
2014 |
1,565 |
$ |
16.99 |
$ |
38.55 |
$ |
40,289 |
0.35 |
% |
0.60 |
% |
1.80 |
% |
11.60 |
% |
12.96 |
% |
||||||||||||||||||||||
|
2013 |
1,941 |
$ |
15.12 |
$ |
34.35 |
$ |
43,705 |
0.39 |
% |
0.60 |
% |
1.80 |
% |
30.04 |
% |
31.63 |
% |
||||||||||||||||||||||
|
2012 |
2,339 |
$ |
11.54 |
$ |
26.27 |
$ |
39,692 |
0.64 |
% |
0.60 |
% |
1.80 |
% |
17.73 |
% |
19.17 |
% |
||||||||||||||||||||||
|
2011 |
2,989 |
$ |
9.74 |
$ |
22.19 |
$ |
42,343 |
0.42 |
% |
0.60 |
% |
1.80 |
% |
–4.36 |
% |
–3.20 |
% |
||||||||||||||||||||||
|
Goldman Sachs Strategic Growth SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
8,563 |
$ |
12.38 |
$ |
25.91 |
$ |
157,352 |
0.11 |
% |
0.70 |
% |
1.75 |
% |
1.34 |
% |
2.42 |
% |
||||||||||||||||||||||
|
2014 |
9,760 |
$ |
12.12 |
$ |
25.33 |
$ |
176,080 |
0.12 |
% |
0.70 |
% |
1.75 |
% |
11.40 |
% |
12.59 |
% |
||||||||||||||||||||||
|
2013 |
10,537 |
$ |
10.80 |
$ |
22.52 |
$ |
171,088 |
0.17 |
% |
0.70 |
% |
1.75 |
% |
29.69 |
% |
31.08 |
% |
||||||||||||||||||||||
|
2012 |
9,355 |
$ |
11.05 |
$ |
17.20 |
$ |
118,718 |
0.54 |
% |
0.70 |
% |
1.75 |
% |
17.53 |
% |
18.79 |
% |
||||||||||||||||||||||
|
2011 |
6,533 |
$ |
9.40 |
$ |
14.49 |
$ |
72,429 |
0.29 |
% |
0.70 |
% |
1.75 |
% |
–4.51 |
% |
–3.54 |
% |
||||||||||||||||||||||
|
Goldman Sachs Strategic International
Equity |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,072 |
$ |
11.76 |
$ |
19.71 |
$ |
30,990 |
1.66 |
% |
0.60 |
% |
1.80 |
% |
–0.76 |
% |
0.45 |
% |
||||||||||||||||||||||
|
2014 |
2,381 |
$ |
11.77 |
$ |
19.75 |
$ |
35,657 |
3.41 |
% |
0.60 |
% |
1.80 |
% |
–9.20 |
% |
–8.10 |
% |
||||||||||||||||||||||
|
2013 |
2,830 |
$ |
12.87 |
$ |
21.63 |
$ |
46,308 |
1.76 |
% |
0.60 |
% |
1.80 |
% |
21.97 |
% |
23.46 |
% |
||||||||||||||||||||||
|
2012 |
3,409 |
$ |
10.48 |
$ |
17.64 |
$ |
45,279 |
2.03 |
% |
0.60 |
% |
1.80 |
% |
19.05 |
% |
20.51 |
% |
||||||||||||||||||||||
|
2011 |
4,086 |
$ |
8.74 |
$ |
14.73 |
$ |
45,166 |
3.15 |
% |
0.60 |
% |
1.80 |
% |
–16.57 |
% |
–15.56 |
% |
||||||||||||||||||||||
|
Goldman Sachs Strategic International
Equity SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
4,695 |
$ |
9.07 |
$ |
16.88 |
$ |
47,866 |
1.46 |
% |
0.70 |
% |
1.75 |
% |
–0.99 |
% |
0.07 |
% |
||||||||||||||||||||||
|
2014 |
5,049 |
$ |
9.14 |
$ |
16.89 |
$ |
51,151 |
3.23 |
% |
0.70 |
% |
1.75 |
% |
–9.31 |
% |
–8.35 |
% |
||||||||||||||||||||||
|
2013 |
5,641 |
$ |
10.06 |
$ |
18.44 |
$ |
62,577 |
1.57 |
% |
0.70 |
% |
1.75 |
% |
21.56 |
% |
22.86 |
% |
||||||||||||||||||||||
|
2012 |
6,356 |
$ |
8.26 |
$ |
15.03 |
$ |
57,154 |
1.91 |
% |
0.70 |
% |
1.75 |
% |
18.77 |
% |
20.04 |
% |
||||||||||||||||||||||
|
2011 |
6,613 |
$ |
6.94 |
$ |
12.53 |
$ |
49,408 |
3.26 |
% |
0.70 |
% |
1.75 |
% |
–16.56 |
% |
–15.76 |
% |
||||||||||||||||||||||
|
Goldman Sachs US Equity Insights |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
866 |
$ |
16.99 |
$ |
44.80 |
$ |
31,838 |
1.29 |
% |
0.60 |
% |
1.80 |
% |
–1.99 |
% |
–0.79 |
% |
||||||||||||||||||||||
|
2014 |
1,010 |
$ |
17.22 |
$ |
45.46 |
$ |
37,542 |
1.34 |
% |
0.60 |
% |
1.80 |
% |
14.27 |
% |
15.67 |
% |
||||||||||||||||||||||
|
2013 |
1,224 |
$ |
14.96 |
$ |
39.56 |
$ |
38,914 |
1.08 |
% |
0.60 |
% |
1.80 |
% |
35.05 |
% |
36.69 |
% |
||||||||||||||||||||||
|
2012 |
1,493 |
$ |
11.00 |
$ |
29.13 |
$ |
34,702 |
1.70 |
% |
0.60 |
% |
1.80 |
% |
12.40 |
% |
13.77 |
% |
||||||||||||||||||||||
|
2011 |
1,831 |
$ |
9.72 |
$ |
25.77 |
$ |
37,339 |
1.61 |
% |
0.60 |
% |
1.80 |
% |
2.18 |
% |
3.42 |
% |
||||||||||||||||||||||
|
Goldman Sachs US Equity Insights SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
30 |
$ |
16.30 |
$ |
26.08 |
$ |
670 |
1.07 |
% |
0.70 |
% |
1.65 |
% |
–2.05 |
% |
–1.10 |
% |
||||||||||||||||||||||
|
2014 |
38 |
$ |
15.98 |
$ |
26.40 |
$ |
852 |
1.08 |
% |
0.70 |
% |
1.65 |
% |
14.27 |
% |
15.37 |
% |
||||||||||||||||||||||
|
2013 |
46 |
$ |
13.97 |
$ |
22.91 |
$ |
891 |
0.84 |
% |
0.70 |
% |
1.65 |
% |
34.97 |
% |
36.27 |
% |
||||||||||||||||||||||
|
2012 |
53 |
$ |
10.34 |
$ |
16.83 |
$ |
775 |
1.49 |
% |
0.70 |
% |
1.65 |
% |
12.26 |
% |
13.34 |
% |
||||||||||||||||||||||
|
2011 |
61 |
$ |
9.20 |
$ |
14.86 |
$ |
786 |
1.50 |
% |
0.70 |
% |
1.65 |
% |
2.19 |
% |
3.17 |
% |
||||||||||||||||||||||
|
Goldman Sachs VIT Core Fixed
Income SC(c) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,109 |
$ |
9.94 |
$ |
9.97 |
$ |
11,044 |
0.84 |
% |
0.90 |
% |
1.30 |
% |
–0.18 |
% |
0.02 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Goldman Sachs VIT Growth
Opportunities SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,268 |
$ |
14.55 |
$ |
20.03 |
$ |
60,353 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–6.86 |
% |
–5.77 |
% |
||||||||||||||||||||||
|
2014 |
3,885 |
$ |
15.62 |
$ |
21.26 |
$ |
75,575 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
9.16 |
% |
10.43 |
% |
||||||||||||||||||||||
|
2013 |
4,245 |
$ |
14.31 |
$ |
19.25 |
$ |
75,402 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
29.89 |
% |
31.40 |
% |
||||||||||||||||||||||
|
2012 |
4,768 |
$ |
11.02 |
$ |
14.65 |
$ |
65,143 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
17.34 |
% |
18.71 |
% |
||||||||||||||||||||||
|
2011 |
4,755 |
$ |
9.41 |
$ |
12.34 |
$ |
55,346 |
0.00 |
% |
0.60 |
% |
1.70 |
% |
–5.60 |
% |
–4.54 |
% |
||||||||||||||||||||||
FSA-70
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Guggenheim Floating Rate Strategies
(Series F) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
159 |
$ |
10.25 |
$ |
10.25 |
$ |
1,627 |
1.89 |
% |
1.00 |
% |
1.00 |
% |
–0.28 |
% |
–0.28 |
% |
||||||||||||||||||||||
|
2014 |
53 |
$ |
10.28 |
$ |
10.28 |
$ |
547 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
1.36 |
% |
1.36 |
% |
||||||||||||||||||||||
|
2013 |
8 |
$ |
10.14 |
$ |
10.14 |
$ |
84 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
0.71 |
% |
0.71 |
% |
||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Guggenheim Global Managed Futures
Strategy |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
30 |
$ |
11.42 |
$ |
11.42 |
$ |
345 |
2.38 |
% |
1.00 |
% |
1.00 |
% |
–2.53 |
% |
–2.53 |
% |
||||||||||||||||||||||
|
2014 |
14 |
$ |
11.72 |
$ |
11.72 |
$ |
165 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
10.96 |
% |
10.96 |
% |
||||||||||||||||||||||
|
2013 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
1.00 |
% |
1.00 |
% |
% |
% |
|||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Guggenheim Long Short Equity |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
22 |
$ |
10.79 |
$ |
10.79 |
$ |
238 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
0.25 |
% |
0.25 |
% |
||||||||||||||||||||||
|
2014 |
5 |
$ |
10.76 |
$ |
10.76 |
$ |
52 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
1.77 |
% |
1.77 |
% |
||||||||||||||||||||||
|
2013 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
1.00 |
% |
1.00 |
% |
% |
% |
|||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Guggenheim Macro Opportunities
Strategies (Series M) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
12 |
$ |
10.50 |
$ |
10.50 |
$ |
131 |
3.29 |
% |
1.00 |
% |
1.00 |
% |
–1.30 |
% |
–1.30 |
% |
||||||||||||||||||||||
|
2014 |
— |
$ |
10.64 |
$ |
10.64 |
$ |
4 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
4.30 |
% |
4.30 |
% |
||||||||||||||||||||||
|
2013 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
1.00 |
% |
1.00 |
% |
% |
% |
|||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Guggenheim Multi-Hedge Strategies |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
59 |
$ |
10.58 |
$ |
10.58 |
$ |
624 |
0.69 |
% |
1.00 |
% |
1.00 |
% |
0.83 |
% |
0.83 |
% |
||||||||||||||||||||||
|
2014 |
17 |
$ |
10.50 |
$ |
10.50 |
$ |
182 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
3.61 |
% |
3.61 |
% |
||||||||||||||||||||||
|
2013 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
1.00 |
% |
1.00 |
% |
% |
% |
|||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Invesco VI American Franchise I |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
701 |
$ |
8.04 |
$ |
9.34 |
$ |
6,035 |
0.00 |
% |
0.70 |
% |
1.65 |
% |
3.28 |
% |
4.27 |
% |
||||||||||||||||||||||
|
2014 |
756 |
$ |
7.79 |
$ |
8.95 |
$ |
6,276 |
0.04 |
% |
0.70 |
% |
1.65 |
% |
6.65 |
% |
7.68 |
% |
||||||||||||||||||||||
|
2013 |
902 |
$ |
7.15 |
$ |
8.32 |
$ |
6,990 |
0.43 |
% |
0.70 |
% |
1.65 |
% |
37.62 |
% |
39.16 |
% |
||||||||||||||||||||||
|
2012 |
1,087 |
$ |
5.20 |
$ |
5.98 |
$ |
6,077 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
11.68 |
% |
12.93 |
% |
||||||||||||||||||||||
|
2011 |
1,327 |
$ |
4.65 |
$ |
5.29 |
$ |
6,599 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
–7.86 |
% |
–6.83 |
% |
||||||||||||||||||||||
|
Invesco VI American Franchise II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
273 |
$ |
7.80 |
$ |
27.69 |
$ |
3,191 |
0.00 |
% |
0.60 |
% |
1.70 |
% |
2.97 |
% |
4.12 |
% |
||||||||||||||||||||||
|
2014 |
338 |
$ |
7.57 |
$ |
26.65 |
$ |
3,775 |
0.00 |
% |
0.60 |
% |
1.70 |
% |
6.33 |
% |
7.52 |
% |
||||||||||||||||||||||
|
2013 |
415 |
$ |
7.11 |
$ |
24.83 |
$ |
4,326 |
0.25 |
% |
0.60 |
% |
1.70 |
% |
37.42 |
% |
38.96 |
% |
||||||||||||||||||||||
|
2012 |
478 |
$ |
5.17 |
$ |
17.91 |
$ |
3,604 |
0.00 |
% |
0.60 |
% |
1.70 |
% |
11.47 |
% |
12.72 |
% |
||||||||||||||||||||||
|
2011 |
579 |
$ |
4.56 |
$ |
15.92 |
$ |
3,856 |
0.00 |
% |
0.60 |
% |
1.70 |
% |
–8.07 |
% |
–6.95 |
% |
||||||||||||||||||||||
|
Invesco VI American Value II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,769 |
$ |
13.86 |
$ |
19.29 |
$ |
27,984 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–10.94 |
% |
–9.90 |
% |
||||||||||||||||||||||
|
2014 |
4,498 |
$ |
15.56 |
$ |
21.41 |
$ |
78,129 |
0.22 |
% |
0.60 |
% |
1.75 |
% |
7.56 |
% |
8.82 |
% |
||||||||||||||||||||||
|
2013 |
3,499 |
$ |
14.46 |
$ |
19.67 |
$ |
56,182 |
0.65 |
% |
0.60 |
% |
1.75 |
% |
31.59 |
% |
33.13 |
% |
||||||||||||||||||||||
|
2012 |
1,638 |
$ |
10.99 |
$ |
14.78 |
$ |
19,958 |
0.99 |
% |
0.60 |
% |
1.75 |
% |
15.03 |
% |
16.37 |
% |
||||||||||||||||||||||
|
2011 |
177 |
$ |
9.56 |
$ |
12.70 |
$ |
2,171 |
0.72 |
% |
0.60 |
% |
1.75 |
% |
–0.83 |
% |
0.22 |
% |
||||||||||||||||||||||
FSA-71
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Invesco VI Balanced Risk Allocation II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
6,359 |
$ |
10.90 |
$ |
13.52 |
$ |
75,614 |
4.12 |
% |
0.60 |
% |
1.75 |
% |
–6.07 |
% |
–4.97 |
% |
||||||||||||||||||||||
|
2014 |
5,478 |
$ |
11.60 |
$ |
14.23 |
$ |
69,261 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
3.86 |
% |
5.08 |
% |
||||||||||||||||||||||
|
2013 |
5,776 |
$ |
11.17 |
$ |
13.54 |
$ |
70,321 |
1.77 |
% |
0.60 |
% |
1.75 |
% |
–0.35 |
% |
0.81 |
% |
||||||||||||||||||||||
|
2012 |
2,710 |
$ |
11.21 |
$ |
13.43 |
$ |
33,209 |
1.13 |
% |
0.60 |
% |
1.75 |
% |
8.70 |
% |
9.97 |
% |
||||||||||||||||||||||
|
2011 |
542 |
$ |
10.31 |
$ |
12.21 |
$ |
6,410 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
5.58 |
% |
6.36 |
% |
||||||||||||||||||||||
|
Invesco VI Comstock I |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,196 |
$ |
22.49 |
$ |
26.74 |
$ |
29,440 |
1.91 |
% |
0.70 |
% |
1.80 |
% |
–7.67 |
% |
–6.64 |
% |
||||||||||||||||||||||
|
2014 |
1,439 |
$ |
24.36 |
$ |
28.64 |
$ |
38,137 |
1.28 |
% |
0.70 |
% |
1.80 |
% |
7.42 |
% |
8.62 |
% |
||||||||||||||||||||||
|
2013 |
1,762 |
$ |
22.68 |
$ |
26.37 |
$ |
43,225 |
1.62 |
% |
0.70 |
% |
1.80 |
% |
33.53 |
% |
35.02 |
% |
||||||||||||||||||||||
|
2012 |
2,131 |
$ |
16.98 |
$ |
19.53 |
$ |
38,914 |
1.67 |
% |
0.70 |
% |
1.80 |
% |
17.08 |
% |
18.40 |
% |
||||||||||||||||||||||
|
2011 |
2,679 |
$ |
14.50 |
$ |
16.49 |
$ |
41,576 |
1.68 |
% |
0.70 |
% |
1.80 |
% |
–3.60 |
% |
–2.53 |
% |
||||||||||||||||||||||
|
Invesco VI Comstock II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
7,016 |
$ |
14.41 |
$ |
25.90 |
$ |
158,849 |
1.57 |
% |
0.60 |
% |
1.80 |
% |
–7.88 |
% |
–6.76 |
% |
||||||||||||||||||||||
|
2014 |
8,915 |
$ |
15.64 |
$ |
27.81 |
$ |
208,968 |
1.08 |
% |
0.60 |
% |
1.80 |
% |
7.14 |
% |
8.45 |
% |
||||||||||||||||||||||
|
2013 |
10,091 |
$ |
14.59 |
$ |
25.67 |
$ |
221,495 |
1.41 |
% |
0.60 |
% |
1.80 |
% |
33.22 |
% |
34.84 |
% |
||||||||||||||||||||||
|
2012 |
11,269 |
$ |
10.95 |
$ |
19.05 |
$ |
187,839 |
1.54 |
% |
0.60 |
% |
1.80 |
% |
16.78 |
% |
18.21 |
% |
||||||||||||||||||||||
|
2011 |
10,576 |
$ |
9.37 |
$ |
16.14 |
$ |
156,807 |
1.27 |
% |
0.60 |
% |
1.80 |
% |
–3.86 |
% |
–2.69 |
% |
||||||||||||||||||||||
|
Invesco VI Equity and Income II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
8,804 |
$ |
13.25 |
$ |
22.67 |
$ |
164,487 |
1.96 |
% |
0.60 |
% |
1.80 |
% |
–4.34 |
% |
–3.17 |
% |
||||||||||||||||||||||
|
2014 |
13,005 |
$ |
13.85 |
$ |
23.43 |
$ |
239,404 |
1.59 |
% |
0.60 |
% |
1.80 |
% |
6.81 |
% |
8.12 |
% |
||||||||||||||||||||||
|
2013 |
13,487 |
$ |
12.96 |
$ |
21.70 |
$ |
236,068 |
1.54 |
% |
0.60 |
% |
1.80 |
% |
22.64 |
% |
24.14 |
% |
||||||||||||||||||||||
|
2012 |
11,924 |
$ |
10.56 |
$ |
17.50 |
$ |
178,328 |
1.87 |
% |
0.60 |
% |
1.80 |
% |
10.36 |
% |
11.71 |
% |
||||||||||||||||||||||
|
2011 |
9,741 |
$ |
9.56 |
$ |
15.68 |
$ |
141,743 |
1.71 |
% |
0.60 |
% |
1.80 |
% |
–3.07 |
% |
–1.89 |
% |
||||||||||||||||||||||
|
Invesco VI Global Real Estate II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
238 |
$ |
10.61 |
$ |
12.65 |
$ |
2,960 |
1.35 |
% |
0.90 |
% |
1.75 |
% |
–3.46 |
% |
–2.63 |
% |
||||||||||||||||||||||
|
2014 |
1,013 |
$ |
10.91 |
$ |
12.99 |
$ |
12,807 |
1.55 |
% |
0.90 |
% |
1.75 |
% |
12.35 |
% |
13.31 |
% |
||||||||||||||||||||||
|
2013 |
689 |
$ |
9.64 |
$ |
11.46 |
$ |
7,841 |
4.56 |
% |
0.90 |
% |
1.75 |
% |
0.65 |
% |
1.52 |
% |
||||||||||||||||||||||
|
2012 |
288 |
$ |
11.22 |
$ |
11.29 |
$ |
3,240 |
0.52 |
% |
0.90 |
% |
1.75 |
% |
10.27 |
% |
10.27 |
% |
||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Invesco VI Government Securities II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
9,206 |
$ |
10.02 |
$ |
10.82 |
$ |
97,513 |
1.87 |
% |
0.60 |
% |
1.80 |
% |
–1.74 |
% |
–0.54 |
% |
||||||||||||||||||||||
|
2014 |
9,174 |
$ |
10.20 |
$ |
10.87 |
$ |
98,609 |
2.84 |
% |
0.60 |
% |
1.80 |
% |
2.01 |
% |
3.26 |
% |
||||||||||||||||||||||
|
2013 |
10,105 |
$ |
9.90 |
$ |
10.53 |
$ |
105,537 |
3.31 |
% |
0.60 |
% |
1.80 |
% |
–4.60 |
% |
–3.44 |
% |
||||||||||||||||||||||
|
2012 |
10,070 |
$ |
10.29 |
$ |
10.91 |
$ |
109,216 |
2.96 |
% |
0.60 |
% |
1.80 |
% |
0.38 |
% |
1.60 |
% |
||||||||||||||||||||||
|
2011 |
10,539 |
$ |
10.16 |
$ |
10.73 |
$ |
112,899 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
5.35 |
% |
6.20 |
% |
||||||||||||||||||||||
|
Invesco VI Growth & Income I |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,553 |
$ |
20.08 |
$ |
23.87 |
$ |
34,050 |
2.88 |
% |
0.70 |
% |
1.80 |
% |
–4.81 |
% |
–3.74 |
% |
||||||||||||||||||||||
|
2014 |
1,819 |
$ |
21.09 |
$ |
24.79 |
$ |
41,653 |
1.72 |
% |
0.70 |
% |
1.80 |
% |
8.30 |
% |
9.51 |
% |
||||||||||||||||||||||
|
2013 |
2,207 |
$ |
19.47 |
$ |
22.64 |
$ |
46,452 |
1.44 |
% |
0.70 |
% |
1.80 |
% |
31.67 |
% |
33.14 |
% |
||||||||||||||||||||||
|
2012 |
2,685 |
$ |
14.79 |
$ |
17.00 |
$ |
42,678 |
1.47 |
% |
0.70 |
% |
1.80 |
% |
12.57 |
% |
13.83 |
% |
||||||||||||||||||||||
|
2011 |
3,264 |
$ |
13.14 |
$ |
14.94 |
$ |
45,833 |
1.20 |
% |
0.70 |
% |
1.80 |
% |
–3.77 |
% |
–2.69 |
% |
||||||||||||||||||||||
|
Invesco VI Growth & Income II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
21,433 |
$ |
14.37 |
$ |
23.10 |
$ |
411,587 |
2.13 |
% |
0.60 |
% |
1.80 |
% |
–5.05 |
% |
–3.89 |
% |
||||||||||||||||||||||
|
2014 |
33,462 |
$ |
15.13 |
$ |
24.06 |
$ |
636,165 |
1.52 |
% |
0.60 |
% |
1.80 |
% |
7.99 |
% |
9.31 |
% |
||||||||||||||||||||||
|
2013 |
34,383 |
$ |
14.00 |
$ |
22.04 |
$ |
609,926 |
1.31 |
% |
0.60 |
% |
1.80 |
% |
31.36 |
% |
32.97 |
% |
||||||||||||||||||||||
|
2012 |
30,129 |
$ |
10.65 |
$ |
16.59 |
$ |
423,938 |
1.42 |
% |
0.60 |
% |
1.80 |
% |
12.29 |
% |
13.66 |
% |
||||||||||||||||||||||
|
2011 |
19,913 |
$ |
9.48 |
$ |
14.61 |
$ |
272,251 |
1.19 |
% |
0.60 |
% |
1.80 |
% |
–4.01 |
% |
–2.85 |
% |
||||||||||||||||||||||
|
Invesco VI International Growth II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,057 |
$ |
10.85 |
$ |
11.68 |
$ |
35,435 |
1.13 |
% |
0.60 |
% |
1.65 |
% |
–4.22 |
% |
–3.20 |
% |
||||||||||||||||||||||
|
2014 |
4,943 |
$ |
11.33 |
$ |
12.10 |
$ |
59,535 |
1.66 |
% |
0.60 |
% |
1.65 |
% |
–1.56 |
% |
–0.51 |
% |
||||||||||||||||||||||
|
2013 |
6,677 |
$ |
11.51 |
$ |
12.20 |
$ |
81,151 |
1.26 |
% |
0.60 |
% |
1.75 |
% |
16.64 |
% |
18.01 |
% |
||||||||||||||||||||||
|
2012 |
2,971 |
$ |
9.86 |
$ |
10.37 |
$ |
30,583 |
1.88 |
% |
0.60 |
% |
1.75 |
% |
13.35 |
% |
14.56 |
% |
||||||||||||||||||||||
|
2011 |
613 |
$ |
8.70 |
$ |
8.77 |
$ |
5,353 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–16.04 |
% |
–15.44 |
% |
||||||||||||||||||||||
FSA-72
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Invesco VI Mid-Cap Growth II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,904 |
$ |
8.40 |
$ |
26.79 |
$ |
32,590 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
–0.77 |
% |
0.44 |
% |
||||||||||||||||||||||
|
2014 |
2,329 |
$ |
8.47 |
$ |
26.72 |
$ |
40,027 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
5.76 |
% |
7.05 |
% |
||||||||||||||||||||||
|
2013 |
2,627 |
$ |
8.01 |
$ |
25.02 |
$ |
42,639 |
0.22 |
% |
0.60 |
% |
1.80 |
% |
34.15 |
% |
35.78 |
% |
||||||||||||||||||||||
|
2012 |
2,764 |
$ |
5.97 |
$ |
18.46 |
$ |
33,382 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
9.62 |
% |
10.96 |
% |
||||||||||||||||||||||
|
2011 |
2,587 |
$ |
5.45 |
$ |
16.67 |
$ |
28,681 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
–10.99 |
% |
–9.90 |
% |
||||||||||||||||||||||
|
Invesco VI Small Cap Equity II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
405 |
$ |
10.14 |
$ |
12.91 |
$ |
5,206 |
0.00 |
% |
0.90 |
% |
1.30 |
% |
–6.97 |
% |
–6.59 |
% |
||||||||||||||||||||||
|
2014 |
1,197 |
$ |
10.86 |
$ |
13.82 |
$ |
16,478 |
0.00 |
% |
0.90 |
% |
1.75 |
% |
0.30 |
% |
1.17 |
% |
||||||||||||||||||||||
|
2013 |
857 |
$ |
10.75 |
$ |
13.66 |
$ |
11,681 |
0.00 |
% |
0.90 |
% |
1.75 |
% |
34.69 |
% |
35.85 |
% |
||||||||||||||||||||||
|
2012 |
347 |
$ |
10.00 |
$ |
10.05 |
$ |
3,491 |
0.00 |
% |
0.90 |
% |
1.65 |
% |
1.85 |
% |
1.85 |
% |
||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Lord Abbett Bond Debenture VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
41,371 |
$ |
11.42 |
$ |
23.01 |
$ |
618,733 |
4.38 |
% |
0.60 |
% |
1.80 |
% |
–3.30 |
% |
–2.12 |
% |
||||||||||||||||||||||
|
2014 |
35,674 |
$ |
11.81 |
$ |
23.53 |
$ |
574,288 |
4.77 |
% |
0.60 |
% |
1.80 |
% |
2.47 |
% |
3.72 |
% |
||||||||||||||||||||||
|
2013 |
34,180 |
$ |
11.52 |
$ |
22.71 |
$ |
546,338 |
5.45 |
% |
0.60 |
% |
1.80 |
% |
6.23 |
% |
7.52 |
% |
||||||||||||||||||||||
|
2012 |
26,020 |
$ |
10.84 |
$ |
21.14 |
$ |
419,231 |
6.46 |
% |
0.60 |
% |
1.80 |
% |
10.51 |
% |
11.86 |
% |
||||||||||||||||||||||
|
2011 |
17,605 |
$ |
9.80 |
$ |
18.92 |
$ |
291,184 |
6.48 |
% |
0.60 |
% |
1.80 |
% |
2.51 |
% |
3.76 |
% |
||||||||||||||||||||||
|
Lord Abbett Calibrated Dividend
Growth VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,179 |
$ |
13.97 |
$ |
25.72 |
$ |
44,923 |
1.76 |
% |
0.60 |
% |
1.80 |
% |
–3.89 |
% |
–2.72 |
% |
||||||||||||||||||||||
|
2014 |
2,240 |
$ |
14.53 |
$ |
26.46 |
$ |
49,855 |
1.62 |
% |
0.60 |
% |
1.80 |
% |
9.54 |
% |
10.87 |
% |
||||||||||||||||||||||
|
2013 |
2,707 |
$ |
13.26 |
$ |
23.89 |
$ |
55,197 |
1.64 |
% |
0.60 |
% |
1.80 |
% |
25.63 |
% |
27.16 |
% |
||||||||||||||||||||||
|
2012 |
2,726 |
$ |
10.55 |
$ |
18.81 |
$ |
46,058 |
2.88 |
% |
0.60 |
% |
1.80 |
% |
10.43 |
% |
11.78 |
% |
||||||||||||||||||||||
|
2011 |
3,127 |
$ |
9.54 |
$ |
16.84 |
$ |
48,403 |
5.64 |
% |
0.60 |
% |
1.80 |
% |
–1.60 |
% |
–0.40 |
% |
||||||||||||||||||||||
|
Lord Abbett Classic Stock VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,206 |
$ |
13.72 |
$ |
20.62 |
$ |
18,978 |
0.85 |
% |
0.60 |
% |
1.75 |
% |
–2.64 |
% |
–1.50 |
% |
||||||||||||||||||||||
|
2014 |
1,597 |
$ |
14.07 |
$ |
20.98 |
$ |
25,074 |
0.70 |
% |
0.60 |
% |
1.75 |
% |
7.23 |
% |
8.49 |
% |
||||||||||||||||||||||
|
2013 |
1,727 |
$ |
13.11 |
$ |
19.38 |
$ |
25,161 |
1.07 |
% |
0.60 |
% |
1.75 |
% |
27.58 |
% |
29.07 |
% |
||||||||||||||||||||||
|
2012 |
1,445 |
$ |
10.26 |
$ |
15.04 |
$ |
16,718 |
1.36 |
% |
0.60 |
% |
1.75 |
% |
13.07 |
% |
14.40 |
% |
||||||||||||||||||||||
|
2011 |
910 |
$ |
9.07 |
$ |
13.18 |
$ |
9,655 |
0.81 |
% |
0.60 |
% |
1.75 |
% |
–9.66 |
% |
–8.70 |
% |
||||||||||||||||||||||
|
Lord Abbett Growth & Income VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
5,041 |
$ |
13.73 |
$ |
21.35 |
$ |
88,967 |
1.13 |
% |
0.60 |
% |
1.80 |
% |
–4.61 |
% |
–3.45 |
% |
||||||||||||||||||||||
|
2014 |
6,108 |
$ |
14.39 |
$ |
22.15 |
$ |
111,740 |
0.65 |
% |
0.60 |
% |
1.80 |
% |
5.72 |
% |
7.01 |
% |
||||||||||||||||||||||
|
2013 |
7,519 |
$ |
13.60 |
$ |
20.74 |
$ |
129,041 |
0.54 |
% |
0.60 |
% |
1.80 |
% |
33.46 |
% |
35.08 |
% |
||||||||||||||||||||||
|
2012 |
9,154 |
$ |
10.19 |
$ |
15.39 |
$ |
116,738 |
0.94 |
% |
0.60 |
% |
1.80 |
% |
10.07 |
% |
11.41 |
% |
||||||||||||||||||||||
|
2011 |
10,172 |
$ |
9.25 |
$ |
13.84 |
$ |
117,661 |
0.72 |
% |
0.60 |
% |
1.80 |
% |
–7.77 |
% |
–6.64 |
% |
||||||||||||||||||||||
|
Lord Abbett Growth Opportunities VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,834 |
$ |
13.70 |
$ |
27.62 |
$ |
38,378 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
0.93 |
% |
2.11 |
% |
||||||||||||||||||||||
|
2014 |
1,169 |
$ |
13.58 |
$ |
27.08 |
$ |
28,558 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
4.22 |
% |
5.43 |
% |
||||||||||||||||||||||
|
2013 |
1,371 |
$ |
13.03 |
$ |
25.71 |
$ |
32,228 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
34.68 |
% |
36.26 |
% |
||||||||||||||||||||||
|
2012 |
1,527 |
$ |
9.67 |
$ |
18.89 |
$ |
27,024 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
12.10 |
% |
13.42 |
% |
||||||||||||||||||||||
|
2011 |
1,614 |
$ |
8.65 |
$ |
16.67 |
$ |
25,880 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–11.57 |
% |
–10.59 |
% |
||||||||||||||||||||||
|
Lord Abbett International
Opportunities VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,967 |
$ |
12.35 |
$ |
24.40 |
$ |
27,940 |
0.82 |
% |
0.60 |
% |
1.75 |
% |
9.15 |
% |
10.43 |
% |
||||||||||||||||||||||
|
2014 |
2,106 |
$ |
11.30 |
$ |
22.14 |
$ |
27,249 |
1.29 |
% |
0.60 |
% |
1.75 |
% |
–7.41 |
% |
–6.32 |
% |
||||||||||||||||||||||
|
2013 |
2,312 |
$ |
12.19 |
$ |
23.68 |
$ |
31,920 |
1.82 |
% |
0.60 |
% |
1.75 |
% |
29.40 |
% |
30.91 |
% |
||||||||||||||||||||||
|
2012 |
2,688 |
$ |
9.41 |
$ |
18.13 |
$ |
28,415 |
1.99 |
% |
0.60 |
% |
1.75 |
% |
18.27 |
% |
19.66 |
% |
||||||||||||||||||||||
|
2011 |
2,783 |
$ |
7.95 |
$ |
15.18 |
$ |
24,685 |
0.98 |
% |
0.60 |
% |
1.75 |
% |
–17.11 |
% |
–16.22 |
% |
||||||||||||||||||||||
FSA-73
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Lord Abbett Mid Cap Stock VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,258 |
$ |
13.49 |
$ |
24.54 |
$ |
66,034 |
0.55 |
% |
0.60 |
% |
1.80 |
% |
–5.52 |
% |
–4.36 |
% |
||||||||||||||||||||||
|
2014 |
3,911 |
$ |
14.27 |
$ |
25.71 |
$ |
83,064 |
0.42 |
% |
0.60 |
% |
1.80 |
% |
9.52 |
% |
10.86 |
% |
||||||||||||||||||||||
|
2013 |
4,624 |
$ |
13.02 |
$ |
23.24 |
$ |
89,509 |
0.40 |
% |
0.60 |
% |
1.80 |
% |
27.98 |
% |
29.54 |
% |
||||||||||||||||||||||
|
2012 |
5,491 |
$ |
10.17 |
$ |
17.98 |
$ |
83,001 |
0.64 |
% |
0.60 |
% |
1.80 |
% |
12.48 |
% |
13.86 |
% |
||||||||||||||||||||||
|
2011 |
6,435 |
$ |
9.04 |
$ |
15.82 |
$ |
86,373 |
0.20 |
% |
0.60 |
% |
1.80 |
% |
–5.73 |
% |
–4.59 |
% |
||||||||||||||||||||||
|
Lord Abbett Series Fundamental
Equity VC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
7,825 |
$ |
13.29 |
$ |
17.87 |
$ |
125,147 |
0.87 |
% |
0.60 |
% |
1.75 |
% |
–5.13 |
% |
–4.02 |
% |
||||||||||||||||||||||
|
2014 |
13,829 |
$ |
14.01 |
$ |
18.62 |
$ |
223,533 |
0.45 |
% |
0.60 |
% |
1.75 |
% |
5.27 |
% |
6.50 |
% |
||||||||||||||||||||||
|
2013 |
14,463 |
$ |
13.31 |
$ |
17.49 |
$ |
221,856 |
0.26 |
% |
0.60 |
% |
1.75 |
% |
33.39 |
% |
34.94 |
% |
||||||||||||||||||||||
|
2012 |
11,852 |
$ |
9.98 |
$ |
12.96 |
$ |
138,428 |
0.72 |
% |
0.60 |
% |
1.75 |
% |
8.64 |
% |
9.92 |
% |
||||||||||||||||||||||
|
2011 |
6,277 |
$ |
9.18 |
$ |
11.79 |
$ |
71,068 |
0.29 |
% |
0.60 |
% |
1.75 |
% |
–6.11 |
% |
–5.06 |
% |
||||||||||||||||||||||
|
MFS Growth Series IC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
200 |
$ |
18.42 |
$ |
29.69 |
$ |
5,390 |
0.15 |
% |
0.70 |
% |
1.80 |
% |
5.63 |
% |
6.81 |
% |
||||||||||||||||||||||
|
2014 |
207 |
$ |
17.31 |
$ |
27.96 |
$ |
5,404 |
0.10 |
% |
0.70 |
% |
1.80 |
% |
6.99 |
% |
8.18 |
% |
||||||||||||||||||||||
|
2013 |
231 |
$ |
16.07 |
$ |
25.98 |
$ |
5,680 |
0.23 |
% |
0.70 |
% |
1.80 |
% |
34.39 |
% |
35.90 |
% |
||||||||||||||||||||||
|
2012 |
264 |
$ |
11.87 |
$ |
19.23 |
$ |
4,793 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
15.27 |
% |
16.56 |
% |
||||||||||||||||||||||
|
2011 |
317 |
$ |
10.23 |
$ |
16.59 |
$ |
4,957 |
0.19 |
% |
0.70 |
% |
1.80 |
% |
–2.11 |
% |
–1.02 |
% |
||||||||||||||||||||||
|
MFS Growth Series SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,820 |
$ |
16.38 |
$ |
28.78 |
$ |
58,065 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
5.37 |
% |
6.66 |
% |
||||||||||||||||||||||
|
2014 |
7,240 |
$ |
15.54 |
$ |
27.16 |
$ |
130,103 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
6.73 |
% |
8.03 |
% |
||||||||||||||||||||||
|
2013 |
6,350 |
$ |
14.55 |
$ |
25.30 |
$ |
107,814 |
0.13 |
% |
0.60 |
% |
1.80 |
% |
34.04 |
% |
35.68 |
% |
||||||||||||||||||||||
|
2012 |
3,971 |
$ |
10.85 |
$ |
18.77 |
$ |
52,121 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
14.97 |
% |
16.37 |
% |
||||||||||||||||||||||
|
2011 |
1,117 |
$ |
9.43 |
$ |
16.24 |
$ |
15,716 |
0.02 |
% |
0.60 |
% |
1.80 |
% |
–2.34 |
% |
–1.15 |
% |
||||||||||||||||||||||
|
MFS Investors Growth Stock IC(d) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
— |
N/A |
N/A |
$ |
— |
1.58 |
% |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||
|
2014 |
215 |
$ |
10.53 |
$ |
12.38 |
$ |
2,420 |
0.52 |
% |
0.70 |
% |
1.80 |
% |
9.45 |
% |
10.67 |
% |
||||||||||||||||||||||
|
2013 |
253 |
$ |
9.62 |
$ |
11.18 |
$ |
2,590 |
0.61 |
% |
0.70 |
% |
1.80 |
% |
27.95 |
% |
29.38 |
% |
||||||||||||||||||||||
|
2012 |
311 |
$ |
7.52 |
$ |
8.64 |
$ |
2,473 |
0.44 |
% |
0.70 |
% |
1.80 |
% |
14.87 |
% |
16.15 |
% |
||||||||||||||||||||||
|
2011 |
317 |
$ |
10.23 |
$ |
16.59 |
$ |
4,957 |
0.19 |
% |
0.70 |
% |
1.80 |
% |
–2.11 |
% |
–1.02 |
% |
||||||||||||||||||||||
|
MFS Investors Growth Stock SC(e) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
— |
N/A |
N/A |
$ |
— |
1.01 |
% |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||
|
2014 |
5,398 |
$ |
10.23 |
$ |
24.62 |
$ |
68,200 |
0.29 |
% |
0.60 |
% |
1.80 |
% |
9.12 |
% |
10.45 |
% |
||||||||||||||||||||||
|
2013 |
6,217 |
$ |
9.37 |
$ |
22.33 |
$ |
70,891 |
0.42 |
% |
0.60 |
% |
1.80 |
% |
27.72 |
% |
29.27 |
% |
||||||||||||||||||||||
|
2012 |
7,067 |
$ |
7.34 |
$ |
17.31 |
$ |
62,304 |
0.22 |
% |
0.60 |
% |
1.80 |
% |
14.58 |
% |
15.98 |
% |
||||||||||||||||||||||
|
2011 |
7,725 |
$ |
6.40 |
$ |
14.96 |
$ |
58,494 |
0.26 |
% |
0.60 |
% |
1.80 |
% |
–1.43 |
% |
–0.23 |
% |
||||||||||||||||||||||
|
MFS Investors Trust IC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
361 |
$ |
17.35 |
$ |
23.07 |
$ |
7,853 |
0.91 |
% |
0.70 |
% |
1.80 |
% |
–1.58 |
% |
–0.48 |
% |
||||||||||||||||||||||
|
2014 |
408 |
$ |
17.50 |
$ |
22.31 |
$ |
8,995 |
0.92 |
% |
0.70 |
% |
1.80 |
% |
9.01 |
% |
10.23 |
% |
||||||||||||||||||||||
|
2013 |
474 |
$ |
15.94 |
$ |
21.26 |
$ |
9,554 |
1.08 |
% |
0.70 |
% |
1.80 |
% |
29.68 |
% |
31.13 |
% |
||||||||||||||||||||||
|
2012 |
570 |
$ |
12.21 |
$ |
16.31 |
$ |
8,814 |
0.87 |
% |
0.70 |
% |
1.80 |
% |
17.04 |
% |
18.35 |
% |
||||||||||||||||||||||
|
2011 |
683 |
$ |
10.36 |
$ |
13.86 |
$ |
8,958 |
0.90 |
% |
0.70 |
% |
1.80 |
% |
–3.94 |
% |
–2.86 |
% |
||||||||||||||||||||||
|
MFS Investors Trust SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,743 |
$ |
15.01 |
$ |
23.28 |
$ |
70,030 |
0.81 |
% |
0.60 |
% |
1.80 |
% |
–1.84 |
% |
–0.65 |
% |
||||||||||||||||||||||
|
2014 |
10,844 |
$ |
15.28 |
$ |
23.48 |
$ |
191,030 |
0.80 |
% |
0.60 |
% |
1.80 |
% |
8.72 |
% |
10.05 |
% |
||||||||||||||||||||||
|
2013 |
10,053 |
$ |
14.05 |
$ |
21.38 |
$ |
163,257 |
1.03 |
% |
0.60 |
% |
1.80 |
% |
29.37 |
% |
30.95 |
% |
||||||||||||||||||||||
|
2012 |
6,817 |
$ |
10.86 |
$ |
16.36 |
$ |
88,846 |
0.77 |
% |
0.60 |
% |
1.80 |
% |
16.69 |
% |
18.12 |
% |
||||||||||||||||||||||
|
2011 |
2,944 |
$ |
9.30 |
$ |
13.88 |
$ |
36,771 |
0.84 |
% |
0.60 |
% |
1.80 |
% |
–4.17 |
% |
–3.00 |
% |
||||||||||||||||||||||
|
MFS New Discovery IC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
65 |
$ |
26.80 |
$ |
35.03 |
$ |
2,152 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
–3.65 |
% |
–2.57 |
% |
||||||||||||||||||||||
|
2014 |
76 |
$ |
27.62 |
$ |
36.15 |
$ |
2,594 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
–8.93 |
% |
–7.91 |
% |
||||||||||||||||||||||
|
2013 |
99 |
$ |
30.11 |
$ |
39.47 |
$ |
3,700 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
38.98 |
% |
40.53 |
% |
||||||||||||||||||||||
|
2012 |
104 |
$ |
21.51 |
$ |
28.24 |
$ |
2,777 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
19.04 |
% |
20.37 |
% |
||||||||||||||||||||||
|
2011 |
132 |
$ |
17.94 |
$ |
23.59 |
$ |
2,938 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
–11.88 |
% |
–10.89 |
% |
||||||||||||||||||||||
FSA-74
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
MFS New Discovery SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,943 |
$ |
12.09 |
$ |
33.92 |
$ |
73,525 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
–3.90 |
% |
–2.73 |
% |
||||||||||||||||||||||
|
2014 |
3,853 |
$ |
12.57 |
$ |
35.11 |
$ |
94,951 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
–9.16 |
% |
–8.05 |
% |
||||||||||||||||||||||
|
2013 |
7,089 |
$ |
13.83 |
$ |
38.43 |
$ |
158,400 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
38.68 |
% |
40.37 |
% |
||||||||||||||||||||||
|
2012 |
5,712 |
$ |
9.97 |
$ |
27.56 |
$ |
102,423 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
18.72 |
% |
20.17 |
% |
||||||||||||||||||||||
|
2011 |
3,072 |
$ |
8.39 |
$ |
23.08 |
$ |
59,039 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
–12.10 |
% |
–11.03 |
% |
||||||||||||||||||||||
|
MFS Research IC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
293 |
$ |
18.92 |
$ |
24.21 |
$ |
6,708 |
0.74 |
% |
0.70 |
% |
1.80 |
% |
–1.01 |
% |
0.10 |
% |
||||||||||||||||||||||
|
2014 |
328 |
$ |
18.93 |
$ |
24.32 |
$ |
7,558 |
0.81 |
% |
0.70 |
% |
1.80 |
% |
8.22 |
% |
9.43 |
% |
||||||||||||||||||||||
|
2013 |
367 |
$ |
16.77 |
$ |
22.35 |
$ |
7,811 |
0.33 |
% |
0.70 |
% |
1.80 |
% |
29.91 |
% |
31.36 |
% |
||||||||||||||||||||||
|
2012 |
426 |
$ |
12.82 |
$ |
17.11 |
$ |
6,955 |
0.80 |
% |
0.70 |
% |
1.80 |
% |
15.16 |
% |
16.45 |
% |
||||||||||||||||||||||
|
2011 |
530 |
$ |
11.05 |
$ |
14.77 |
$ |
7,498 |
0.85 |
% |
0.70 |
% |
1.80 |
% |
–2.24 |
% |
–1.15 |
% |
||||||||||||||||||||||
|
MFS Research SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
222 |
$ |
15.08 |
$ |
24.66 |
$ |
4,475 |
0.50 |
% |
0.60 |
% |
1.75 |
% |
–1.23 |
% |
–0.07 |
% |
||||||||||||||||||||||
|
2014 |
399 |
$ |
15.27 |
$ |
24.73 |
$ |
7,680 |
0.58 |
% |
0.60 |
% |
1.75 |
% |
8.01 |
% |
9.28 |
% |
||||||||||||||||||||||
|
2013 |
393 |
$ |
14.14 |
$ |
22.68 |
$ |
7,010 |
0.30 |
% |
0.60 |
% |
1.75 |
% |
29.69 |
% |
31.21 |
% |
||||||||||||||||||||||
|
2012 |
350 |
$ |
10.90 |
$ |
17.32 |
$ |
4,996 |
0.62 |
% |
0.60 |
% |
1.75 |
% |
14.86 |
% |
16.20 |
% |
||||||||||||||||||||||
|
2011 |
252 |
$ |
9.49 |
$ |
14.93 |
$ |
3,279 |
0.66 |
% |
0.60 |
% |
1.75 |
% |
–2.37 |
% |
–1.28 |
% |
||||||||||||||||||||||
|
MFS Total Return IC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,067 |
$ |
21.33 |
$ |
25.75 |
$ |
25,781 |
2.60 |
% |
0.70 |
% |
1.80 |
% |
–2.16 |
% |
–1.07 |
% |
||||||||||||||||||||||
|
2014 |
1,212 |
$ |
21.64 |
$ |
26.18 |
$ |
29,780 |
1.84 |
% |
0.70 |
% |
1.80 |
% |
6.55 |
% |
7.74 |
% |
||||||||||||||||||||||
|
2013 |
1,463 |
$ |
20.17 |
$ |
24.43 |
$ |
33,548 |
1.75 |
% |
0.70 |
% |
1.80 |
% |
16.91 |
% |
18.21 |
% |
||||||||||||||||||||||
|
2012 |
1,726 |
$ |
17.31 |
$ |
20.78 |
$ |
33,710 |
2.71 |
% |
0.70 |
% |
1.80 |
% |
9.25 |
% |
10.48 |
% |
||||||||||||||||||||||
|
2011 |
2,112 |
$ |
15.57 |
$ |
18.92 |
$ |
37,517 |
2.53 |
% |
0.70 |
% |
1.80 |
% |
–0.05 |
% |
1.06 |
% |
||||||||||||||||||||||
|
MFS Total Return SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,476 |
$ |
12.91 |
$ |
24.96 |
$ |
67,343 |
2.44 |
% |
0.60 |
% |
1.80 |
% |
–2.37 |
% |
–1.18 |
% |
||||||||||||||||||||||
|
2014 |
5,578 |
$ |
13.22 |
$ |
25.42 |
$ |
102,488 |
1.69 |
% |
0.60 |
% |
1.80 |
% |
6.29 |
% |
7.59 |
% |
||||||||||||||||||||||
|
2013 |
5,936 |
$ |
12.43 |
$ |
23.78 |
$ |
104,046 |
1.66 |
% |
0.60 |
% |
1.80 |
% |
16.60 |
% |
18.03 |
% |
||||||||||||||||||||||
|
2012 |
5,764 |
$ |
10.65 |
$ |
20.28 |
$ |
89,702 |
2.54 |
% |
0.60 |
% |
1.80 |
% |
8.94 |
% |
10.27 |
% |
||||||||||||||||||||||
|
2011 |
5,387 |
$ |
9.78 |
$ |
18.51 |
$ |
80,275 |
2.40 |
% |
0.60 |
% |
1.80 |
% |
–0.24 |
% |
0.98 |
% |
||||||||||||||||||||||
|
MFS Utilities IC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
99 |
$ |
29.72 |
$ |
32.51 |
$ |
3,118 |
4.19 |
% |
0.70 |
% |
1.65 |
% |
–15.93 |
% |
–15.12 |
% |
||||||||||||||||||||||
|
2014 |
137 |
$ |
35.15 |
$ |
38.51 |
$ |
5,090 |
2.09 |
% |
0.70 |
% |
1.65 |
% |
10.88 |
% |
11.94 |
% |
||||||||||||||||||||||
|
2013 |
153 |
$ |
31.53 |
$ |
34.59 |
$ |
5,123 |
2.26 |
% |
0.70 |
% |
1.80 |
% |
18.35 |
% |
19.67 |
% |
||||||||||||||||||||||
|
2012 |
182 |
$ |
26.45 |
$ |
29.07 |
$ |
5,131 |
6.51 |
% |
0.70 |
% |
1.80 |
% |
11.44 |
% |
12.69 |
% |
||||||||||||||||||||||
|
2011 |
232 |
$ |
23.57 |
$ |
25.94 |
$ |
5,840 |
3.20 |
% |
0.70 |
% |
1.80 |
% |
4.87 |
% |
6.04 |
% |
||||||||||||||||||||||
|
MFS Utilities SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,694 |
$ |
11.69 |
$ |
31.48 |
$ |
35,747 |
2.86 |
% |
0.60 |
% |
1.75 |
% |
–16.25 |
% |
–15.27 |
% |
||||||||||||||||||||||
|
2014 |
3,801 |
$ |
13.96 |
$ |
37.40 |
$ |
78,284 |
1.92 |
% |
0.60 |
% |
1.80 |
% |
10.44 |
% |
11.79 |
% |
||||||||||||||||||||||
|
2013 |
4,035 |
$ |
12.64 |
$ |
33.67 |
$ |
75,165 |
2.21 |
% |
0.60 |
% |
1.80 |
% |
18.05 |
% |
19.49 |
% |
||||||||||||||||||||||
|
2012 |
3,099 |
$ |
10.70 |
$ |
28.36 |
$ |
57,793 |
6.67 |
% |
0.60 |
% |
1.80 |
% |
11.17 |
% |
12.53 |
% |
||||||||||||||||||||||
|
2011 |
1,662 |
$ |
9.62 |
$ |
25.37 |
$ |
34,035 |
3.16 |
% |
0.60 |
% |
1.80 |
% |
4.60 |
% |
5.87 |
% |
||||||||||||||||||||||
|
MFS VIT Total Return Bond SC(b) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
50,020 |
$ |
10.52 |
$ |
12.27 |
$ |
567,063 |
3.28 |
% |
0.60 |
% |
1.75 |
% |
–2.32 |
% |
–1.18 |
% |
||||||||||||||||||||||
|
2014 |
64,834 |
$ |
10.77 |
$ |
12.42 |
$ |
741,457 |
2.76 |
% |
0.60 |
% |
1.75 |
% |
3.77 |
% |
4.99 |
% |
||||||||||||||||||||||
|
2013 |
58,361 |
$ |
10.38 |
$ |
11.83 |
$ |
642,579 |
1.16 |
% |
0.60 |
% |
1.75 |
% |
–3.01 |
% |
–1.88 |
% |
||||||||||||||||||||||
|
2012 |
41,750 |
$ |
10.71 |
$ |
12.05 |
$ |
477,297 |
2.76 |
% |
0.60 |
% |
1.75 |
% |
5.18 |
% |
6.41 |
% |
||||||||||||||||||||||
|
2011 |
24,788 |
$ |
10.10 |
$ |
11.33 |
$ |
275,699 |
2.88 |
% |
0.60 |
% |
1.75 |
% |
4.68 |
% |
5.84 |
% |
||||||||||||||||||||||
|
MFS VIT Value SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
13,576 |
$ |
15.33 |
$ |
19.14 |
$ |
241,370 |
2.28 |
% |
0.60 |
% |
1.75 |
% |
–2.67 |
% |
–1.53 |
% |
||||||||||||||||||||||
|
2014 |
29,436 |
$ |
15.75 |
$ |
19.44 |
$ |
516,769 |
1.37 |
% |
0.60 |
% |
1.75 |
% |
8.28 |
% |
9.54 |
% |
||||||||||||||||||||||
|
2013 |
29,190 |
$ |
14.54 |
$ |
17.75 |
$ |
471,818 |
1.03 |
% |
0.60 |
% |
1.75 |
% |
33.23 |
% |
34.78 |
% |
||||||||||||||||||||||
|
2012 |
24,538 |
$ |
10.92 |
$ |
13.17 |
$ |
300,401 |
1.48 |
% |
0.60 |
% |
1.75 |
% |
13.85 |
% |
15.19 |
% |
||||||||||||||||||||||
|
2011 |
14,747 |
$ |
9.59 |
$ |
11.43 |
$ |
162,861 |
1.41 |
% |
0.60 |
% |
1.75 |
% |
–2.15 |
% |
–1.06 |
% |
||||||||||||||||||||||
FSA-75
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
MFS VIT II Emerging Markets Equity SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
72 |
$ |
7.29 |
$ |
7.68 |
$ |
537 |
0.58 |
% |
0.90 |
% |
1.65 |
% |
–14.52 |
% |
–13.87 |
% |
||||||||||||||||||||||
|
2014 |
143 |
$ |
8.53 |
$ |
8.92 |
$ |
1,241 |
0.65 |
% |
0.90 |
% |
1.65 |
% |
–8.52 |
% |
–7.82 |
% |
||||||||||||||||||||||
|
2013 |
476 |
$ |
9.31 |
$ |
9.45 |
$ |
4,467 |
1.61 |
% |
0.90 |
% |
1.75 |
% |
–7.06 |
% |
–6.25 |
% |
||||||||||||||||||||||
|
2012 |
236 |
$ |
10.02 |
$ |
10.08 |
$ |
2,369 |
0.55 |
% |
0.90 |
% |
1.75 |
% |
2.95 |
% |
2.95 |
% |
||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
MFS VIT II International Value SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2,166 |
$ |
11.05 |
$ |
14.10 |
$ |
30,515 |
2.73 |
% |
0.90 |
% |
1.30 |
% |
4.94 |
% |
5.36 |
% |
||||||||||||||||||||||
|
2014 |
6,677 |
$ |
10.50 |
$ |
13.38 |
$ |
89,173 |
2.05 |
% |
0.90 |
% |
1.75 |
% |
–0.63 |
% |
0.22 |
% |
||||||||||||||||||||||
|
2013 |
6,572 |
$ |
13.16 |
$ |
13.35 |
$ |
87,721 |
1.53 |
% |
0.90 |
% |
1.75 |
% |
25.41 |
% |
26.49 |
% |
||||||||||||||||||||||
|
2012 |
2,855 |
$ |
10.49 |
$ |
10.56 |
$ |
30,141 |
0.82 |
% |
0.90 |
% |
1.75 |
% |
5.91 |
% |
5.91 |
% |
||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
MFS VIT II MA Investors Growth
Stock IC(f) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
202 |
$ |
9.82 |
$ |
9.90 |
$ |
1,987 |
1.08 |
% |
0.70 |
% |
1.80 |
% |
–3.72 |
% |
–2.91 |
% |
||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
MFS VIT II MA Investors Growth
Stock SC(f) |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
5,131 |
$ |
9.80 |
$ |
9.90 |
$ |
50,659 |
1.07 |
% |
0.60 |
% |
1.80 |
% |
–3.95 |
–3.06 |
||||||||||||||||||||||||
|
2014 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2013 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Oppenheimer Capital Appreciation
Fund/VA |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
343 |
$ |
18.59 |
$ |
27.31 |
$ |
8,632 |
0.09 |
% |
0.70 |
% |
1.80 |
% |
1.68 |
% |
2.82 |
% |
||||||||||||||||||||||
|
2014 |
397 |
$ |
18.16 |
$ |
26.71 |
$ |
9,817 |
0.44 |
% |
0.70 |
% |
1.80 |
% |
13.33 |
% |
14.60 |
% |
||||||||||||||||||||||
|
2013 |
464 |
$ |
15.91 |
$ |
23.44 |
$ |
10,032 |
0.99 |
% |
0.70 |
% |
1.80 |
% |
27.41 |
% |
28.83 |
% |
||||||||||||||||||||||
|
2012 |
542 |
$ |
12.40 |
$ |
18.29 |
$ |
9,139 |
0.66 |
% |
0.70 |
% |
1.80 |
% |
12.06 |
% |
13.32 |
% |
||||||||||||||||||||||
|
2011 |
675 |
$ |
10.98 |
$ |
16.23 |
$ |
10,037 |
0.38 |
% |
0.70 |
% |
1.80 |
% |
–2.92 |
% |
–1.84 |
% |
||||||||||||||||||||||
|
Oppenheimer Capital Appreciation
Fund/VA SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,174 |
$ |
15.27 |
$ |
26.47 |
$ |
58,337 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
1.41 |
% |
2.65 |
% |
||||||||||||||||||||||
|
2014 |
2,119 |
$ |
15.05 |
$ |
25.96 |
$ |
40,005 |
0.18 |
% |
0.60 |
% |
1.80 |
% |
13.06 |
% |
14.44 |
% |
||||||||||||||||||||||
|
2013 |
2,395 |
$ |
13.30 |
$ |
22.83 |
$ |
39,883 |
0.75 |
% |
0.60 |
% |
1.80 |
% |
27.10 |
% |
28.65 |
% |
||||||||||||||||||||||
|
2012 |
2,598 |
$ |
10.46 |
$ |
17.86 |
$ |
33,999 |
0.39 |
% |
0.60 |
% |
1.80 |
% |
11.76 |
% |
13.12 |
% |
||||||||||||||||||||||
|
2011 |
2,762 |
$ |
9.37 |
$ |
15.90 |
$ |
32,178 |
0.11 |
% |
0.60 |
% |
1.80 |
% |
–3.14 |
% |
–1.96 |
% |
||||||||||||||||||||||
|
Oppenheimer Discovery Mid Cap
Growth Fund/VA |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
127 |
$ |
16.14 |
$ |
22.79 |
$ |
2,782 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
4.69 |
% |
5.86 |
% |
||||||||||||||||||||||
|
2014 |
139 |
$ |
15.27 |
$ |
21.65 |
$ |
2,907 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
3.88 |
% |
5.04 |
% |
||||||||||||||||||||||
|
2013 |
167 |
$ |
14.56 |
$ |
20.72 |
$ |
3,343 |
0.01 |
% |
0.70 |
% |
1.80 |
% |
33.54 |
% |
35.03 |
% |
||||||||||||||||||||||
|
2012 |
190 |
$ |
10.80 |
$ |
15.43 |
$ |
2,831 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
14.35 |
% |
15.63 |
% |
||||||||||||||||||||||
|
2011 |
221 |
$ |
9.35 |
$ |
13.42 |
$ |
2,878 |
0.00 |
% |
0.70 |
% |
1.80 |
% |
–0.72 |
% |
0.39 |
% |
||||||||||||||||||||||
|
Oppenheimer Discovery Mid Cap
Growth Fund/VA SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
46 |
$ |
15.05 |
$ |
28.35 |
$ |
919 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
4.44 |
% |
5.71 |
% |
||||||||||||||||||||||
|
2014 |
54 |
$ |
14.31 |
$ |
26.87 |
$ |
1,012 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
3.63 |
% |
4.89 |
% |
||||||||||||||||||||||
|
2013 |
57 |
$ |
13.71 |
$ |
25.67 |
$ |
1,024 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
33.19 |
% |
34.81 |
% |
||||||||||||||||||||||
|
2012 |
64 |
$ |
10.22 |
$ |
19.08 |
$ |
876 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
14.07 |
% |
15.47 |
% |
||||||||||||||||||||||
|
2011 |
79 |
$ |
8.90 |
$ |
16.56 |
$ |
951 |
0.00 |
% |
0.60 |
% |
1.80 |
% |
–0.97 |
% |
0.23 |
% |
||||||||||||||||||||||
FSA-76
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Oppenheimer Global Fund/VA |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
266 |
$ |
29.25 |
$ |
36.85 |
$ |
9,090 |
1.33 |
% |
0.70 |
% |
1.80 |
% |
2.08 |
% |
3.22 |
% |
||||||||||||||||||||||
|
2014 |
306 |
$ |
28.45 |
$ |
35.90 |
$ |
10,207 |
1.10 |
% |
0.70 |
% |
1.80 |
% |
0.45 |
% |
1.58 |
% |
||||||||||||||||||||||
|
2013 |
365 |
$ |
28.12 |
$ |
35.54 |
$ |
12,082 |
1.36 |
% |
0.70 |
% |
1.80 |
% |
25.02 |
% |
26.42 |
% |
||||||||||||||||||||||
|
2012 |
435 |
$ |
22.34 |
$ |
28.27 |
$ |
11,429 |
2.15 |
% |
0.70 |
% |
1.80 |
% |
19.08 |
% |
20.42 |
% |
||||||||||||||||||||||
|
2011 |
546 |
$ |
18.62 |
$ |
23.60 |
$ |
11,939 |
1.29 |
% |
0.70 |
% |
1.80 |
% |
–9.94 |
% |
–8.93 |
% |
||||||||||||||||||||||
|
Oppenheimer Global Fund/VA SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
10,419 |
$ |
13.22 |
$ |
35.75 |
$ |
269,963 |
1.32 |
% |
0.60 |
% |
1.80 |
% |
1.81 |
% |
3.05 |
% |
||||||||||||||||||||||
|
2014 |
16,067 |
$ |
12.98 |
$ |
34.92 |
$ |
362,251 |
0.88 |
% |
0.60 |
% |
1.80 |
% |
0.22 |
% |
1.44 |
% |
||||||||||||||||||||||
|
2013 |
17,940 |
$ |
12.95 |
$ |
34.65 |
$ |
399,020 |
1.17 |
% |
0.60 |
% |
1.80 |
% |
24.71 |
% |
26.23 |
% |
||||||||||||||||||||||
|
2012 |
17,305 |
$ |
10.38 |
$ |
27.63 |
$ |
325,895 |
1.92 |
% |
0.60 |
% |
1.80 |
% |
18.77 |
% |
20.22 |
% |
||||||||||||||||||||||
|
2011 |
11,057 |
$ |
8.73 |
$ |
23.13 |
$ |
205,559 |
0.82 |
% |
0.60 |
% |
1.80 |
% |
% |
% |
||||||||||||||||||||||||
|
Oppenheimer Global Strategic Income
Fund/VA |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
648 |
$ |
19.25 |
$ |
22.29 |
$ |
13,319 |
5.98 |
% |
0.70 |
% |
1.80 |
% |
–4.02 |
% |
–2.94 |
% |
||||||||||||||||||||||
|
2014 |
752 |
$ |
20.06 |
$ |
22.96 |
$ |
16,068 |
4.25 |
% |
0.70 |
% |
1.80 |
% |
0.99 |
% |
2.12 |
% |
||||||||||||||||||||||
|
2013 |
863 |
$ |
19.86 |
$ |
22.49 |
$ |
18,181 |
5.03 |
% |
0.70 |
% |
1.80 |
% |
–1.93 |
% |
–0.83 |
% |
||||||||||||||||||||||
|
2012 |
1,024 |
$ |
20.25 |
$ |
22.68 |
$ |
21,907 |
5.82 |
% |
0.70 |
% |
1.80 |
% |
11.49 |
% |
12.74 |
% |
||||||||||||||||||||||
|
2011 |
1,198 |
$ |
18.16 |
$ |
20.11 |
$ |
22,886 |
3.43 |
% |
0.70 |
% |
1.80 |
% |
–0.95 |
% |
0.15 |
% |
||||||||||||||||||||||
|
Oppenheimer Global Strategic Income
Fund/VA SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
26,621 |
$ |
9.95 |
$ |
21.56 |
$ |
388,479 |
5.59 |
% |
0.60 |
% |
1.80 |
% |
–4.24 |
% |
–3.08 |
% |
||||||||||||||||||||||
|
2014 |
28,045 |
$ |
10.38 |
$ |
22.27 |
$ |
425,726 |
3.91 |
% |
0.60 |
% |
1.80 |
% |
0.65 |
% |
1.88 |
% |
||||||||||||||||||||||
|
2013 |
27,993 |
$ |
10.31 |
$ |
21.88 |
$ |
427,093 |
4.62 |
% |
0.60 |
% |
1.80 |
% |
–2.16 |
% |
–0.96 |
% |
||||||||||||||||||||||
|
2012 |
21,427 |
$ |
10.53 |
$ |
22.12 |
$ |
354,421 |
5.56 |
% |
0.60 |
% |
1.80 |
% |
11.11 |
% |
12.47 |
% |
||||||||||||||||||||||
|
2011 |
14,618 |
$ |
9.48 |
$ |
19.68 |
$ |
244,206 |
2.44 |
% |
0.60 |
% |
1.80 |
% |
–1.16 |
% |
0.05 |
% |
||||||||||||||||||||||
|
Oppenheimer Main Street Fund/VA |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
519 |
$ |
17.28 |
$ |
22.69 |
$ |
10,981 |
0.92 |
% |
0.70 |
% |
1.80 |
% |
1.47 |
% |
2.61 |
% |
||||||||||||||||||||||
|
2014 |
586 |
$ |
16.91 |
$ |
22.24 |
$ |
12,203 |
0.84 |
% |
0.70 |
% |
1.80 |
% |
8.71 |
% |
9.93 |
% |
||||||||||||||||||||||
|
2013 |
680 |
$ |
15.45 |
$ |
20.34 |
$ |
12,995 |
1.10 |
% |
0.70 |
% |
1.80 |
% |
29.41 |
% |
30.85 |
% |
||||||||||||||||||||||
|
2012 |
808 |
$ |
11.85 |
$ |
15.63 |
$ |
11,887 |
0.95 |
% |
0.70 |
% |
1.80 |
% |
14.77 |
% |
16.05 |
% |
||||||||||||||||||||||
|
2011 |
974 |
$ |
10.25 |
$ |
13.55 |
$ |
12,467 |
0.88 |
% |
0.70 |
% |
1.80 |
% |
–1.81 |
% |
–0.71 |
% |
||||||||||||||||||||||
|
Oppenheimer Main Street Fund/VA SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,969 |
$ |
15.82 |
$ |
24.97 |
$ |
35,737 |
0.48 |
% |
0.60 |
% |
1.80 |
% |
1.25 |
% |
2.49 |
% |
||||||||||||||||||||||
|
2014 |
1,047 |
$ |
15.62 |
$ |
24.41 |
$ |
19,448 |
0.58 |
% |
0.60 |
% |
1.80 |
% |
8.42 |
% |
9.74 |
% |
||||||||||||||||||||||
|
2013 |
1,097 |
$ |
14.40 |
$ |
22.29 |
$ |
18,944 |
0.87 |
% |
0.60 |
% |
1.80 |
% |
29.08 |
% |
30.65 |
% |
||||||||||||||||||||||
|
2012 |
934 |
$ |
11.15 |
$ |
17.10 |
$ |
12,922 |
0.64 |
% |
0.60 |
% |
1.80 |
% |
14.51 |
% |
15.91 |
% |
||||||||||||||||||||||
|
2011 |
721 |
$ |
9.75 |
$ |
14.78 |
$ |
9,079 |
0.52 |
% |
0.60 |
% |
1.80 |
% |
–2.10 |
% |
–0.91 |
% |
||||||||||||||||||||||
|
Oppenheimer Money Fund/VA |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
443,743 |
$ |
0.93 |
$ |
10.96 |
$ |
2,546,039 |
0.01 |
% |
0.60 |
% |
1.80 |
% |
–1.79 |
% |
–0.59 |
% |
||||||||||||||||||||||
|
2014 |
116,203 |
$ |
0.94 |
$ |
11.02 |
$ |
447,994 |
0.01 |
% |
0.60 |
% |
1.80 |
% |
–1.79 |
% |
–0.59 |
% |
||||||||||||||||||||||
|
2013 |
64,777 |
$ |
0.95 |
$ |
11.09 |
$ |
116,188 |
0.01 |
% |
0.60 |
% |
1.80 |
% |
–1.78 |
% |
–0.59 |
% |
||||||||||||||||||||||
|
2012 |
64,476 |
$ |
0.96 |
$ |
11.15 |
$ |
97,588 |
0.01 |
% |
0.60 |
% |
1.80 |
% |
–1.79 |
% |
–0.59 |
% |
||||||||||||||||||||||
|
2011 |
57,856 |
$ |
0.97 |
$ |
11.22 |
$ |
75,329 |
0.01 |
% |
0.60 |
% |
1.80 |
% |
–1.78 |
% |
–0.59 |
% |
||||||||||||||||||||||
|
PIMCO VIT All Asset Advisor |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
76 |
$ |
8.89 |
$ |
9.56 |
$ |
724 |
3.27 |
% |
0.90 |
% |
1.75 |
% |
–10.78 |
% |
–10.00 |
% |
||||||||||||||||||||||
|
2014 |
84 |
$ |
10.37 |
$ |
10.62 |
$ |
887 |
3.44 |
% |
0.90 |
% |
1.75 |
% |
–1.30 |
% |
–0.45 |
% |
||||||||||||||||||||||
|
2013 |
606 |
$ |
10.51 |
$ |
10.67 |
$ |
6,413 |
4.48 |
% |
0.90 |
% |
1.75 |
% |
–1.64 |
% |
–0.79 |
% |
||||||||||||||||||||||
|
2012 |
411 |
$ |
10.68 |
$ |
10.75 |
$ |
4,400 |
7.58 |
% |
0.90 |
% |
1.75 |
% |
6.53 |
% |
6.53 |
% |
||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
FSA-77
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
PIMCO VIT Global Diversified Allocation
Portfolio |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
443 |
$ |
10.17 |
$ |
10.31 |
$ |
4,544 |
3.42 |
% |
1.00 |
% |
1.75 |
% |
–7.21 |
% |
–6.50 |
% |
||||||||||||||||||||||
|
2014 |
118 |
$ |
10.97 |
$ |
11.06 |
$ |
1,299 |
4.61 |
% |
1.30 |
% |
1.75 |
% |
3.81 |
% |
4.28 |
% |
||||||||||||||||||||||
|
2013 |
58 |
$ |
10.57 |
$ |
10.60 |
$ |
615 |
5.42 |
% |
1.30 |
% |
1.75 |
% |
4.11 |
% |
4.43 |
% |
||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
PIMCO VIT Long-Term US Government
Advisor |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,300 |
$ |
11.31 |
$ |
14.76 |
$ |
16,833 |
1.96 |
% |
0.60 |
% |
1.75 |
% |
–3.21 |
% |
–2.08 |
% |
||||||||||||||||||||||
|
2014 |
1,050 |
$ |
11.59 |
$ |
15.11 |
$ |
13,894 |
2.19 |
% |
0.60 |
% |
1.75 |
% |
21.73 |
% |
23.15 |
% |
||||||||||||||||||||||
|
2013 |
1,024 |
$ |
9.44 |
$ |
12.30 |
$ |
11,064 |
2.29 |
% |
0.60 |
% |
1.75 |
% |
–14.56 |
% |
–13.56 |
% |
||||||||||||||||||||||
|
2012 |
981 |
$ |
10.95 |
$ |
14.27 |
$ |
12,558 |
2.05 |
% |
0.60 |
% |
1.75 |
% |
2.50 |
% |
3.70 |
% |
||||||||||||||||||||||
|
2011 |
547 |
$ |
10.59 |
$ |
13.79 |
$ |
7,144 |
2.54 |
% |
0.60 |
% |
1.75 |
% |
25.55 |
% |
26.94 |
% |
||||||||||||||||||||||
|
PIMCO VIT Low Duration Advisor |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
8,535 |
$ |
9.77 |
$ |
11.02 |
$ |
88,159 |
3.37 |
% |
0.60 |
% |
1.75 |
% |
–1.54 |
% |
–0.39 |
% |
||||||||||||||||||||||
|
2014 |
8,042 |
$ |
9.92 |
$ |
11.06 |
$ |
83,935 |
1.03 |
% |
0.60 |
% |
1.75 |
% |
–1.01 |
% |
0.15 |
% |
||||||||||||||||||||||
|
2013 |
8,206 |
$ |
10.02 |
$ |
11.04 |
$ |
86,219 |
1.33 |
% |
0.60 |
% |
1.75 |
% |
–1.98 |
% |
–0.83 |
% |
||||||||||||||||||||||
|
2012 |
6,399 |
$ |
10.22 |
$ |
11.14 |
$ |
68,572 |
1.79 |
% |
0.60 |
% |
1.75 |
% |
3.89 |
% |
5.11 |
% |
||||||||||||||||||||||
|
2011 |
3,962 |
$ |
9.84 |
$ |
10.60 |
$ |
41,152 |
1.56 |
% |
0.60 |
% |
1.75 |
% |
–0.70 |
% |
0.40 |
% |
||||||||||||||||||||||
|
PIMCO VIT Real Return Advisor |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
36,629 |
$ |
9.51 |
$ |
11.62 |
$ |
337,368 |
4.40 |
% |
0.60 |
% |
1.75 |
% |
–4.50 |
% |
–3.38 |
% |
||||||||||||||||||||||
|
2014 |
31,406 |
$ |
9.96 |
$ |
12.03 |
$ |
336,945 |
1.32 |
% |
0.60 |
% |
1.75 |
% |
1.19 |
% |
2.37 |
% |
||||||||||||||||||||||
|
2013 |
29,995 |
$ |
9.82 |
$ |
11.75 |
$ |
317,960 |
1.86 |
% |
0.60 |
% |
1.75 |
% |
–10.89 |
% |
–9.85 |
% |
||||||||||||||||||||||
|
2012 |
20,704 |
$ |
10.92 |
$ |
13.03 |
$ |
249,987 |
0.93 |
% |
0.60 |
% |
1.75 |
% |
6.74 |
% |
7.99 |
% |
||||||||||||||||||||||
|
2011 |
11,142 |
$ |
10.15 |
$ |
12.07 |
$ |
131,420 |
1.86 |
% |
0.60 |
% |
1.75 |
% |
9.67 |
% |
10.89 |
% |
||||||||||||||||||||||
|
PIMCO VIT Short-Term Advisor |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
7,184 |
$ |
9.65 |
$ |
10.38 |
$ |
71,672 |
0.80 |
% |
0.60 |
% |
1.75 |
% |
–0.76 |
% |
0.40 |
% |
||||||||||||||||||||||
|
2014 |
7,993 |
$ |
9.72 |
$ |
10.34 |
$ |
79,774 |
0.60 |
% |
0.60 |
% |
1.75 |
% |
–1.15 |
% |
0.00 |
% |
||||||||||||||||||||||
|
2013 |
8,264 |
$ |
9.83 |
$ |
10.34 |
$ |
82,907 |
0.65 |
% |
0.60 |
% |
1.75 |
% |
–1.29 |
% |
–0.14 |
% |
||||||||||||||||||||||
|
2012 |
4,719 |
$ |
9.95 |
$ |
10.36 |
$ |
47,725 |
0.77 |
% |
0.60 |
% |
1.75 |
% |
0.88 |
% |
2.06 |
% |
||||||||||||||||||||||
|
2011 |
2,725 |
$ |
9.86 |
$ |
10.15 |
$ |
27,210 |
0.85 |
% |
0.60 |
% |
1.75 |
% |
–1.29 |
% |
–0.19 |
% |
||||||||||||||||||||||
|
PIMCO VIT Total Return Advisor |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
76,559 |
$ |
10.37 |
$ |
12.11 |
$ |
861,569 |
5.01 |
% |
0.60 |
% |
1.75 |
% |
–1.41 |
% |
–0.25 |
% |
||||||||||||||||||||||
|
2014 |
73,680 |
$ |
10.52 |
$ |
12.14 |
$ |
838,594 |
2.10 |
% |
0.60 |
% |
1.75 |
% |
2.35 |
% |
3.55 |
% |
||||||||||||||||||||||
|
2013 |
73,904 |
$ |
10.28 |
$ |
11.72 |
$ |
818,498 |
2.12 |
% |
0.60 |
% |
1.75 |
% |
–3.77 |
% |
–2.65 |
% |
||||||||||||||||||||||
|
2012 |
60,040 |
$ |
10.68 |
$ |
12.04 |
$ |
692,430 |
2.47 |
% |
0.60 |
% |
1.75 |
% |
7.57 |
% |
8.83 |
% |
||||||||||||||||||||||
|
2011 |
39,540 |
$ |
9.93 |
$ |
11.06 |
$ |
429,278 |
2.55 |
% |
0.60 |
% |
1.75 |
% |
1.75 |
% |
2.88 |
% |
||||||||||||||||||||||
|
QS Legg Mason Dynamic Multi-Strategy
VIT II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
3,427 |
$ |
10.23 |
$ |
11.56 |
$ |
39,280 |
0.83 |
% |
1.00 |
% |
1.75 |
% |
–7.09 |
% |
–6.39 |
% |
||||||||||||||||||||||
|
2014 |
3,119 |
$ |
10.92 |
$ |
12.39 |
$ |
38,387 |
1.33 |
% |
1.00 |
% |
1.75 |
% |
4.51 |
% |
5.31 |
% |
||||||||||||||||||||||
|
2013 |
2,604 |
$ |
11.71 |
$ |
11.80 |
$ |
30,601 |
1.19 |
% |
1.30 |
% |
1.75 |
% |
16.06 |
% |
16.59 |
% |
||||||||||||||||||||||
|
2012 |
687 |
$ |
10.09 |
$ |
10.12 |
$ |
6,939 |
3.90 |
% |
1.30 |
% |
1.75 |
% |
1.11 |
% |
1.42 |
% |
||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Royce Capital Fund Micro-Cap SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1,365 |
$ |
8.65 |
$ |
12.73 |
$ |
15,408 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–14.14 |
% |
–13.14 |
% |
||||||||||||||||||||||
|
2014 |
1,367 |
$ |
10.07 |
$ |
14.65 |
$ |
17,916 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
–5.52 |
% |
–4.42 |
% |
||||||||||||||||||||||
|
2013 |
2,304 |
$ |
10.66 |
$ |
15.33 |
$ |
29,991 |
0.37 |
% |
0.60 |
% |
1.75 |
% |
18.55 |
% |
19.93 |
% |
||||||||||||||||||||||
|
2012 |
1,920 |
$ |
8.99 |
$ |
12.74 |
$ |
21,618 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
5.57 |
% |
6.70 |
% |
||||||||||||||||||||||
|
2011 |
1,124 |
$ |
8.52 |
$ |
11.96 |
$ |
12,807 |
3.55 |
% |
0.60 |
% |
1.75 |
% |
–13.74 |
% |
–12.78 |
% |
||||||||||||||||||||||
FSA-78
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Royce Capital Fund Small-Cap SC |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
7,845 |
$ |
11.95 |
$ |
15.76 |
$ |
110,724 |
0.30 |
% |
0.60 |
% |
1.75 |
% |
–13.51 |
% |
–12.50 |
% |
||||||||||||||||||||||
|
2014 |
12,633 |
$ |
13.82 |
$ |
18.02 |
$ |
198,116 |
0.00 |
% |
0.60 |
% |
1.75 |
% |
1.13 |
% |
2.31 |
% |
||||||||||||||||||||||
|
2013 |
13,592 |
$ |
13.66 |
$ |
17.61 |
$ |
209,486 |
1.05 |
% |
0.60 |
% |
1.75 |
% |
32.09 |
% |
33.63 |
% |
||||||||||||||||||||||
|
2012 |
11,286 |
$ |
10.34 |
$ |
13.18 |
$ |
134,250 |
0.04 |
% |
0.60 |
% |
1.75 |
% |
10.25 |
% |
11.54 |
% |
||||||||||||||||||||||
|
2011 |
6,047 |
$ |
9.38 |
$ |
11.81 |
$ |
68,884 |
0.42 |
% |
0.60 |
% |
1.75 |
% |
–5.19 |
% |
–4.13 |
% |
||||||||||||||||||||||
|
Rydex Commodities Strategy |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
2 |
$ |
4.19 |
$ |
4.19 |
$ |
8 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
–34.46 |
% |
–34.46 |
% |
||||||||||||||||||||||
|
2014 |
1 |
$ |
6.40 |
$ |
6.40 |
$ |
9 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
–34.67 |
% |
–34.67 |
% |
||||||||||||||||||||||
|
2013 |
1 |
$ |
9.79 |
$ |
9.79 |
$ |
7 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
3.07 |
% |
3.07 |
% |
||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Rydex Inverse Government Long Bond |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
1 |
$ |
7.45 |
$ |
7.45 |
$ |
6 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
–2.20 |
% |
–2.20 |
% |
||||||||||||||||||||||
|
2014 |
1 |
$ |
7.62 |
$ |
7.62 |
$ |
6 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
–25.66 |
% |
–25.66 |
% |
||||||||||||||||||||||
|
2013 |
1 |
$ |
10.25 |
$ |
10.25 |
$ |
7 |
0.00 |
% |
1.00 |
% |
1.00 |
% |
3.24 |
% |
3.24 |
% |
||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Rydex Inverse S&P 500 Strategy |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
— |
N/A |
N/A |
$ |
— |
0.00 |
% |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||
|
2014 |
— |
$ |
7.79 |
$ |
7.79 |
$ |
— |
0.00 |
% |
1.00 |
% |
1.00 |
% |
–15.31 |
% |
–15.31 |
% |
||||||||||||||||||||||
|
2013 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
1.00 |
% |
1.00 |
% |
% |
% |
|||||||||||||||||||||||||
|
2012 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
2011 |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||||||||||||||||||||||||||||||
|
Templeton Developing Markets VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
212 |
$ |
6.84 |
$ |
7.11 |
$ |
1,494 |
2.10 |
% |
0.90 |
% |
1.75 |
% |
–21.01 |
% |
–20.33 |
% |
||||||||||||||||||||||
|
2014 |
143 |
$ |
8.66 |
$ |
8.94 |
$ |
1,265 |
2.19 |
% |
0.90 |
% |
1.75 |
% |
–9.99 |
% |
–9.22 |
% |
||||||||||||||||||||||
|
2013 |
434 |
$ |
9.62 |
$ |
9.85 |
$ |
4,214 |
2.19 |
% |
0.90 |
% |
1.75 |
% |
–2.65 |
% |
–1.81 |
% |
||||||||||||||||||||||
|
2012 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
0.90 |
% |
1.75 |
% |
% |
% |
|||||||||||||||||||||||||
|
2011 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
0.90 |
% |
1.75 |
% |
% |
% |
|||||||||||||||||||||||||
|
Templeton Foreign VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
8,409 |
$ |
9.53 |
$ |
15.87 |
$ |
98,221 |
3.71 |
% |
0.60 |
% |
1.75 |
% |
–8.13 |
% |
–7.05 |
% |
||||||||||||||||||||||
|
2014 |
8,483 |
$ |
10.38 |
$ |
17.11 |
$ |
107,207 |
1.92 |
% |
0.60 |
% |
1.75 |
% |
–12.69 |
% |
–11.66 |
% |
||||||||||||||||||||||
|
2013 |
9,848 |
$ |
11.89 |
$ |
19.41 |
$ |
140,153 |
2.38 |
% |
0.60 |
% |
1.75 |
% |
20.82 |
% |
22.23 |
% |
||||||||||||||||||||||
|
2012 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
0.60 |
% |
1.75 |
% |
% |
% |
|||||||||||||||||||||||||
|
2011 |
9,254 |
$ |
8.47 |
$ |
13.50 |
$ |
93,795 |
1.70 |
% |
0.60 |
% |
1.75 |
% |
–12.15 |
% |
–11.17 |
% |
||||||||||||||||||||||
|
Templeton Global Bond VIP Fund CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
28,607 |
$ |
9.78 |
$ |
16.66 |
$ |
348,208 |
7.94 |
% |
0.60 |
% |
1.75 |
% |
–5.98 |
% |
–4.88 |
% |
||||||||||||||||||||||
|
2014 |
26,715 |
$ |
10.41 |
$ |
17.51 |
$ |
347,037 |
5.09 |
% |
0.60 |
% |
1.75 |
% |
0.05 |
% |
1.22 |
% |
||||||||||||||||||||||
|
2013 |
23,923 |
$ |
10.40 |
$ |
17.30 |
$ |
315,568 |
4.80 |
% |
0.60 |
% |
1.75 |
% |
–0.15 |
% |
1.02 |
% |
||||||||||||||||||||||
|
2012 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
0.60 |
% |
1.75 |
% |
% |
% |
|||||||||||||||||||||||||
|
2011 |
9,357 |
$ |
9.21 |
$ |
14.97 |
$ |
130,435 |
5.43 |
% |
0.60 |
% |
1.75 |
% |
–2.55 |
% |
–1.46 |
% |
||||||||||||||||||||||
|
Templeton Growth VIP CL 2 |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
10,086 |
$ |
10.93 |
$ |
19.27 |
$ |
125,430 |
2.91 |
% |
0.60 |
% |
1.75 |
% |
–8.12 |
% |
–7.05 |
% |
||||||||||||||||||||||
|
2014 |
10,521 |
$ |
11.89 |
$ |
20.78 |
$ |
141,369 |
1.38 |
% |
0.60 |
% |
1.75 |
% |
–4.51 |
% |
–3.40 |
% |
||||||||||||||||||||||
|
2013 |
12,582 |
$ |
12.44 |
$ |
21.55 |
$ |
176,917 |
2.69 |
% |
0.60 |
% |
1.75 |
% |
28.54 |
% |
30.04 |
% |
||||||||||||||||||||||
|
2012 |
0 |
$ |
0.00 |
$ |
0.00 |
$ |
0 |
% |
0.60 |
% |
1.75 |
% |
% |
% |
|||||||||||||||||||||||||
|
2011 |
12,715 |
$ |
8.12 |
$ |
13.83 |
$ |
115,070 |
1.30 |
% |
0.60 |
% |
1.75 |
% |
–8.55 |
% |
–7.53 |
% |
||||||||||||||||||||||
|
UIF Global Real Estate II |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
678 |
$ |
11.85 |
$ |
23.28 |
$ |
9,253 |
2.21 |
% |
0.60 |
% |
1.75 |
% |
–3.14 |
% |
–2.01 |
% |
||||||||||||||||||||||
|
2014 |
750 |
$ |
12.24 |
$ |
23.81 |
$ |
10,471 |
6.74 |
% |
0.60 |
% |
1.75 |
% |
11.86 |
% |
13.17 |
% |
||||||||||||||||||||||
|
2013 |
828 |
$ |
10.94 |
$ |
21.08 |
$ |
10,250 |
3.69 |
% |
0.60 |
% |
1.75 |
% |
0.84 |
% |
2.02 |
% |
||||||||||||||||||||||
|
2012 |
911 |
$ |
10.85 |
$ |
20.70 |
$ |
11,067 |
0.55 |
% |
0.60 |
% |
1.75 |
% |
27.67 |
% |
29.16 |
% |
||||||||||||||||||||||
|
2011 |
751 |
$ |
8.50 |
$ |
16.06 |
$ |
7,311 |
3.29 |
% |
0.60 |
% |
1.75 |
% |
–11.68 |
% |
–10.69 |
% |
||||||||||||||||||||||
FSA-79
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
6. FINANCIAL HIGHLIGHTS — (Continued)
|
As of December 31 |
For the Year Ended December 31 |
||||||||||||||||||||||||||||||||||||||
|
Units |
Unit
Fair Value |
Unit
Fair Value |
Net
Assets |
Investment
Income |
Expense Ratio |
Total Return |
|||||||||||||||||||||||||||||||||
|
Subaccount |
(000's) |
Lowest |
Highest |
(000's) |
Ratio* |
Lowest** |
Highest** |
Lowest*** |
Highest*** |
||||||||||||||||||||||||||||||
|
Van Eck Global Hard Asset |
|||||||||||||||||||||||||||||||||||||||
|
2015 |
7 |
$ |
22.90 |
$ |
25.01 |
$ |
174 |
0.03 |
% |
1.25 |
% |
1.80 |
% |
–34.65 |
% |
–34.28 |
% |
||||||||||||||||||||||
|
2014 |
7 |
$ |
35.05 |
$ |
38.05 |
$ |
241 |
0.09 |
% |
1.25 |
% |
1.80 |
% |
–20.56 |
% |
–20.11 |
% |
||||||||||||||||||||||
|
2013 |
7 |
$ |
44.12 |
$ |
47.63 |
$ |
326 |
0.67 |
% |
1.25 |
% |
1.80 |
% |
8.55 |
% |
9.15 |
% |
||||||||||||||||||||||
|
2012 |
7 |
$ |
40.64 |
$ |
43.64 |
$ |
310 |
0.60 |
% |
1.25 |
% |
1.80 |
% |
1.52 |
% |
2.09 |
% |
||||||||||||||||||||||
|
2011 |
7 |
$ |
40.03 |
$ |
42.74 |
$ |
304 |
1.24 |
% |
1.25 |
% |
1.80 |
% |
–17.95 |
% |
–17.49 |
% |
||||||||||||||||||||||
*These ratios represent the dividends, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount if affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest.
**These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. These ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded.
***These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses addressed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented.
(a) Effective April 29, 2015, name changed from Goldman Sachs Global Markets Navigator SC.
(b) Effective April 30, 2015, name changed from MFS VIT Research Bond SC.
(c) For the period (commencement of operations): June 29, 2015 to December 31, 2015.
(d) For the period (cessation of operations): January 1, 2015 to March 28, 2015, fund merged into MFS VIT II MA Investors Growth Stock IC.
(e) For the period (cessation of operations): January 1, 2015 to March 28, 2015, fund merged into MFS VIT II MA Investors Growth Stock SC.
(f) For the period (commencement of operations): March 28, 2015 to December 31, 2015.
FSA-80
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
7. EXPENSES
The following is a summary of Separate Account expense charges which are assessed either as a direct reduction in unit values or through a redemption of units for all contracts contained within the Separate Account:
|
Expense Type |
Range |
||||||
|
Mortality and Expense Risk Charge
To compensate Protective Life for assuming mortality and expense risks, a daily mortality and expense risk is deducted through the reduction of unit values. The charge is assessed on an annual basis and is calculated as a percent of the average daily net assets and varies depending on the product purchased and the death benefit option selected. |
0.50 % - 1.65% | ||||||
|
Administrative Charge
An annual fee is assessed to reimburse Protective Life for expenses incurred in the administration of the contract and the Separate Account. The charge is assessed through the reduction of unit values. |
0.10 % - 0.15% | ||||||
|
Contract Maintenance Fee
This annual charge is assessed through the redemption of units and is waived when the account value or purchase payments less surrenders and associated surrender charges equals or exceeds $50,000 - $100,000, depending on the product. |
$ 0 - $50 | ||||||
|
Surrender Charge (Contingent Deferred Sales Charge)
This charge is assessed as a percent of the amount surrendered and is imposed to reimburse Protective Life for some of the costs of distributing the contracts. The percentage charged is assessed through the redemption of units and is based upon the number of full years which have elapsed between the date the contract was purchased and the surrender date. |
0.00 % - 8.50% | ||||||
|
Transfer Fee
Currently there is no fee charged for transfers; however, Protective Life has reserved the right to charge for each transfer after the first 12 transfers in any contract year as a redemption of units. |
$ 25 | ||||||
|
Deferred Sales Charge
This charge is assessed as a percentage of cumulative purchase payments and is imposed to reimburse Protective Life for some of the costs of distributing the contracts. The fees are deducted quarterly and assessed through redemption of units. |
0.00 % - 0.70% | ||||||
FSA-81
THE PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
Year Ended December 31, 2015
7. EXPENSES — (Continued)
|
Expense Type |
Range |
||||||
|
Optional Benefit Fee
Optional benefits may be elected by contract owners. These benefits include death benefits and living benefits. The fees for such benefits are deducted monthly and assessed through redemption of units. These fees are calculated on either a "Benefit Base" basis, an "Asset Base" basis, a "Floored Asset Base" basis or a "Net Amount at Risk" basis. |
0.10
% - 2.20%
on Benefit Base 0.15 % - 0.45% on Asset Base 1.0 % - 2.2% on Floored Asset Base $ 0.25 per $ 1000 - $ 18.94 per $ 1000 on Net Amount at Risk. |
||||||
8. RELATED PARTY TRANSACTIONS
Contract owners' net payments represent premiums received from contract owners less certain deductions made by Protective Life in accordance with the contract terms. These deductions include, where appropriate, tax, surrender, mortality risk and expense and administrative charges. These deductions are made to the individual contracts in accordance with the terms governing each contract as set forth in the Contract.
Protective Life offers a loan privilege to certain contract owners. Such contract owners may obtain loans using the Contract as the only security for the loan. Loans are subject to provisions of The Internal Revenue Code of 1986, as amended, and to applicable retirement program rules. There were no loans outstanding as of December 31, 2015.
Investment Distributors, Inc., a wholly owned subsidiary of PLC, is the principal underwriter for the Separate Account.
9. SUBSEQUENT EVENTS
The Separate Account has evaluated the effects of events subsequent to December 31, 2015, and through the financial statement issuance date. All accounting and disclosure requirements related to subsequent events are included in our financial statements.
FSA-82
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareowner of
Protective Life Insurance Company
In our opinion, the consolidated balance sheet as of December 31, 2015 and the related consolidated statements of income, comprehensive income (loss), shareowner's equity and cash flows for the period February 1, 2015 to December 31, 2015 present fairly, in all material respects, the financial position of Protective Life Insurance Company and its subsidiaries (the "Company" or "Successor Company") at December 31, 2015, and the results of their operations and their cash flows for the period February 1, 2015 to December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion the financial statement schedules listed in the accompanying index as of December 31, 2015 and for the period from February 1, 2015 to December 31, 2015 present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. The Company's management is responsible for these financial statements and financial statement schedules. Our responsibility is to express opinions on these financial statements and financial statement schedules based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
As discussed in Notes 1 and 4 to the consolidated financial statements, Protective Life Corporation (the Company's parent company) was acquired on February 1, 2015 by The Dai-ichi Life Insurance Company, Limited. The Company elected to apply "pushdown" accounting as of the acquisition date.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
March 18, 2016
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareowner of
Protective Life Insurance Company
In our opinion, the accompanying consolidated balance sheet as of December 31, 2014 and the related consolidated statements of income, comprehensive income (loss), shareowner's equity and cash flows for the period from January 1, 2015 to January 31, 2015 and for each of two years in the period ended December 31, 2014 present fairly, in all material respects, the financial position of Protective Life Insurance Company and its subsidiaries (the "Company" or "Predecessor Company") at December 31, 2014, and the results of their operations and their cash flows for the period from January 1, 2015 to January 31, 2015 and for each of the two years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index as of December 31, 2014, for the period from January 1, 2015 to January 31, 2015 and for each of the two years in the period ended December 31, 2014, present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Notes 1 and 4 to the consolidated financial statements, Protective Life Corporation (the Company's parent company) was acquired on February 1, 2015 by The Dai-ichi Life Insurance Company, Limited. The Company elected to apply the "pushdown" basis of accounting as of the acquisition date.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
March 18, 2016
F-2
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1,
2015 to December 31, |
January 1,
2015 to January 31, |
For The Year Ended
December 31, |
|||||||||||||||||
|
2015 |
2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In
Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Revenues |
|||||||||||||||||||
|
Premiums and policy fees |
$ |
2,992,822 |
$ |
260,582 |
$ |
3,283,069 |
$ |
2,967,322 |
|||||||||||
|
Reinsurance ceded |
(1,174,871 |
) |
(91,632 |
) |
(1,395,743 |
) |
(1,387,437 |
) |
|||||||||||
|
Net of reinsurance ceded |
1,817,951 |
168,950 |
1,887,326 |
1,579,885 |
|||||||||||||||
|
Net investment income |
1,532,796 |
164,605 |
2,098,013 |
1,836,188 |
|||||||||||||||
|
Realized investment gains (losses): |
|||||||||||||||||||
|
Derivative financial instruments |
58,436 |
22,031 |
(13,492 |
) |
82,161 |
||||||||||||||
|
All other investments |
(166,935 |
) |
81,153 |
205,302 |
(121,537 |
) |
|||||||||||||
|
Other-than-temporary impairment losses |
(28,659 |
) |
(636 |
) |
(2,589 |
) |
(10,941 |
) |
|||||||||||
|
Portion recognized in other
comprehensive income (before taxes) |
1,666 |
155 |
(4,686 |
) |
(11,506 |
) |
|||||||||||||
|
Net impairment losses recognized in
earnings |
(26,993 |
) |
(481 |
) |
(7,275 |
) |
(22,447 |
) |
|||||||||||
|
Other income |
271,787 |
23,388 |
294,333 |
250,420 |
|||||||||||||||
|
Total revenues |
3,487,042 |
459,646 |
4,464,207 |
3,604,670 |
|||||||||||||||
|
Benefits and expenses |
|||||||||||||||||||
|
Benefits and settlement expenses,
net of reinsurance ceded: (Successor 2015 — $1,022,638); (Predecessor 2015 — $87,830; 2014 — $1,223,804; 2013 — $1,207,781) |
2,535,388 |
266,575 |
2,786,463 |
2,473,988 |
|||||||||||||||
|
Amortization of deferred policy acquisition
costs and value of business acquired |
95,064 |
4,817 |
308,320 |
154,660 |
|||||||||||||||
|
Other operating expenses, net of
reinsurance ceded: (Successor 2015 — $196,383); (Predecessor 2015 — $17,700; 2014 — $199,824 ; 2013 — $199,079) |
602,402 |
55,407 |
630,635 |
553,523 |
|||||||||||||||
|
Total benefits and expenses |
3,232,854 |
326,799 |
3,725,418 |
3,182,171 |
|||||||||||||||
|
Income before income tax |
254,188 |
132,847 |
738,789 |
422,499 |
|||||||||||||||
|
Income tax (benefit) expense |
|||||||||||||||||||
|
Current |
46,722 |
(47,384 |
) |
181,763 |
(18,298 |
) |
|||||||||||||
|
Deferred |
27,769 |
91,709 |
65,075 |
149,195 |
|||||||||||||||
|
Total income tax expense |
74,491 |
44,325 |
246,838 |
130,897 |
|||||||||||||||
|
Net income |
$ |
179,697 |
$ |
88,522 |
$ |
491,951 |
$ |
291,602 |
|||||||||||
See Notes to Consolidated Financial Statements
F-3
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1,
2015 to December 31, |
January 1,
2015 to January 31, |
For The Year Ended
December 31, |
|||||||||||||||||
|
2015 |
2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In
Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Net income |
$ |
179,697 |
$ |
88,522 |
$ |
491,951 |
$ |
291,602 |
|||||||||||
|
Other comprehensive income (loss): |
|||||||||||||||||||
|
Change in net unrealized gains (losses)
on investments, net of income tax: (Successor 2015 — $(680,274)); (Predecessor 2015 — $259,616; 2014 — $529,838; 2013 — $(673,302)) |
(1,263,367 |
) |
482,143 |
983,985 |
(1,250,416 |
) |
|||||||||||||
|
Reclassification adjustment for
investment amounts included in net income, net of income tax: (Successor 2015 — $9,352); (Predecessor 2015 — $(2,244); 2014 — $(23,903); 2013 — $(15,396)) |
17,369 |
(4,166 |
) |
(44,391 |
) |
(28,594 |
) |
||||||||||||
|
Change in net unrealized gains (losses)
relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (Successor 2015 — $(212)); (Predecessor 2015 — $(131); 2014 — $1,883 ; 2013 — $2,472) |
(393 |
) |
(243 |
) |
3,498 |
4,591 |
|||||||||||||
|
Change in accumulated (loss)
gain — derivatives, net of income tax: (Successor 2015 — $(45)); (Predecessor 2015 — $5; 2014 — $(1); 2013 — $395 ) |
(86 |
) |
9 |
(2 |
) |
734 |
|||||||||||||
|
Reclassification adjustment for derivative
amounts included in net income, net of income tax: (Successor 2015 — $45); (Predecessor 2015 — $13; 2014 — $622 ; 2013 — $822) |
86 |
23 |
1,155 |
1,527 |
|||||||||||||||
|
Total other comprehensive income (loss) |
(1,246,391 |
) |
477,766 |
944,245 |
(1,272,158 |
) |
|||||||||||||
|
Total comprehensive income (loss) |
$ |
(1,066,694 |
) |
$ |
566,288 |
$ |
1,436,196 |
$ |
(980,556 |
) |
|||||||||
See Notes to Consolidated Financial Statements
F-4
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
|
Successor
Company |
Predecessor
Company |
||||||||||
|
As of
December 31, 2015 |
As of
December 31, 2014 |
||||||||||
|
(Dollars In
Thousands) |
(Dollars In
Thousands) |
||||||||||
|
Assets |
|||||||||||
|
Fixed maturities, at fair value (amortized cost: 2015 Successor — $38,389,859;
2014 Predecessor — $33,716,848) |
$ |
35,507,098 |
$ |
36,756,240 |
|||||||
|
Fixed maturities, at amortized cost (fair value: 2015 Successor — $515,000;
2014 Predecessor — $485,422) |
593,314 |
435,000 |
|||||||||
|
Equity securities, at fair value (cost: 2015 Successor — $693,147; 2014 Predecessor — $735,297) |
699,925 |
756,790 |
|||||||||
|
Mortgage loans (related to securitizations: 2015 Successor — $359,181;
2014 Predecessor — $455,250) |
5,662,812 |
5,133,780 |
|||||||||
|
Investment real estate, net of accumulated depreciation (2015 Successor — $133;
2014 Predecessor — $246) |
11,118 |
5,918 |
|||||||||
|
Policy loans |
1,699,508 |
1,758,237 |
|||||||||
|
Other long-term investments |
594,036 |
491,282 |
|||||||||
|
Short-term investments |
263,837 |
246,717 |
|||||||||
|
Total investments |
45,031,648 |
45,583,964 |
|||||||||
|
Cash |
212,358 |
268,286 |
|||||||||
|
Accrued investment income |
472,694 |
474,095 |
|||||||||
|
Accounts and premiums receivable |
54,054 |
81,137 |
|||||||||
|
Reinsurance receivables |
5,307,556 |
5,907,662 |
|||||||||
|
Deferred policy acquisition costs and value of business acquired |
1,562,373 |
3,155,046 |
|||||||||
|
Goodwill |
732,443 |
77,577 |
|||||||||
|
Other intangibles, net of accumulated depreciation (2015 Successor — $37,869) |
645,131 |
— |
|||||||||
|
Property and equipment, net of accumulated depreciation (2015 Successor — $7,908;
2014 Predecessor — $116,688) |
101,600 |
51,760 |
|||||||||
|
Other assets |
255,283 |
398,574 |
|||||||||
|
Income tax receivable |
— |
1,648 |
|||||||||
|
Assets related to separate accounts |
|||||||||||
|
Variable annuity |
12,829,188 |
13,157,429 |
|||||||||
|
Variable universal life |
827,610 |
834,940 |
|||||||||
|
Total assets |
$ |
68,031,938 |
$ |
69,992,118 |
|||||||
|
Liabilities |
|||||||||||
|
Future policy benefits and claims |
$ |
29,703,190 |
$ |
29,944,477 |
|||||||
|
Unearned premiums |
651,205 |
1,515,001 |
|||||||||
|
Total policy liabilities and accruals |
30,354,395 |
31,459,478 |
|||||||||
|
Stable value product account balances |
2,131,822 |
1,959,488 |
|||||||||
|
Annuity account balances |
10,719,862 |
10,950,729 |
|||||||||
|
Other policyholders' funds |
1,069,572 |
1,430,325 |
|||||||||
|
Other liabilities |
1,230,500 |
1,178,962 |
|||||||||
|
Income tax payable |
76,584 |
— |
|||||||||
|
Deferred income taxes |
1,215,180 |
1,611,864 |
|||||||||
|
Non-recourse funding obligations |
1,951,563 |
1,527,752 |
|||||||||
|
Repurchase program borrowings |
438,185 |
50,000 |
|||||||||
|
Liabilities related to separate accounts |
|||||||||||
|
Variable annuity |
12,829,188 |
13,157,429 |
|||||||||
|
Variable universal life |
827,610 |
834,940 |
|||||||||
|
Total liabilities |
62,844,461 |
64,160,967 |
|||||||||
|
Commitments and contingencies — Note 13 |
|||||||||||
|
Shareowner's equity |
|||||||||||
|
Preferred Stock; $1 par value, shares authorized: 2,000; Liquidation preference: $2,000 |
2 |
2 |
|||||||||
|
Common Stock; $1 par value, shares authorized and issued: 2015 and 2014 — 5,000,000 |
5,000 |
5,000 |
|||||||||
|
Additional paid-in-capital |
6,274,169 |
1,437,787 |
|||||||||
|
Retained earnings |
154,697 |
2,905,151 |
|||||||||
|
Accumulated other comprehensive income (loss): |
|||||||||||
|
Net unrealized gains (losses) on investments, net of income tax: (2015 Successor — $(670,922);
2014 Predecessor — $796,488) |
(1,245,998 |
) |
1,479,192 |
||||||||
|
Net unrealized (losses) gains relating to other-than-temporary impaired investments for which a
portion has been recognized in earnings, net of income tax: (2015 Successor — $(212); 2014 Predecessor — $2,208) |
(393 |
) |
4,101 |
||||||||
|
Accumulated loss — derivatives, net of income tax: (2015 Successor — $0; 2014 Predecessor — $(45)) |
— |
(82 |
) |
||||||||
|
Total shareowner's equity |
5,187,477 |
5,831,151 |
|||||||||
|
Total liabilities and shareowner's equity |
$ |
68,031,938 |
$ |
69,992,118 |
|||||||
See Notes to Consolidated Financial Statements
F-5
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF SHAREOWNER'S EQUITY
|
Preferred
Stock |
Common
Stock |
Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total
Shareowner's Equity |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Predecessor Company |
|||||||||||||||||||||||||||
|
Balance, December 31, 2012 |
$ |
2 |
$ |
5,000 |
$ |
1,363,258 |
$ |
2,507,829 |
$ |
1,811,124 |
$ |
5,687,213 |
|||||||||||||||
|
Net income for 2013 |
291,602 |
291,602 |
|||||||||||||||||||||||||
|
Other comprehensive loss |
(1,272,158 |
) |
(1,272,158 |
) |
|||||||||||||||||||||||
|
Comprehensive loss for 2013 |
(980,556 |
) |
|||||||||||||||||||||||||
|
Capital contributions |
70,000 |
70,000 |
|||||||||||||||||||||||||
|
Dividends paid to the parent
company |
(86,231 |
) |
(86,231 |
) |
|||||||||||||||||||||||
|
Balance, December 31, 2013 |
$ |
2 |
$ |
5,000 |
$ |
1,433,258 |
$ |
2,713,200 |
$ |
538,966 |
$ |
4,690,426 |
|||||||||||||||
|
Net income for 2014 |
491,951 |
491,951 |
|||||||||||||||||||||||||
|
Other comprehensive income |
944,245 |
944,245 |
|||||||||||||||||||||||||
|
Comprehensive income for 2014 |
1,436,196 |
||||||||||||||||||||||||||
|
Capital contributions |
4,529 |
4,529 |
|||||||||||||||||||||||||
|
Dividends paid to the parent
company |
(300,000 |
) |
(300,000 |
) |
|||||||||||||||||||||||
|
Balance, December 31, 2014 |
$ |
2 |
$ |
5,000 |
$ |
1,437,787 |
$ |
2,905,151 |
$ |
1,483,211 |
$ |
5,831,151 |
|||||||||||||||
|
Net income for the period of
January 1, 2015 to January 31, 2015 |
88,522 |
88,522 |
|||||||||||||||||||||||||
|
Other comprehensive income |
477,766 |
477,766 |
|||||||||||||||||||||||||
|
Comprehensive income for
the period of January 1, 2015 to January 31, 2015 |
566,288 |
||||||||||||||||||||||||||
|
Balance, January 31, 2015 |
$ |
2 |
$ |
5,000 |
$ |
1,437,787 |
$ |
2,993,673 |
$ |
1,960,977 |
$ |
6,397,439 |
|||||||||||||||
|
Preferred
Stock |
Common
Stock |
Additional
Paid-in Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total
Shareowner's Equity |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Successor Company |
|||||||||||||||||||||||||||
|
Balance, February 1, 2015 |
$ |
2 |
$ |
5,000 |
$ |
6,504,211 |
$ |
— |
$ |
— |
$ |
6,509,213 |
|||||||||||||||
|
Net income for the period of
February 1, 2015 to December 31, 2015 |
179,697 |
179,697 |
|||||||||||||||||||||||||
|
Other comprehensive loss |
(1,246,391 |
) |
(1,246,391 |
) |
|||||||||||||||||||||||
|
Comprehensive loss for the period
of February 1, 2015 to December 31, 2015 |
(1,066,694 |
) |
|||||||||||||||||||||||||
|
Dividends paid to the parent
company |
(25,000 |
) |
(25,000 |
) |
|||||||||||||||||||||||
|
Return of capital |
(230,042 |
) |
(230,042 |
) |
|||||||||||||||||||||||
|
Balance, December 31, 2015 |
$ |
2 |
$ |
5,000 |
$ |
6,274,169 |
$ |
154,697 |
$ |
(1,246,391 |
) |
$ |
5,187,477 |
||||||||||||||
See Notes to Consolidated Financial Statements
F-6
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
See Notes to Consolidated Financial Statements
F-7
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Basis of Presentation
Protective Life Insurance Company (the "Company"), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation ("PLC"), an insurance holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan ("Dai-ichi Life"), when DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC (the "Merger"). Prior to February 1, 2015, and for the periods reported as "predecessor", PLC's stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger date, the Company remains an SEC registrant within the United States.
The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies.
The Merger was accounted for by PLC under the acquisition method of accounting under ASC Topic 805 Business Combinations . In accordance with ASC Topic 805-20-30, all identifiable assets acquired and liabilities assumed were measured at fair value as of the acquisition date. PLC elected to apply "pushdown" accounting by applying the guidance allowed by ASC Topic 805, Business Combinations , including the initial recognition of most of PLC's assets and liabilities at fair value as of the acquisition date, and similarly recognizing goodwill calculated based on the terms of the transaction and the fair value of the new basis of net assets of PLC. The new basis of accounting will be the basis of the accounting records in the preparation of future financial statements and related disclosures after the Merger date. Goodwill of $735.7 million was recorded as of the acquisition date which represents the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in the Merger, and reflects the Company's assembled workforce, future growth potential and other sources of value not associated with identifiable assets. During the measurement period subsequent to February 1, 2015, the Company has made adjustments to provisional amounts related to certain tax balances that resulted in a decrease to goodwill of $3.3 million from the amount recorded at the Merger date. The balance of goodwill associated with the Merger as of December 31, 2015 (Successor Company) is $732.4 million.
The Merger was accounted for by the Company in a manner consistent with that utilized by PLC. In accordance with ASC Topic 805-20-30, all identifiable assets acquired and liabilities assumed were measured at fair value as of the acquisition date. In conjunction with PLC's and the Company's election to apply "pushdown" accounting to reflect the impact of the transaction and the new basis of net assets recorded as of February 1, 2015, the entire amount of goodwill and other identifiable intangible assets recognized by PLC were allocated to the Company. This was supported by the fact that the Company is the primary operating subsidiary of PLC and the workforce, distribution and sales organization, current and future policy and portfolio cash flows, and other items for which the transaction was primarily based are consistent between PLC and the Company. As such, the entire balance of goodwill is included in the new basis of net assets of the Company. The new basis of accounting will be the basis of the accounting records in the preparation of future financial statements and related disclosures after the Merger date.
F-8
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION — (Continued)
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Such accounting principles differ from statutory reporting practices used by insurance companies in reporting to state regulatory authorities (see also Note 21, Statutory Reporting Practices and Other Regulatory Matters ).
The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.
Entities Included
The consolidated financial statements include the accounts of Protective Life Insurance Company and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs ("DAC") and related amortization periods, goodwill recoverability, value of business acquired ("VOBA"), investment and certain derivatives fair values, other-than-temporary impairments, future policy benefits, pension and other postretirement benefits, provisions for income taxes, reserves for contingent liabilities, reinsurance risk transfer assessments, and reserves for losses in connection with unresolved legal matters.
Significant Accounting Policies
Valuation of Investment Securities
The Company determines the appropriate classification of investment securities at the time of purchase and periodically re-evaluates such designations. Investment securities are classified as either trading, available-for-sale, or held-to-maturity securities. Investment securities classified as trading are recorded at fair value with changes in fair value recorded in realized gains (losses). Investment securities purchased for long term investment purposes are classified as available-for-sale and are recorded at fair value with changes in unrealized gains and losses, net of taxes, reported as a component of other comprehensive income (loss). Investment securities are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity and are reported at amortized cost. Interest income on available-for-sale and held-to-maturity securities includes the amortization of premiums and accretion of discounts and are recorded in investment income.
F-9
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a "waterfall" approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information as outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non-binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which the Company purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party service or an independent broker quotation. Included in the pricing of other asset-backed securities, collateralized mortgage obligations ("CMOs"), and mortgage-backed securities ("MBS") are estimates of the rate of future prepayments of principal and underlying collateral support over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and rates of prepayments previously experienced at the interest rate levels projected for the underlying collateral. The basis for the cost of securities sold was determined at the Committee on Uniform Securities Identification Procedures ("CUSIP") level. The committee supplies a unique nine-character identification, called a CUSIP number, for each class of security approved for trading in the U.S., to facilitate clearing and settlement. These numbers are used when any buy and sell orders are recorded.
Each quarter the Company reviews investments with unrealized losses and tests for other-than-temporary impairments. The Company analyzes various factors to determine if any specific other-than-temporary asset impairments exist. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of the Company's intent to sell the security (including a more likely than not assessment of whether the Company will be required to sell the security) before recovering the security's amortized cost, 5) the duration of the decline, 6) an economic analysis of the issuer's industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security by security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, and in some cases, an analysis regarding the Company's expectations for recovery of the security's entire amortized cost basis through the receipt of future cash flows is performed. Once a determination has been made that a specific other-than-temporary impairment exists, the security's basis is adjusted and an other-than-temporary impairment is recognized. Equity securities that are other-than-temporarily impaired are written down to fair value
F-10
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
with a realized loss recognized in earnings. Other-than-temporary impairments to debt securities that the Company does not intend to sell and does not expect to be required to sell before recovering the security's amortized cost are written down to discounted expected future cash flows ("post impairment cost") and credit losses are recorded in earnings. The difference between the securities' discounted expected future cash flows and the fair value of the securities on the impairment date is recognized in other comprehensive income (loss) as a non-credit portion impairment. When calculating the post impairment cost for residential mortgage-backed securities ("RMBS"), commercial mortgage-backed securities ("CMBS"), and other asset-backed securities (collectively referred to as asset-backed securities or "ABS"), the Company considers all known market data related to cash flows to estimate future cash flows. When calculating the post impairment cost for corporate debt securities, the Company considers all contractual cash flows to estimate expected future cash flows. To calculate the post impairment cost, the expected future cash flows are discounted at the original purchase yield. Debt securities that the Company intends to sell or expects to be required to sell before recovery are written down to fair value with the change recognized in earnings.
Cash
Cash includes all demand deposits reduced by the amount of outstanding checks and drafts. As a result of the Company's cash management system, checks issued from a particular bank but not yet presented for payment may create negative book cash balances with the bank. Such negative balances are included in other liabilities and were $70.3 million as of December 31, 2015 (Successor Company) and was immaterial as of December 31, 2014 (Predecessor Company), respectively. The Company has deposits with certain financial institutions which exceed federally insured limits. The Company has reviewed the creditworthiness of these financial institutions and believes there is minimal risk of a material loss.
Deferred Policy Acquisition Costs
The incremental direct costs associated with successfully acquired insurance policies are deferred to the extent such costs are deemed recoverable from future profits. Such costs include commissions and other costs of acquiring traditional life and health insurance, credit insurance, universal life insurance, and investment products. DAC are subject to recoverability testing at the end of each accounting period. Traditional life and health insurance acquisition costs are amortized over the premium-payment period of the related policies in proportion to the ratio of annual premium income to the present value of the total anticipated premium income. Credit insurance acquisition costs are being amortized in proportion to earned premium. Acquisition costs for universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization.
The Company makes certain assumptions regarding the mortality, persistency, expenses, and interest rates (equal to the rate used to compute liabilities for future policy benefits, currently 1.0% to 8%) the Company expects to experience in future periods when determining the present value of estimated gross profits. These assumptions are best estimates and are periodically updated whenever actual experience and/or expectations for the future change from that assumed. Additionally, these costs have been adjusted by an amount equal to the amortization that would have been recorded if unrealized gains or losses on investments associated with our universal life and investment products had been
F-11
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
realized. Acquisition costs for stable value contracts are amortized over the term of the contracts using the effective yield method.
Value of Businesses Acquired
In conjunction with the Merger, a portion of the purchase price was allocated to the right to receive future gross profits from cash flows and earnings of the Company's insurance policies and investment contracts as of the date of the Merger. This intangible asset, called VOBA, is based on the actuarially estimated present value of future cash flows from the Company's insurance policies and investment contracts in-force on the date of the Merger. The estimated present value of future cash flows used in the calculation of the VOBA is based on certain assumptions, including mortality, persistency, expenses, and interest rates that the Company expects to experience in future years. The Company amortizes VOBA in proportion to gross premiums for traditional life products, or estimated gross margins ("EGMs") for participating traditional life products within the MONY Life Insurance Company ("MONY") block. For interest sensitive products, the Company uses various amortization bases including expected gross profits ("EGPs"), revenues, or insurance in-force. VOBA is subject to annual recoverability testing.
Intangible Assets
Intangible assets with definite lives are amortized over the estimated useful life of the asset and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Amortizable intangible assets primarily consist of distribution relationships, trade names, and technology. Intangible assets with indefinite lives, primarily insurance licenses, are not amortized, but are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.
Property and Equipment
In conjunction with the Merger, property and equipment was recorded at fair value as of the Merger date and will be depreciated from this basis in future periods based on the respective estimated useful lives. Real estate assets were recorded at appraised values as of the acquisition date. The Company has estimated the remaining useful life of the home office building to be 25 years. Land is not depreciated.
The Company depreciates its assets using the straight-line method over the estimated useful lives of the assets. The Company's furniture is depreciated over a ten year useful life, office equipment and machines are depreciated over a five year useful life, and software and computers are depreciated over a three year useful life. Major repairs or improvements are capitalized and depreciated over the estimated useful lives of the assets. Other repairs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or retired are removed from the accounts, and resulting gains or losses are included in income.
F-12
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Property and equipment consisted of the following:
|
Successor Company |
Predecessor Company |
||||||||||
|
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||
|
Home office building |
$ |
90,617 |
$ |
75,109 |
|||||||
|
Data processing equipment |
14,607 |
40,568 |
|||||||||
|
Other, principally furniture and equipment |
4,284 |
52,771 |
|||||||||
|
109,508 |
168,448 |
||||||||||
|
Accumulated depreciation |
(7,908 |
) |
(116,688 |
) |
|||||||
|
Total property and equipment |
$ |
101,600 |
$ |
51,760 |
|||||||
Separate Accounts
The separate account assets represent funds for which the Company does not bear the investment risk. These assets are carried at fair value and are equal to the separate account liabilities, which represent the policyholder's equity in those assets. The investment income and investment gains and losses on the separate account assets accrue directly to the policyholder. These amounts are reported separately as assets and liabilities related to separate accounts in the accompanying consolidated financial statements. Amounts assessed against policy account balances for the costs of insurance, policy administration, and other services are included in premiums and policy fees in the accompanying consolidated statements of income.
Stable Value Product Account Balances
The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank ("FHLB"), and markets guaranteed investment contracts ("GICs") to 401(k) and other qualified retirement savings plans. GICs are contracts which specify a return on deposits for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan. During 2015, the Company terminated its funding agreement-backed notes program registered with the United States Securities and Exchange Commission (the "SEC") and, on October 2, 2015, established an unregistered funding agreement-backed notes program.
The segment's products complement the Company's overall asset/liability management in that the terms may be tailored to the needs of the Company as the seller of the contracts. Stable value product account balances include GICs and funding agreements the Company has issued. As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), the Company had $400.7 million and $39.8 million, respectively, of stable value product account balances marketed through structured programs. Most GICs and funding agreements the Company has written have maturities of one to ten years.
F-13
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
As of December 31, 2015 (Successor Company), future maturities of stable value products were as follows:
|
Year of Maturity |
Amount |
||||||
|
(Dollars In Millions) |
|||||||
|
2016 |
$ |
534.7 |
|||||
|
2017-2018 |
1,068.1 |
||||||
|
2019-2020 |
451.2 |
||||||
|
Thereafter |
62.3 |
||||||
Derivative Financial Instruments
The Company records its derivative financial instruments in the consolidated balance sheet in "other long-term investments" and "other liabilities" in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in the other comprehensive income (loss), depending upon whether the derivative instrument qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists. For cash flow hedges, the effective portion of their gain or loss is reported as a component of other comprehensive income (loss) and reclassified into earnings in the period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. Effectiveness of the Company's hedge relationships is assessed on a quarterly basis. The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship in earnings. Changes in the fair value of derivatives that are recognized in current earnings are reported in "Realized investment gains (losses) — Derivative financial instruments". For additional information, see Note 23, Derivative Financial Instruments.
Insurance Liabilities and Reserves
Establishing an adequate liability for the Company's obligations to policyholders requires the use of certain assumptions. Estimating liabilities for future policy benefits on life and health insurance products requires the use of assumptions relative to future investment yields, mortality, morbidity, persistency, and other assumptions based on the Company's historical experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Determining liabilities for the Company's property and casualty insurance products also requires the use of assumptions, including the projected levels of used vehicle prices, the frequency and severity of claims, and the effectiveness of internal processes designed to reduce the level of claims. The Company's results depend significantly upon the extent to which its actual claims experience is consistent with the assumptions the Company used in determining its reserves and pricing its products. The Company's reserve assumptions and estimates require significant judgment and, therefore, are inherently uncertain. The Company cannot determine with precision the ultimate amounts that it will pay for actual claims or the timing of those payments.
F-14
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Guaranteed Minimum Withdrawal Benefits
The Company also establishes reserves for guaranteed minimum withdrawal benefits ("GMWB") on its variable annuity ("VA") products. The GMWB is valued in accordance with FASB guidance under the ASC Derivatives and Hedging Topic which utilizes the valuation technique prescribed by the ASC Fair Value Measurements and Disclosures Topic, which requires the embedded derivative to be recorded at fair value using current implied volatilities for the equity indices. The fair value of the GMWB is impacted by equity market conditions and can result in the GMWB embedded derivative being in an overall net asset or net liability position. In times of favorable equity market conditions the likelihood and severity of claims is reduced and expected fee income increases. Since claims are generally expected later than fees, these favorable equity market conditions can result in the present value of fees being greater than the present value of claims, which results in a net GMWB embedded derivative asset. In times of unfavorable equity market conditions the likelihood and severity of claims is increased and expected fee income decreases and can result in the present value of claims exceeding the present value of fees resulting in a net GMWB embedded derivative liability. The methods used to estimate the embedded derivatives employ assumptions about mortality, lapses, policyholder behavior, equity market returns, interest rates, and market volatility. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. In conjunction with the Merger, the Company updated the fair value of the GMWB reserves to reflect current assumptions as of February 1, 2015 (Successor Company). As a result of the application of ASC Topic 805, the Company reset the hedge premium rates utilized in the valuation for all policies to be equal to the present value of future claims with the reset hedge premium rates being capped at the actual charges to the policyholder. This update resulted in a decrease in the net liability of approximately $69.4 million on the Merger date. The Company reinsures certain risks associated with the GMWB to Shades Creek Captive Insurance ("Shades Creek"), a direct wholly owned insurance subsidiary of PLC. As of December 31, 2015 (Successor Company), the Company's net GMWB liability held, including the impact of reinsurance, was $18.5 million.
Goodwill
Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill. The Company evaluates the carrying value of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired as of the testing date. If it is determined that it is more likely than not that impairment exists, the Company compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The Company utilizes a fair value measurement
F-15
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
(which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The Company's material goodwill balances are attributable to certain of its operating segments (which are each considered to be reporting units). The cash flows used to determine the fair value of the Company's reporting units are dependent on a number of significant assumptions. The Company's estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions.
On the date of the Merger, goodwill of $735.7 million was recognized as the excess of the purchase consideration over the fair value of identifiable assets acquired and liabilities assumed. During the measurement period subsequent to February 1, 2015, the Company has made adjustments to provisional amounts related to certain tax balances that resulted in a decrease to goodwill of $3.3 million from the amount recorded at the Merger date. The balance of goodwill associated with the Merger as of December 31, 2015 (Successor Company) is $732.4 million. The balance recognized as goodwill is not amortized, but is reviewed for impairment on an annual basis, or more frequently as events or circumstances may warrant, including those circumstances which would more likely than not reduce the fair value of the Company's reporting units below its carrying amount. During the fourth quarter of 2015, the Company performed its annual evaluation of goodwill based on information as of September 30, 2015 (Successor Company) and determined that no adjustment to impair goodwill was necessary. The Company has assessed whether events have occurred subsequent to September 30, 2015 that would impact the Company's conclusion and no such events were identified. As of December 31, 2015 (Successor Company), the Company had goodwill of $732.4 million.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. In general, income tax provisions are based on the income reported for financial statement purposes. Deferred income taxes arise from the recognition of temporary differences between the basis of assets and liabilities determined for financial reporting purposes and the basis determined for income tax purposes. Such temporary differences are principally related to net unrealized gains (losses), deferred policy acquisition costs and value of business acquired, and future policy benefits and claims.
The Company analyzes whether it needs to establish a valuation allowance on each of its deferred tax assets. In performing this analysis, the Company first considers the need for a valuation allowance on each separate deferred tax asset. Ultimately, it analyzes this need in the aggregate in order to prevent the double-counting of expected future taxable income in each of the foregoing separate analyses.
Variable Interest Entities
The Company holds certain investments in entities in which its ownership interests could possibly be considered variable interests under Topic 810 of the FASB ASC (excluding debt and equity securities held as trading, available-for-sale, or held-to-maturity). The Company reviews the characteristics of each of these applicable entities and compares those characteristics to applicable criteria to determine
F-16
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
whether the entity is a Variable Interest Entity ("VIE"). If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. For more information on the Company's investment in a VIE refer to Note 6, Investment Operations, to the consolidated financial statements.
Policyholder Liabilities, Revenues, and Benefits Expense
Traditional Life, Health, and Credit Insurance Products
Traditional life insurance products consist principally of those products with fixed and guaranteed premiums and benefits, and they include whole life insurance policies, term and term-like life insurance policies, limited payment life insurance policies, and certain annuities with life contingencies. In accordance with ASC 805, the liabilities for future policy benefits on traditional life insurance products, when combined with the associated VOBA, were recorded at fair value on the date of the Merger. These values were computed using assumptions that include interest rates, mortality, lapse rates, expense estimates, and other assumptions based on the Company's experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation.
Liabilities for future policy benefits on traditional life insurance products have been computed using a net level method including assumptions as to investment yields, mortality, persistency, and other assumptions based on the Company's experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Reserve investment yield assumptions on December 31, 2015 (Successor Company), range from approximately 2.8% to 4.5%. The liability for future policy benefits and claims on traditional life, health, and credit insurance products includes estimated unpaid claims that have been reported to us and claims incurred but not yet reported. Policy claims are charged to expense in the period in which the claims are incurred.
Traditional life insurance premiums are recognized as revenue when due. Health and credit insurance premiums are recognized as revenue over the terms of the policies. Benefits and expenses are associated with earned premiums so that profits are recognized over the life of the contracts. This is accomplished by means of the provision for liabilities for future policy benefits and the amortization of DAC and VOBA. Gross premiums in excess of net premiums related to immediate annuities are deferred and recognized over the life of the policy.
F-17
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Activity in the liability for unpaid claims for life and health insurance is summarized as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
As of December 31, |
As of January 31, |
As of December 31, |
|||||||||||||||||
|
2015 |
2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Balance beginning of year |
$ |
403,009 |
$ |
419,401 |
$ |
334,450 |
$ |
326,633 |
|||||||||||
|
Less: reinsurance |
149,618 |
163,671 |
117,502 |
155,341 |
|||||||||||||||
|
Net balance beginning of year |
253,391 |
255,730 |
216,948 |
171,292 |
|||||||||||||||
|
Incurred related to: |
|||||||||||||||||||
|
Current year |
973,175 |
97,573 |
1,075,005 |
698,028 |
|||||||||||||||
|
Prior year |
95,977 |
9,360 |
102,936 |
68,396 |
|||||||||||||||
|
Total incurred |
1,069,152 |
106,933 |
1,177,941 |
766,424 |
|||||||||||||||
|
Paid related to: |
|||||||||||||||||||
|
Current year |
939,824 |
98,281 |
1,017,193 |
682,877 |
|||||||||||||||
|
Prior year |
111,222 |
10,991 |
121,966 |
85,146 |
|||||||||||||||
|
Total paid |
1,051,046 |
109,272 |
1,139,159 |
768,023 |
|||||||||||||||
|
Other changes: |
|||||||||||||||||||
|
Acquisition and reserve transfers(1) |
— |
— |
— |
47,255 |
|||||||||||||||
|
Net balance end of year |
271,497 |
253,391 |
255,730 |
216,948 |
|||||||||||||||
|
Add: reinsurance |
112,537 |
149,618 |
163,671 |
117,502 |
|||||||||||||||
|
Balance end of year |
$ |
384,034 |
$ |
403,009 |
$ |
419,401 |
$ |
334,450 |
|||||||||||
(1) This amount represents the net liability, before reinsurance, for unpaid claims as of December 31, 2013 (Predecessor Company) for MONY Life Insurance Company. The claims activity from the acquisition date of October 1, 2013 through December 31, 2013 (Predecessor Company) for MONY Life Insurance Company is not reflected in this chart.
Universal Life and Investment Products
Universal life and investment products include universal life insurance, guaranteed investment contracts, guaranteed funding agreements, deferred annuities, and annuities without life contingencies. Premiums and policy fees for universal life and investment products consist of fees that have been assessed against policy account balances for the costs of insurance, policy administration, and surrenders. Such fees are recognized when assessed and earned. Benefit reserves for universal life and investment products represent policy account balances before applicable surrender charges plus certain deferred policy initiation fees that are recognized in income over the term of the policies. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances and interest credited to policy account balances. Interest rates credited to universal life products ranged from 1.0% to 8.75% and investment products ranged from 0.2% to 9.8% in 2015.
The Company establishes liabilities for fixed indexed annuity ("FIA") products. These products are deferred fixed annuities with a guaranteed minimum interest rate plus a contingent return based on equity market performance. The FIA product is considered a hybrid financial instrument under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC" or
F-18
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
"Codification") Topic 815 — Derivatives and Hedging which allows the Company to make the election to value the liabilities of these FIA products at fair value. This election was made for the FIA products issued prior to 2010 as the policies were issued. These products are no longer being marketed. The future changes in the fair value of the liability for these FIA products are recorded in Benefit and settlement expenses with the liability being recorded in Annuity account balances . For more information regarding the determination of fair value of annuity account balances please refer to Note 22, Fair Value of Financial Instruments . Premiums and policy fees for these FIA products consist of fees that have been assessed against the policy account balances for surrenders. Such fees are recognized when assessed and earned.
The Company currently markets a deferred fixed annuity with a guaranteed minimum interest rate plus a contingent return based on equity market performance and the products are considered hybrid financial instruments under the FASB's ASC Topic 815 — Derivatives and Hedging . The Company did not elect to value these FIA products at fair value prior to the Merger date. As a result, the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities . Changes in the fair value of the embedded derivative are recorded in Realized investment gains (losses) — Derivative financial instruments . For more information regarding the determination of fair value of the FIA embedded derivative refer to Note 22, Fair Value of Financial Instruments. The host contract is accounted for as a debt instrument in accordance with ASC Topic 944 — Financial Services — Insurance and is recorded in Annuity account balances with any discount to the minimum account value being accreted using the effective yield method. Benefits and settlement expenses include accreted interest and benefit claims incurred during the period.
The Company markets universal life products with a guaranteed minimum interest rate plus a contingent return based on equity market performance and the products are considered hybrid financial instruments under the FASB's ASC Topic 815 — Derivatives and Hedging . The Company did not elect to value these IUL products at fair value prior to the Merger date. As a result, the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities . Changes in the fair value of the embedded derivative are recorded in Realized investment gains (losses) — Derivative financial instruments . For more information regarding the determination of fair value of the IUL embedded derivative refer to Note 22, Fair Value of Financial Instruments . The host contract is accounted for as a debt instrument in accordance with ASC Topic 944 — Financial Services — Insurance and is recorded in Future policy benefits and claims with any discount to the minimum account value being accreted using the effective yield method. Benefits and settlement expenses include accreted interest and benefit claims incurred during the period.
The Company's accounting policies with respect to variable universal life ("VUL") and VA are identical except that policy account balances (excluding account balances that earn a fixed rate) are valued at fair value and reported as components of assets and liabilities related to separate accounts.
The Company establishes liabilities for guaranteed minimum death benefits ("GMDB") on its VA products. The methods used to estimate the liabilities employ assumptions about mortality and the performance of equity markets. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience. Future declines in the equity market would increase the Company's GMDB liability.
F-19
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. Our GMDB, as of December 31, 2015 (Successor Company), are subject to a dollar-for-dollar reduction upon withdrawal of related annuity deposits on contracts issued prior to January 1, 2003. The Company reinsures certain risks associated with the GMDB to Shades Creek. As of December 31, 2015 (Successor Company), the GMDB reserve, including the impact of reinsurance, was $29.9 million.
Property and Casualty Insurance Products
Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection ("GAP"). Premiums for service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Fee income from providing administrative services is recognized as earned when the related services are performed. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Benefit reserves are recorded when insured events occur. Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported ("IBNR") reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.
Reinsurance
The Company uses reinsurance extensively in certain of its segments and accounts for reinsurance and the recognition of the impact of reinsurance costs in accordance with the ASC Financial Services — Insurance Topic. The following summarizes some of the key aspects of the Company's accounting policies for reinsurance.
Reinsurance Accounting Methodology — Ceded premiums of the Company's traditional life insurance products are treated as an offset to direct premium and policy fee revenue and are recognized when due to the assuming company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis. Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable financial reporting period. Expense allowances paid by the assuming companies which are allocable to the current period are treated as an offset to other operating expenses. Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the "ultimate" or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances representing recovery of acquisition costs is treated as an offset to direct amortization of DAC or VOBA. Amortization of deferred expense allowances is calculated as a level percentage of expected premiums in all durations given expected future lapses and mortality and accretion due to interest.
The Company utilizes reinsurance on certain short duration insurance contracts (primarily issued through the Asset Protection segment). As part of these reinsurance transactions the Company receives reinsurance allowances which reimburse the Company for acquisition costs such as commissions and
F-20
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
premium taxes. A ceding fee is also collected to cover other administrative costs and profits for the Company. As a component of reinsurance costs, reinsurance allowances are accounted for in accordance with the relevant provisions of ASC Financial Services — Insurance Topic, which state that reinsurance costs should be amortized over the contract period of the reinsurance if the contract is short-duration. Accordingly, reinsurance allowances received related to short-duration contracts are capitalized and charged to expense in proportion to premiums earned. Ceded unamortized acquisition costs are netted with direct unamortized acquisition costs in the balance sheet.
Ceded premiums and policy fees on the Company's fixed universal life ("UL"), VUL, bank-owned life insurance ("BOLI"), and annuity products reduce premiums and policy fees recognized by the Company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis. Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable valuation period.
Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the "ultimate" or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances are amortized based on future expected gross profits. Assumptions regarding mortality, lapses, and interest rates are continuously reviewed and may be periodically changed. These changes will result in "unlocking" that changes the balance in the ceded deferred acquisition cost and can affect the amortization of DAC and VOBA. Ceded unearned revenue liabilities are also amortized based on expected gross profits. Assumptions are based on the best current estimate of expected mortality, lapses and interest spread.
The Company has also assumed certain policy risks written by other insurance companies through reinsurance agreements. Premiums and policy fees as well as Benefits and settlement expenses include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Assumed reinsurance is accounted for in accordance with ASC Financial Services — Insurance Topic.
Reinsurance Allowances — Long-Duration Contracts — Reinsurance allowances are intended to reimburse the ceding company for some portion of the ceding company's commissions, expenses, and taxes. The amount and timing of reinsurance allowances (both first year and renewal allowances) are contractually determined by the applicable reinsurance contract and do not necessarily bear a relationship to the amount and incidence of expenses actually paid by the ceding company in any given year.
Ultimate reinsurance allowances are defined as the lowest allowance percentage paid by the reinsurer in any policy duration over the lifetime of a universal life policy (or through the end of the level term period for a traditional life policy). Ultimate reinsurance allowances are determined during the negotiation of each reinsurance agreement and will differ between agreements.
The Company determines its "cost of reinsurance" to include amounts paid to the reinsurer (ceded premiums) net of amounts reimbursed by the reinsurer (in the form of allowances). As noted within ASC Financial Services — Insurance Topic, "The difference, if any, between amounts paid for a reinsurance contract and the amount of the liabilities for policy benefits relating to the underlying reinsured contracts is part of the estimated cost to be amortized." The Company's policy is to amortize the cost of reinsurance over the life of the underlying reinsured contracts (for long-duration policies) in a manner consistent with the way in which benefits and expenses on the underlying contracts are
F-21
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
recognized. For the Company's long-duration contracts, it is the Company's practice to defer reinsurance allowances as a component of the cost of reinsurance and recognize the portion related to the recovery of acquisition costs as a reduction of applicable unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense in proportion to net revenue recognized. The remaining balance of reinsurance allowances are included as a component of the cost of reinsurance and those allowances which are allocable to the current period are recorded as an offset to operating expenses in the current period consistent with the recognition of benefits and expenses on the underlying reinsured contracts. This practice is consistent with the Company's practice of capitalizing direct expenses (e.g. commissions), and results in the recognition of reinsurance allowances on a systematic basis over the life of the reinsured policies on a basis consistent with the way in which acquisition costs on the underlying reinsured contracts would be recognized. In some cases reinsurance allowances allocable to the current period may exceed non-deferred direct costs, which may cause net other operating expenses (related to specific contracts) to be negative.
Amortization of Reinsurance Allowances — Reinsurance allowances do not affect the methodology used to amortize DAC and VOBA, or the period over which such DAC and VOBA are amortized. Reinsurance allowances offset the direct expenses capitalized, reducing the net amount that is capitalized. DAC and VOBA on traditional life policies are amortized based on the pattern of estimated gross premiums of the policies in force. Reinsurance allowances do not affect the gross premiums, so therefore they do not impact traditional life amortization patterns. DAC and VOBA on universal life products are amortized based on the pattern of estimated gross profits of the policies in force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore do impact amortization patterns.
Reinsurance Assets and Liabilities — Claim liabilities and policy benefits are calculated consistently for all policies, regardless of whether or not the policy is reinsured. Once the claim liabilities and policy benefits for the underlying policies are estimated, the amounts recoverable from the reinsurers are estimated based on a number of factors including the terms of the reinsurance contracts, historical payment patterns of reinsurance partners, and the financial strength and credit worthiness of reinsurance partners and recorded as Reinsurance receivables on the balance sheet. The reinsurance receivables were recorded in the balance sheet using current accounting policies and the most current assumptions as of the Merger date. As of the Merger date, the Company also calculated the ceded VOBA associated with the reinsured policies. The reinsurance receivables combined with the associated ceded VOBA represent the fair value of the reinsurance assets. Liabilities for unpaid reinsurance claims are produced from claims and reinsurance system records, which contain the relevant terms of the individual reinsurance contracts. The Company monitors claims due from reinsurers to ensure that balances are settled on a timely basis. Incurred but not reported claims are reviewed by the Company's actuarial staff to ensure that appropriate amounts are ceded.
The Company analyzes and monitors the credit worthiness of each of its reinsurance partners to minimize collection issues. For newly executed reinsurance contracts with reinsurance companies that do not meet predetermined standards, the Company requires collateral such as assets held in trusts or letters of credit.
F-22
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Components of Reinsurance Cost — The following income statement lines are affected by reinsurance cost:
Premiums and policy fees ("reinsurance ceded" on the Company's financial statements) represent consideration paid to the assuming company for accepting the ceding company's risks. Ceded premiums and policy fees increase reinsurance cost.
Benefits and settlement expenses include incurred claim amounts ceded and changes in ceded policy reserves. Ceded benefits and settlement expenses decrease reinsurance cost.
Amortization of deferred policy acquisition cost and VOBA reflects the amortization of capitalized reinsurance allowances representing recovery of acquisition costs. Ceded amortization decreases reinsurance cost.
Other expenses include reinsurance allowances paid by assuming companies to the Company less amounts representing recovery of acquisition costs. Reinsurance allowances decrease reinsurance cost.
The Company's reinsurance programs do not materially impact the other income line of the Company's income statement. In addition, net investment income generally has no direct impact on the Company's reinsurance cost. However, it should be noted that by ceding business to the assuming companies, the Company forgoes investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies' profitability on business assumed from the Company.
Accounting Pronouncements Recently Adopted
Accounting Standards Update ("ASU") No. 2014-08 — Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. This Update changes the requirements for reporting discontinued operations and related disclosures. The Update limits the definition of a discontinued operation to disposals that represent "strategic shifts" that will have a major effect on an entity's operation and financial results. Additionally, the Update requires enhanced disclosures about the components of discontinued operations and the financial effects of the disposal. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Company has reviewed the additional disclosures required by the Update, and will apply the revised guidance to any disposals occurring after the effective date.
ASU No. 2014-11 — Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. This Update changes the requirements for classification of certain repurchase agreements, and will expand the use of secured borrowing accounting for repurchase-to-maturity transactions. In addition, the Update requires additional disclosures for repurchase agreements accounted for both as sales and as secured borrowings. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Update did not impact the Company's financial position or results of operations. The Company has updated its policies and processes to ensure compliance with the additional disclosure requirements in this Update.
ASU No. 2014-17 — Business Combinations (Topic 805). This Update relates to "pushdown accounting", which refers to pushing down the acquirer's accounting and reporting basis (which is recognized in conjunction with its accounting for a business combination) to the acquiree's standalone
F-23
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
financial statements. The new guidance makes pushdown accounting optional for an acquiree that is a business or nonprofit activity when there is a change-in-control event (e.g., the acquirer in a business combination obtains control over the acquiree). In addition, the staff of the SEC released Staff Accounting Bulletin ("SAB") No. 115, which rescinds SAB Topic 5J, "New Basis of Accounting Required in Certain Circumstances" (the SEC staff's pre-existing guidance on pushdown accounting) and conforms SEC guidance on pushdown accounting to the FASB's new guidance. Revised SEC guidance was codified in ASU No. 2015-08, issued in May 2015. The new pushdown accounting guidance became effective upon its issuance on November 18, 2014. Although now optional, the Company has applied pushdown accounting to its standalone financial statements effective with the Company becoming a wholly owned subsidiary of Dai-ichi Life on February 1, 2015. The presentation within this report for predecessor and successor periods is consistent with this Update.
ASU No. 2015-16 — Business Combinations (Topic 805) — Simplifying the Accounting for Measurement-Period Adjustments. This Update provides that an acquirer must recognize adjustments to provisional amounts that are identified during the measurement period following a business combination in the reporting period in which the adjustment amounts are determined. This Update is effective for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments in the Update are to be applied prospectively for adjustments that occur after the effective date, with early adoption permitted for financial statements that have not been issued. The Company elected early adoption of the revised guidance in this Update by way of a change in accounting principle in the fourth quarter of 2015. The Company made adjustments to provisional amounts recorded as part of the Dai-ichi Merger which resulted in a decrease to goodwill of $3.3 million. See Note 9, Goodwill for more details on the measurement period adjustment.
Accounting Pronouncements Not Yet Adopted
ASU No. 2014-09 — Revenue from Contracts with Customers (Topic 606). This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update was originally effective for annual and interim periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14 — Revenues from Contracts with Customers: Deferral of the Effective Date , to defer the effective date of ASU No. 2014-09 by one year to annual and interim periods beginning after December 15, 2017. Early adoption will be allowed, but not before the original effective date. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption. The Company is currently assessing the impact this standard will have on its non-insurance operations.
ASU No. 2014-15 — Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. This Update will require management to assess an entity's ability to continue as a going concern, and will require footnote disclosures in certain circumstances. Under the updated guidance, management should consider relevant conditions and evaluate whether it is probable that the entity will be unable to meet its obligations within one year after the issuance date of the financial statements. The Update is
F-24
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
effective for annual periods ending December 31, 2016 and for annual and interim periods thereafter, with early adoption permitted. The amendments in this Update will not impact the Company's financial position or results of operations. However, the new guidance will require a formal assessment of going concern by management based on criteria prescribed in the new guidance. The Company is reviewing its policies and processes to ensure compliance with the new guidance.
ASU No. 2015-02 — Consolidation — Amendments to the Consolidation Analysis. This Update makes several targeted changes to generally accepted accounting principles, including a) eliminating the presumption that a general partner should consolidate a limited partnership and b) eliminating the consolidation model specific to limited partnerships. The amendments also clarify when fees and related party relationships should be considered in the consolidation of variable interest entities. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2015. The Company is prepared to comply with the revised guidance and does not expect a material financial or operational impact upon adoption.
ASU No. 2015-03 — Interest — Imputation of Interest. The objective of this Update is to eliminate diversity in practice related to the presentation of debt issuance costs. The amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. The Update is effective for fiscal years beginning after December 15, 2015, and requires revised presentation of debt issuance costs in all periods presented in the financial statements. The Company is prepared to comply with the revised guidance and does not believe it will materially impact the presentation of the Company's financial position.
ASU No. 2015-05 — Intangibles — Goodwill and Other — Internal-Use Software. The amendments in this Update provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer's accounting for service contracts. The Update is effective for annual and interim periods beginning after December 15, 2015. The Company is prepared to comply with the revised guidance and does not believe it will materially impact the presentation of the Company's financial position.
ASU No. 2015-09 — Financial Services — Insurance (Topic 944): Disclosures about Short-Duration Contracts. The amendments in this Update require additional disclosures for short-duration contracts issued by insurance entities. The additional disclosures focus on the liability for unpaid claims and claim adjustment expenses and include incurred and paid claims development information by accident year in tabular form, along with a reconciliation of this information to the statement of financial position. For accident years included in the development tables, the amendments also require disclosure of the total incurred-but-not-reported liabilities and expected development on reported claims, along with claims frequency information unless impracticable. Finally, the amendments require disclosure of the historical average annual percentage payout of incurred claims. With the exception of the current reporting period, claims development information may be presented as supplementary information. The Update is effective for annual periods beginning after December 15, 2015 and interim
F-25
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
periods beginning after December 15, 2016. The Company is reviewing its products to determine the applicability and potential impact of the new disclosures.
ASU No. 2015-12 — Plan Accounting — (Topics 960, 962 and 965). This Update is a three-part standard that provides guidance on certain aspects of the accounting related to employee benefit plans. Part I requires an employee benefit plan to use contract value as the only measurement amount for fully-benefit responsive investment contracts. Part II simplifies and increases the effectiveness of plan investment disclosure requirements for employee benefit plans by eliminating certain disclosures related to individual investments over 5 percent and by eliminating the need to disaggregate investments in multiple ways. Part III provides a measurement-date practical expedient for plan investments when the fiscal year-end of a plan does not coincide with a month-end. The guidance is effective for fiscal years beginning after December 15, 2015 for all three parts and early adoption is permitted. For parts I and II, amendments should be applied retrospectively to all financial statements presented, while part III should be applied prospectively. The Company is reviewing its policies and procedures to ensure compliance with the revised guidance.
ASU No. 2015-15 — Interest — Imputation of Interest — Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. The objective of this Update is to clarify the SEC Staff's position on presenting and measuring debt issuance costs incurred in connection with line-of-credit arrangements given the lack of guidance on the topic in ASU No. 2015-03. This Update reflects the SEC Staff's decision to not object when an entity defers and presents debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement. The Company is prepared to comply with the revised guidance.
ASU No. 2016-01 — Financial Instruments — Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the Update requires that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2017. The Company is reviewing its policies and processes to ensure compliance with the revised guidance.
ASU No. 2016-02 — Leases. This Update will amend the accounting model used by lessees, requiring all leases with terms greater than twelve months to be recorded on the balance sheet in the form of a right-of-use asset and lease liability. These amounts will be initially measured as the present value of remaining lease payments. The Update will retain the existing distinction between operating and finance leases. This distinction will impact both the measurement and classification of lease expense over the term of the contract. The Update also introduces minor changes to the accounting model for lessors, along with new disclosures focused on providing users with qualitative and quantitative information about the amounts recorded in the financial statements. The Update is effective for annual and interim periods beginning after December 15, 2018. The Company is reviewing its policies and processes, as well as existing lease agreements, to determine the impact of the updated guidance.
ASU No. 2016-08 — Revenue from Contracts with Customers — Principal versus Agent Considerations. This Update provides clarifying guidance regarding the application of
F-26
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
ASU No. 2014-09 — Revenue From Contracts with Customers when another party, along with the reporting entity, is involved in providing a good or a service to a customer. In these circumstances, an entity is required to determine whether the nature of its promise is to provide that good or service to the customer (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The amendments in the Update clarify the implementation guidance on principal versus agent considerations. The Update is effective, along with ASU 2014-09, for annual and interim periods beginning after December 15, 2017. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update with regard to its non-insurance operations.
3. RECENTLY ANNOUNCED REINSURANCE AND FINANCING TRANSACTION
On January 15, 2016, the Company completed the transaction contemplated by the Master Agreement, dated September 30, 2015 (the "Master Agreement"), with Genworth Life and Annuity Insurance Company ("GLAIC"). Pursuant to the Master Agreement, on January 15, 2016, the Company entered into a reinsurance agreement (the "Reinsurance Agreement") under the terms of which the Company coinsures certain term life insurance business of GLAIC (the "GLAIC Block"). In connection with the reinsurance transaction, on January 15, 2016, Golden Gate Captive Insurance Company ("Golden Gate"), a wholly owned subsidiary of the Company, and Steel City, LLC ("Steel City"), a newly formed wholly owned subsidiary of PLC, entered into an 18-year transaction to finance $2.188 billion of "XXX" reserves related to the acquired GLAIC Block and the other term life insurance business reinsured to Golden Gate by the Company and West Coast Life Insurance Company ("WCL"), a direct wholly owned subsidiary. Steel City issued notes with an aggregate initial principal amount of $2.188 billion to Golden Gate in exchange for a surplus note issued by Golden Gate with an initial principal amount of $2.188 billion. Through the structure, Hannover Life Reassurance Company of America (Bermuda) Ltd., The Canada Life Assurance Company (Barbados Branch) and Nomura Americas Re Ltd. (collectively, the "Risk-Takers") provide credit enhancement to the Steel City notes for the 18-year term in exchange for credit enhancement fees. The transaction is "non-recourse" to PLC, WCL and the Company, meaning that none of these companies are liable to reimburse the Risk-Takers for any credit enhancement payments required to be made. In connection with the transaction, PLC has entered into certain support agreements under which it guarantees or otherwise supports certain obligations of Golden Gate or Steel City, including a guarantee of the fees to the Risk-Takers. The estimated average annual expense of the credit enhancement under generally accepted accounting principles is approximately $3.1 million, after-tax. As a result of the financing transaction described above, the $800 million of Golden Gate Series A Surplus Notes held by PLC were contributed to the Company and then subsequently contributed to Golden Gate, which resulted in the extinguishment of these notes. Also on January 15, 2016, Golden Gate paid an extraordinary dividend of $300 million to the Company as approved by the Vermont Department of Financial Regulation.
4. DAI-ICHI MERGER
On February 1, 2015 PLC, subsequent to required approvals from PLC's shareholders and relevant regulatory authorities, became a wholly owned subsidiary of Dai-ichi Life as contemplated by the Agreement and Plan of Merger (the "Merger Agreement") with Dai-ichi Life and DL Investment (Delaware), Inc., a Delaware corporation and wholly owned subsidiary of Dai-ichi Life, which provided for the Merger of DL Investment (Delaware), Inc. with and into PLC (the "Merger"), with PLC surviving
F-27
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DAI-ICHI MERGER — (Continued)
the Merger as a wholly owned subsidiary of Dai-ichi Life. On February 1, 2015 each share of PLC's common stock outstanding was converted into the right to receive $70 per share, without interest, (the "Per Share Merger Consideration"). The aggregate cash consideration paid in connection with the Merger for the outstanding shares of common stock was approximately $5.6 billion, such amounts paid directly to the shareowners of record by Dai-ichi Life. The Merger provided Dai-ichi Life with a platform for growth in the United States, where it did not previously have a significant presence. In connection with the completion of the Merger, PLC's previously publicly traded equity was delisted from the NYSE, although PLC and the Company remain SEC registrants for financial reporting purposes in the United States.
The Merger was accounted for under the acquisition method of accounting under ASC Topic 805. In accordance with ASC Topic 805-20-30, all identifiable assets acquired and liabilities assumed were measured at fair value as of the acquisition date. On the date of the Merger, goodwill of $735.7 million represented the cost in excess of the fair value of net assets acquired (including identifiable intangibles) in the Merger, and reflected the Company's assembled workforce, future growth potential and other sources of value not associated with identifiable assets. During the measurement period subsequent to February 1, 2015, the Company has made adjustments to provisional amounts related to certain tax balances that resulted in a decrease to goodwill of $3.3 million from the amount recorded at the Merger date. The balance of goodwill associated with the Merger as of December 31, 2015 (Successor Company) is $732.4 million. None of the goodwill is tax deductible.
The following table summarizes the fair value of assets acquired and liabilities assumed at the acquisition date:
|
Fair Value
As of February 1, 2015 |
|||||||
|
(Dollars In Thousands) |
|||||||
|
Assets |
|||||||
|
Fixed maturities |
$ |
38,342,948 |
|||||
|
Equity securities |
699,081 |
||||||
|
Mortgage loans |
5,580,229 |
||||||
|
Investment real estate |
7,456 |
||||||
|
Policy loans |
1,751,872 |
||||||
|
Other long-term investments |
657,346 |
||||||
|
Short-term investments |
311,236 |
||||||
|
Total investments |
47,350,168 |
||||||
|
Cash |
378,903 |
||||||
|
Accrued investment income |
483,691 |
||||||
|
Accounts and premiums receivable |
104,260 |
||||||
|
Reinsurance receivables |
5,538,637 |
||||||
|
Value of business acquired |
1,278,064 |
||||||
|
Goodwill |
735,712 |
||||||
|
Other intangibles |
683,000 |
||||||
|
Property and equipment |
102,736 |
||||||
|
Other assets |
224,555 |
||||||
|
Income tax receivable |
50,117 |
||||||
F-28
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DAI-ICHI MERGER — (Continued)
|
Fair Value
As of February 1, 2015 |
|||||||
|
(Dollars In Thousands) |
|||||||
|
Assets related to separate accounts |
|||||||
|
Variable annuity |
$ |
12,970,587 |
|||||
|
Variable universal life |
819,188 |
||||||
|
Total assets |
$ |
70,719,618 |
|||||
|
Liabilities |
|||||||
|
Future policy and benefit claims |
$ |
30,195,397 |
|||||
|
Unearned premiums |
622,278 |
||||||
|
Total policy liabilities and accruals |
30,817,675 |
||||||
|
Stable value product account balances |
1,932,277 |
||||||
|
Annuity account balances |
10,941,661 |
||||||
|
Other policyholders' funds |
1,388,083 |
||||||
|
Other liabilities |
1,533,666 |
||||||
|
Deferred income taxes |
1,861,632 |
||||||
|
Non-recourse funding obligations |
1,895,636 |
||||||
|
Repurchase program borrowings |
50,000 |
||||||
|
Liabilities related to separate accounts |
|||||||
|
Variable annuity |
12,970,587 |
||||||
|
Variable universal life |
819,188 |
||||||
|
Total liabilities |
64,210,405 |
||||||
|
Net assets acquired |
$ |
6,509,213 |
|||||
As of the acquisition date, all contractual cash flows related to the Company's historical and acquired receivables (as presented within this consolidated balance sheet) are expected to be collected.
Intangible assets recognized by the Company included the following (excluding goodwill):
|
Estimated
Fair Value on Acquisition Date |
Estimated
Useful Life |
||||||||||
|
(Dollars In Thousands) |
(In Years) |
||||||||||
|
Distribution relationships |
$ |
405,000 |
14-22 |
||||||||
|
Trade names |
103,000 |
13-17 |
|||||||||
|
Technology |
143,000 |
7-14 |
|||||||||
|
Total intangible assets subject to amortization |
651,000 |
||||||||||
|
Insurance licenses |
32,000 |
Indefinite |
|||||||||
|
Total intangible assets |
$ |
683,000 |
|||||||||
Identified intangible assets were valued using the excess earnings method, relief from royalty method or cost approach, as appropriate.
F-29
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. DAI-ICHI MERGER — (Continued)
Amortizable intangible assets will be amortized straight line over their assigned useful lives. The following is a schedule of future estimated aggregate amortization expense:
| Year |
Amount |
||||||
|
(Dollars In Thousands) |
|||||||
| 2016 |
$ |
41,313 |
|||||
| 2017 |
41,313 |
||||||
| 2018 |
41,313 |
||||||
| 2019 |
41,313 |
||||||
| 2020 |
41,313 |
||||||
All tangible and intangible assets of the Company were allocated to applicable operating segments in connection with the recording of pushdown accounting. The purchase price was also allocated to each operating segment in accordance with the determined fair value of the operating segments, such that the total reconciled with the total consideration paid in the Merger. Subtraction of the fair value of the tangible and intangible assets for each operating segment from the allocated purchase price of that operating segment resulted in the goodwill allocated to each operating segment. The amount of goodwill allocated to each operating segment is reflected in Note 25, Operating Segments.
Treatment of Benefit Plans
At or immediately prior to the Merger, each stock appreciation right with respect to shares of PLC's Common Stock granted under any Stock Plan (each, a "SAR") that was outstanding and unexercised immediately prior to the Merger and that had a base price per share of Common Stock underlying such SAR (the "Base Price") that was less than the Per Share Merger Consideration (each such SAR, an "In-the-Money SAR"), whether or not exercisable or vested, was cancelled and converted into the right to receive an amount in cash less any applicable withholding taxes, determined by multiplying (i) the excess of the Per Share Merger Consideration over the Base Price of such In-the-Money SAR by (ii) the number of shares of PLC's Common Stock subject to such In- the-Money SAR (such amount, the "SAR Consideration").
At or immediately prior to the effective time of the Merger, each restricted stock unit with respect to a share of PLC's Common Stock granted under any Stock Plan (each, a "RSU") that was outstanding immediately prior to the Merger, whether or not vested, was cancelled and converted into the right to receive an amount in cash, without interest, less any applicable withholding taxes, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of PLC's RSUs.
The number of performance shares earned for each award of performance shares granted under any PLC Stock Plan was calculated by determining the number of performance shares that would have been paid if the subject award period had ended on the December 31 immediately preceding the Merger (based on the conditions set for payment of performance share awards for the subject award period), provided that the number of performance shares earned for each award were not less than the aggregate number of performance shares at the target performance level. Each performance share earned that was outstanding immediately prior to the Merger, whether or not vested, was cancelled and converted into the right to receive an amount in cash, without interest, less any applicable withholding taxes, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of Performance Shares.
F-30
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. MONY CLOSED BLOCK OF BUSINESS
In 1998, MONY Life Insurance Company ("MONY") converted from a mutual insurance company to a stock corporation ("demutualization"). In connection with its demutualization, an accounting mechanism known as a closed block (the "Closed Block") was established for certain individuals' participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the acquisition of MONY in 2013.
Assets allocated to the Closed Block inure solely to the benefit of each Closed Block's policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY's general account, any of MONY's separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the "Superintendent"). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.
The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in accumulated other comprehensive income (loss) ("AOCI")) at the acquisition date of October 1, 2013, represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company developed an actuarial calculation of the expected timing of MONY's Closed Block's earnings as of October 1, 2013. Pursuant to the acquisition of the Company by Dai-ichi Life, this actuarial calculation of the expected timing of MONY's Closed Block earnings was recalculated and reset as of February 1, 2015, along with the establishment of a policyholder dividend obligation as of such date.
If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company's net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend, unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.
Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.
F-31
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. MONY CLOSED BLOCK OF BUSINESS — (Continued)
Summarized financial information for the Closed Block as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company) and is as follows:
|
Successor Company |
Predecessor Company |
||||||||||
|
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||
| Closed block liabilities | |||||||||||
|
Future policy benefits, policyholders'
account balances and other policyholder liabilities |
$ |
6,010,520 |
$ |
6,138,505 |
|||||||
|
Policyholder dividend obligation |
— |
366,745 |
|||||||||
|
Other liabilities |
22,917 |
53,838 |
|||||||||
|
Total closed block liabilities |
6,033,437 |
6,559,088 |
|||||||||
|
Closed block assets |
|||||||||||
|
Fixed maturities, available-for-sale, at
fair value |
4,426,090 |
4,524,037 |
|||||||||
|
Equity securities, available-for-sale, at
fair value |
— |
5,387 |
|||||||||
|
Mortgage loans on real estate |
247,162 |
448,855 |
|||||||||
|
Policy loans |
746,102 |
771,120 |
|||||||||
|
Cash and other invested assets |
34,420 |
30,984 |
|||||||||
|
Other assets |
166,445 |
221,270 |
|||||||||
|
Total closed block assets |
5,620,219 |
6,001,653 |
|||||||||
|
Excess of reported closed block liabilities
over closed block assets |
413,218 |
557,435 |
|||||||||
|
Portion of above representing accumulated
other comprehensive income: |
|||||||||||
|
Net unrealized investments gains (losses)
net of policyholder dividend obligation of $(179,360) (Successor) and $ 106,886 (Predecessor) |
(18,597 |
) |
— |
||||||||
|
Future earnings to be recognized from closed
block assets and closed block liabilities |
$ |
394,621 |
$ |
557,435 |
|||||||
F-32
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. MONY CLOSED BLOCK OF BUSINESS — (Continued)
Reconciliation of the policyholder dividend obligation is as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
|||||||||||||
|
Policyholder dividend obligation,
beginning balance |
$ |
323,432 |
$ |
366,745 |
$ |
190,494 |
|||||||||
|
Applicable to net revenue
(losses) |
(47,493 |
) |
(1,369 |
) |
(910 |
) |
|||||||||
|
Change in net unrealized
investment gains (losses) allocated to policyholder dividend obligation; includes deferred tax benefits of $(96,579) (Successor); $47,277 (2015 — Predecessor); $58,571 (2014 — Predecessor) |
(275,939 |
) |
135,077 |
177,161 |
|||||||||||
|
Policyholder dividend obligation,
ending balance |
$ |
— |
$ |
500,453 |
$ |
366,745 |
|||||||||
Closed Block revenues and expenses were as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
|||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||
|
Revenues |
|||||||||||||||
|
Premiums and other income |
$ |
185,562 |
$ |
15,065 |
$ |
212,765 |
|||||||||
|
Net investment income |
193,203 |
19,107 |
239,028 |
||||||||||||
|
Net investment gains |
3,333 |
568 |
10,528 |
||||||||||||
|
Total revenues |
382,098 |
34,740 |
462,321 |
||||||||||||
|
Benefits and other deductions |
|||||||||||||||
|
Benefits and settlement expenses |
336,629 |
31,152 |
417,667 |
||||||||||||
|
Other operating expenses |
1,001 |
— |
674 |
||||||||||||
|
Total benefits and other
deductions |
337,630 |
31,152 |
418,341 |
||||||||||||
|
Net revenues before income taxes |
44,468 |
3,588 |
43,980 |
||||||||||||
|
Income tax expense |
14,920 |
1,256 |
20,377 |
||||||||||||
|
Net revenues |
$ |
29,548 |
$ |
2,332 |
$ |
23,603 |
|||||||||
F-33
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS
Major categories of net investment income are summarized as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Fixed maturities |
$ |
1,266,769 |
$ |
140,052 |
$ |
1,711,722 |
$ |
1,508,924 |
|||||||||||
|
Equity securities |
40,879 |
2,556 |
41,533 |
26,735 |
|||||||||||||||
|
Mortgage loans |
252,577 |
24,977 |
360,778 |
333,093 |
|||||||||||||||
|
Investment real estate |
2,528 |
112 |
4,483 |
3,555 |
|||||||||||||||
|
Short-term investments |
93,938 |
9,974 |
109,592 |
72,433 |
|||||||||||||||
|
1,656,691 |
177,671 |
2,228,108 |
1,944,740 |
||||||||||||||||
|
Other investment expenses |
123,895 |
13,066 |
130,095 |
108,552 |
|||||||||||||||
|
Net investment income |
$ |
1,532,796 |
$ |
164,605 |
$ |
2,098,013 |
$ |
1,836,188 |
|||||||||||
Net realized investment gains (losses) for all other investments are summarized as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Fixed maturities |
$ |
1,272 |
$ |
6,891 |
$ |
75,074 |
$ |
63,161 |
|||||||||||
|
Equity securities |
(1,001 |
) |
— |
495 |
3,276 |
||||||||||||||
|
Impairments on fixed maturity
securities |
(26,993 |
) |
(481 |
) |
(7,275 |
) |
(19,100 |
) |
|||||||||||
|
Impairments on equity securities |
— |
— |
— |
(3,347 |
) |
||||||||||||||
|
Modco trading portfolio |
(167,359 |
) |
73,062 |
142,016 |
(178,134 |
) |
|||||||||||||
|
Other investments |
153 |
1,200 |
(12,283 |
) |
(9,840 |
) |
|||||||||||||
|
Total realized gains
(losses) — investments |
$ |
(193,928 |
) |
$ |
80,672 |
$ |
198,027 |
$ |
(143,984 |
) |
|||||||||
For the period of February 1, 2015 to December 31, 2015 (Successor Company), gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $8.7 million and gross realized losses were $35.5 million, including $27.0 million of impairment losses.
For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $6.9 million and gross realized losses were $0.5 million, including $0.4 million of impairment losses. For the year ended December 31, 2014 (Predecessor Company), gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $76.7 million and gross realized losses were $8.1 million, including $6.9 million of impairment losses. For the year
F-34
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
ended December 31, 2013 (Predecessor Company), gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $72.6 million and gross realized losses were $27.9 million, including $21.7 million of impairment losses.
For the period of February 1, 2015 to December 31, 2015 (Successor Company), the Company sold securities in an unrealized gain position with a fair value (proceeds) of $948.8 million. The gain realized on the sale of these securities was $8.7 million.
For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company sold securities in an unrealized gain position with a fair value (proceeds) of $172.6 million. The gain realized on the sale of the securities was $6.9 million. For the year ended December 31, 2014 (Predecessor Company), the Company sold securities in an unrealized gain position with a fair value (proceeds) of $1.7 billion. The gain realized on the sale of these securities was $76.7 million. For the year ended December 31, 2013 (Predecessor Company), the Company sold securities in an unrealized gain position with a fair value (proceeds) of $2.3 billion. The gain realized on the sale of these securities was $72.6 million.
For the period of February 1, 2015 to December 31, 2015 (Successor Company), the Company sold securities in an unrealized loss position with a fair value (proceeds) of $178.4 million. The loss realized on the sale of these securities was $8.5 million. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.
For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company sold securities in an unrealized loss position with a fair value (proceeds) of $0.4 million. The loss realized on the sale of these securities were immaterial to the Company. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.
For the year ended December 31, 2014 (Predecessor Company), the Company sold securities in an unrealized loss position with a fair value (proceeds) of $22.9 million. The loss realized on the sale of these securities was $1.2 million. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.
For the year ended December 31, 2013 (Predecessor Company), the Company sold securities in an unrealized loss position with a fair value (proceeds) of $398.2 million. The loss realized on the sale of these securities was $6.2 million. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.
F-35
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
The amortized cost and fair value of the Company's investments classified as available-for-sale as of December 31, 2015 (Successor Company) and as of December 31, 2014 (Predecessor Company), are as follows:
|
Amortized
Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair
Value |
Total OTTI
Recognized in OCI(1) |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Successor Company
As of December 31, 2015 |
|||||||||||||||||||||||
|
Fixed maturities: |
|||||||||||||||||||||||
|
Residential mortgage-backed
securities |
$ |
1,773,099 |
$ |
9,286 |
$ |
(17,112 |
) |
$ |
1,765,273 |
$ |
— |
||||||||||||
|
Commercial mortgage-backed
securities |
1,327,288 |
428 |
(41,852 |
) |
1,285,864 |
— |
|||||||||||||||||
|
Other asset-backed securities |
813,056 |
2,758 |
(18,763 |
) |
797,051 |
— |
|||||||||||||||||
|
U.S. government-related securities |
1,566,260 |
449 |
(34,532 |
) |
1,532,177 |
— |
|||||||||||||||||
|
Other government-related
securities |
18,483 |
— |
(743 |
) |
17,740 |
— |
|||||||||||||||||
|
States, municipals, and political
subdivisions |
1,729,732 |
682 |
(126,814 |
) |
1,603,600 |
— |
|||||||||||||||||
|
Corporate securities |
28,433,530 |
26,147 |
(2,681,020 |
) |
25,778,657 |
(605 |
) |
||||||||||||||||
|
Preferred stock |
64,362 |
192 |
(1,867 |
) |
62,687 |
— |
|||||||||||||||||
|
35,725,810 |
39,942 |
(2,922,703 |
) |
32,843,049 |
(605 |
) |
|||||||||||||||||
|
Equity securities |
684,888 |
13,255 |
(6,477 |
) |
691,666 |
— |
|||||||||||||||||
|
Short-term investments |
202,110 |
— |
— |
202,110 |
— |
||||||||||||||||||
|
$ |
36,612,808 |
$ |
53,197 |
$ |
(2,929,180 |
) |
$ |
33,736,825 |
$ |
(605 |
) |
||||||||||||
|
Predecessor Company
As of December 31, 2014 |
|||||||||||||||||||||||
|
Fixed maturities: |
|||||||||||||||||||||||
|
Residential mortgage-backed
securities |
$ |
1,374,141 |
$ |
56,381 |
$ |
(12,264 |
) |
$ |
1,418,258 |
$ |
6,404 |
||||||||||||
|
Commercial mortgage-backed
securities |
1,119,979 |
59,637 |
(2,364 |
) |
1,177,252 |
— |
|||||||||||||||||
|
Other asset-backed securities |
857,365 |
17,961 |
(35,950 |
) |
839,376 |
(95 |
) |
||||||||||||||||
|
U.S. government-related securities |
1,394,028 |
44,149 |
(9,282 |
) |
1,428,895 |
— |
|||||||||||||||||
|
Other government-related
securities |
16,939 |
3,233 |
— |
20,172 |
— |
||||||||||||||||||
|
States, municipals, and political
subdivisions |
1,391,526 |
296,594 |
(431 |
) |
1,687,689 |
— |
|||||||||||||||||
|
Corporate securities |
24,744,050 |
2,760,703 |
(138,975 |
) |
27,365,778 |
— |
|||||||||||||||||
|
30,898,028 |
3,238,658 |
(199,266 |
) |
33,937,420 |
6,309 |
||||||||||||||||||
|
Equity securities |
713,813 |
35,646 |
(14,153 |
) |
735,306 |
— |
|||||||||||||||||
|
Short-term investments |
151,572 |
— |
— |
151,572 |
— |
||||||||||||||||||
|
$ |
31,763,413 |
$ |
3,274,304 |
$ |
(213,419 |
) |
$ |
34,824,298 |
$ |
6,309 |
|||||||||||||
(1) These amounts are included in the gross unrealized gains and gross unrealized losses columns above.
F-36
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
The preferred stock shown above as of December 31, 2015 (Successor Company) is included in the equity securities total as of December 31, 2014 (Predecessor Company).
The amortized cost and fair value of the Company's investments classified as held-to-maturity as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), are as follows:
|
Amortized
Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair
Value |
Total OTTI
Recognized in OCI |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Successor Company
As of December 31, 2015 |
|||||||||||||||||||||||
|
Fixed maturities: |
|||||||||||||||||||||||
|
Other |
$ |
593,314 |
$ |
— |
$ |
(78,314 |
) |
$ |
515,000 |
$ |
— |
||||||||||||
|
$ |
593,314 |
$ |
— |
$ |
(78,314 |
) |
$ |
515,000 |
$ |
— |
|||||||||||||
|
Predecessor Company
As of December 31, 2014 |
|||||||||||||||||||||||
|
Fixed maturities: |
|||||||||||||||||||||||
|
Other |
$ |
435,000 |
$ |
50,422 |
$ |
— |
$ |
485,422 |
$ |
— |
|||||||||||||
|
$ |
435,000 |
$ |
50,422 |
$ |
— |
$ |
485,422 |
$ |
— |
||||||||||||||
During the period of February 1, 2015 to December 31, 2015 (Successor Company) and for the year ended December 31, 2014 (Predecessor Company), the Company did not record any other-than-temporary impairments on held-to-maturity securities. The Company's held-to-maturity securities had $78.3 million of gross unrecognized holding losses for the period of February 1, 2015 to December 31, 2015 (Successor Company). For the year ended December 31, 2014 (Predecessor Company), the Company did not have any gross unrecognized holding losses. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings, financial health of the issuer, continued access of the issuer to capital markets and other pertinent information.
As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), the Company had an additional $2.7 billion and $2.8 billion of fixed maturities, $8.3 million and $21.5 million of equity securities, and $61.7 million and $95.1 million of short-term investments classified as trading securities, respectively.
The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of December 31, 2015 (Successor Company), by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.
|
Available-for-sale |
Held-to-maturity |
||||||||||||||||||
|
Amortized
Cost |
Fair
Value |
Amortized
Cost |
Fair
Value |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Due in one year or less |
$ |
937,594 |
$ |
935,861 |
$ |
— |
$ |
— |
|||||||||||
|
Due after one year through five years |
5,860,269 |
5,725,005 |
— |
— |
|||||||||||||||
|
Due after five years through ten years |
7,791,519 |
7,494,182 |
— |
— |
|||||||||||||||
|
Due after ten years |
21,136,428 |
18,688,001 |
593,314 |
515,000 |
|||||||||||||||
|
$ |
35,725,810 |
$ |
32,843,049 |
$ |
593,314 |
$ |
515,000 |
||||||||||||
F-37
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
During the period of February 1, 2015 to December 31, 2015 (Successor Company), the Company recorded pre-tax other-than-temporary impairments of investments of $28.7 million, all of which were related to fixed maturities. Credit impairments recorded in earnings during the period of February 1, 2015 to December 31, 2015 (Successor Company), were $27.0 million. During the period of February 1, 2015 to December 31, 2015 (Successor Company), $1.7 million of non-credit impairment losses were recorded in other comprehensive income. There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the period of February 1, 2015 to December 31, 2015 (Successor Company).
During the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company recorded pre-tax other-than-temporary impairments of investments of $0.6 million, all of which related to fixed maturities. Credit impairments recorded in earnings during the period were $0.5 million. During the period of January 1, 2015 to January 31, 2015 (Predecessor Company), $0.1 million of non-credit impairment losses were recorded in other comprehensive income. There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the period of January 1, 2015 to January 31, 2015 (Predecessor Company).
During the year ended December 31, 2014 (Predecessor Company), the Company recorded pre-tax other-than-temporary impairments of investments of $2.6 million, all of which related to fixed maturities. Credit impairments recorded in earnings during the year ended December 31, 2014 (Predecessor Company), were $7.3 million. During the year ended December 31, 2014 (Predecessor Company), $4.7 million of non-credit losses previously recorded in other comprehensive income were recorded in earnings as credit losses. There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the year ended December 31, 2014 (Predecessor Company).
During the year ended December 31, 2013 (Predecessor Company), the Company recorded pre-tax other-than-temporary impairments of investments of $10.9 million, of which $7.6 million were related to fixed maturities and $3.3 million were related to equity securities. Credit impairments recorded in earnings during the year ended December 31, 2013 (Predecessor Company) were $22.4 million. Non-credit impairment losses of $11.5 million that were previously recorded in other comprehensive income (loss) were recorded in earnings as credit losses. There were no impairments related to equity securities. For the year ended December 31, 2013 (Predecessor Company), there were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell.
F-38
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
The following chart is a rollforward of available-for-sale credit losses on fixed maturities held by the Company for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss):
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Beginning balance |
$ |
— |
$ |
15,463 |
$ |
41,674 |
$ |
121,237 |
|||||||||||
|
Additions for newly impaired securities |
22,761 |
— |
— |
3,516 |
|||||||||||||||
|
Additions for previously impaired
securities |
— |
221 |
2,263 |
12,066 |
|||||||||||||||
|
Reductions for previously impaired
securities due to a change in expected cash flows |
— |
— |
(28,474 |
) |
(87,908 |
) |
|||||||||||||
|
Reductions for previously impaired
securities that were sold in the current period |
— |
— |
— |
(7,237 |
) |
||||||||||||||
|
Other |
— |
— |
— |
— |
|||||||||||||||
|
Ending balance |
$ |
22,761 |
$ |
15,684 |
$ |
15,463 |
$ |
41,674 |
|||||||||||
The following table includes the gross unrealized losses and fair value of the Company's investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2015 (Successor Company):
|
Less Than 12 Months |
12 Months or More |
Total |
|||||||||||||||||||||||||
|
Fair
Value |
Unrealized
Loss |
Fair
Value |
Unrealized
Loss |
Fair
Value |
Unrealized
Loss |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Residential mortgage-
backed securities |
$ |
977,433 |
$ |
(17,112 |
) |
$ |
— |
$ |
— |
$ |
977,433 |
$ |
(17,112 |
) |
|||||||||||||
|
Commercial mortgage-
backed securities |
1,232,495 |
(41,852 |
) |
— |
— |
1,232,495 |
(41,852 |
) |
|||||||||||||||||||
|
Other asset-backed
securities |
633,274 |
(18,763 |
) |
— |
— |
633,274 |
(18,763 |
) |
|||||||||||||||||||
|
U.S. government-related
securities |
1,291,476 |
(34,532 |
) |
— |
— |
1,291,476 |
(34,532 |
) |
|||||||||||||||||||
|
Other government-related
securities |
17,740 |
(743 |
) |
— |
— |
17,740 |
(743 |
) |
|||||||||||||||||||
|
States, municipalities, and
political subdivisions |
1,566,752 |
(126,814 |
) |
— |
— |
1,566,752 |
(126,814 |
) |
|||||||||||||||||||
|
Corporate securities |
24,235,121 |
(2,681,020 |
) |
— |
— |
24,235,121 |
(2,681,020 |
) |
|||||||||||||||||||
|
Preferred stock |
34,685 |
(1,867 |
) |
— |
— |
34,685 |
(1,867 |
) |
|||||||||||||||||||
|
Equities |
248,493 |
(6,477 |
) |
— |
— |
248,493 |
(6,477 |
) |
|||||||||||||||||||
|
$ |
30,237,469 |
$ |
(2,929,180 |
) |
$ |
— |
$ |
— |
$ |
30,237,469 |
$ |
(2,929,180 |
) |
||||||||||||||
F-39
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
The preferred stock shown above as of December 31, 2015 (Successor Company), is included in the equity securities total as of December 31, 2014 (Predecessor Company).
The book value of the Company's investment portfolio was marked to fair value as of February 1, 2015 (Successor Company), in conjunction with the Dai-ichi Merger which resulted in the elimination of previously unrealized gains and losses from accumulated other comprehensive income as of that date. The level of interest rates as of February 1, 2015 (Successor Company) resulted in an increase in the carrying value of the Company's investments. Since February 1, 2015 (Successor Company), interest rates have increased resulting in net unrealized losses in the Company's investment portfolio.
As of December 31, 2015 (Successor Company), the Company had a total of 2,547 positions that were in an unrealized loss position, but the Company does not consider these unrealized loss positions to be other-than-temporary. This is based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover, and the Company does not intend to sell or expect to be required to sell the securities before recovering the Company's amortized cost of the securities.
The following table includes the gross unrealized losses and fair value of the Company's investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2014 (Predecessor Company):
|
Less Than 12 Months |
12 Months or More |
Total |
|||||||||||||||||||||||||
|
Fair
Value |
Unrealized
Loss |
Fair
Value |
Unrealized
Loss |
Fair
Value |
Unrealized
Loss |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Residential mortgage-
backed securities |
$ |
165,877 |
$ |
(9,547 |
) |
$ |
67,301 |
$ |
(2,717 |
) |
$ |
233,178 |
$ |
(12,264 |
) |
||||||||||||
|
Commercial mortgage-
backed securities |
49,908 |
(334 |
) |
102,529 |
(2,030 |
) |
152,437 |
(2,364 |
) |
||||||||||||||||||
|
Other asset-backed
securities |
108,665 |
(6,473 |
) |
537,488 |
(29,477 |
) |
646,153 |
(35,950 |
) |
||||||||||||||||||
|
U.S. government-related
securities |
231,917 |
(3,868 |
) |
280,803 |
(5,414 |
) |
512,720 |
(9,282 |
) |
||||||||||||||||||
|
Other government-related
securities |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||
|
States, municipalities, and
political subdivisions |
1,905 |
(134 |
) |
10,481 |
(297 |
) |
12,386 |
(431 |
) |
||||||||||||||||||
|
Corporate securities |
1,657,103 |
(76,285 |
) |
776,863 |
(62,690 |
) |
2,433,966 |
(138,975 |
) |
||||||||||||||||||
|
Equities |
17,430 |
(218 |
) |
129,509 |
(13,935 |
) |
146,939 |
(14,153 |
) |
||||||||||||||||||
|
$ |
2,232,805 |
$ |
(96,859 |
) |
$ |
1,904,974 |
$ |
(116,560 |
) |
$ |
4,137,779 |
$ |
(213,419 |
) |
|||||||||||||
RMBS had a gross unrealized loss greater than twelve months of $2.7 million as of December 31, 2014 (Predecessor Company). Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.
F-40
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
CMBS had a gross unrealized loss greater than twelve months of $2.0 million as of December 31, 2014 (Predecessor Company). Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.
The other asset-backed securities had a gross unrealized loss greater than twelve months of $29.5 million as of December 31, 2014 (Predecessor Company). This category predominately includes student-loan backed auction rate securities, the underlying collateral, of which is at least 97% guaranteed by the Federal Family Education Loan Program ("FFELP"). These unrealized losses have occurred within the Company's auction rate securities ("ARS") portfolio since the market collapse during 2008. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.
The U.S. government-related category had gross unrealized losses greater than twelve months of $5.4 million as of December 31, 2014 (Predecessor Company). These declines were entirely related to changes in interest rates.
The corporate securities category had gross unrealized losses greater than twelve months of $62.7 million as of December 31, 2014 (Predecessor Company). The aggregate decline in market value of these securities was deemed temporary due to positive factor supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.
The equities category had a gross unrealized loss greater than twelve months of $13.9 million as of December 31, 2014 (Predecessor Company). The aggregate decline in market value of these securities was deemed temporary due to factors supporting the recoverability of the respective investments. Positive factors include credit ratings, the financial health of the issuer, the continued access of the issuer to the capital markets, and other pertinent information.
The Company does not consider these unrealized loss positions to be other-than-temporary, based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover, and does not intend to sell or expect to be required to sell the securities before recovering the Company's amortized cost of the securities.
As of December 31, 2015 (Successor Company), the Company had securities in its available-for-sale portfolio which were rated below investment grade of $1.5 billion and had an amortized cost of $1.7 billion. In addition, included in the Company's trading portfolio, the Company held $288.2 million of securities which were rated below investment grade. Approximately $928.7 million of the below investment grade securities were not publicly traded.
F-41
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INVESTMENT OPERATIONS — (Continued)
The change in unrealized gains (losses), net of income tax, on fixed maturity and equity securities, classified as available-for-sale is summarized as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Fixed maturities |
$ |
(1,873,795 |
) |
$ |
669,160 |
$ |
1,224,248 |
$ |
(1,269,277 |
) |
|||||||||
|
Equity securities |
4,406 |
12,172 |
33,642 |
(20,899 |
) |
||||||||||||||
The Company held $27.1 million of non-income producing securities for the period of February 1, 2015 to December 31, 2015 (Successor Company).
Included in the Company's invested assets are $1.7 billion of policy loans as of December 31, 2015 (Successor Company). The interest rates on standard policy loans range from 3.0% to 8.0%. The collateral loans on life insurance policies have an interest rate of 13.64%.
Variable Interest Entities
The Company holds certain investments in entities in which its ownership interests could possibly be considered variable interests under Topic 810 of the FASB ASC (excluding debt and equity securities held as trading, available for sale, or held to maturity). The Company reviews the characteristics of each of these applicable entities and compares those characteristics to applicable criteria to determine whether the entity is a Variable Interest Entity ("VIE"). If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.
Based on this analysis, the Company had an interest in one wholly owned subsidiary, Red Mountain, LLC ("Red Mountain"), that was determined to be a VIE as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company). The activity most significant to Red Mountain is the issuance of a note in connection with a financing transaction involving Golden Gate V Vermont Captive Insurance Company ("Golden Gate V") and the Company in which Golden Gate V issued non-recourse funding obligations to Red Mountain and Red Mountain issued the note to Golden Gate V. Credit enhancement on the Red Mountain Note is provided by an unrelated third party. For details of this transaction, see Note 12, Debt and Other Obligations . The Company has the power, via its 100% ownership through an affiliate, to direct the activities of the VIE, but does not have the obligation to absorb losses related to the primary risks or sources of variability to the VIE. The variability of loss would be borne primarily by the third party in its function as provider of credit enhancement on the Red Mountain Note. Accordingly, it was determined that the Company is not the primary beneficiary of the VIE. The Company's risk of loss related to the VIE is limited to its investment of $10,000. Additionally, PLC, the holding company, has guaranteed the VIE's credit enhancement fee obligation to the unrelated third party provider. As of December 31, 2015 (Successor Company), no payments have been made or required related to this guarantee.
F-42
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. MORTGAGE LOANS
Mortgage Loans
The Company invests a portion of its investment portfolio in commercial mortgage loans. As of December 31, 2015 (Successor Company), the Company's mortgage loan holdings were approximately $5.7 billion. The Company has specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments. The Company's underwriting procedures relative to its commercial loan portfolio are based, in the Company's view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the Company's mortgage loans portfolio was underwritten by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition.
The Company's commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment income.
As of February 1, 2015, all mortgage loans were measured at fair value. Each mortgage loan was individually analyzed to determine the fair value. Each loan was either analyzed and assigned a discount rate or given an impairment, based on whether facts and circumstances which, as of the acquisition date, indicated less than full projected collections of contractual principal and interest payments. Various market factors were considered in determining the net present value of the expected cash flow stream or underlying real estate collateral, including the characteristics of the borrower, the underlying collateral, underlying credit worthiness of the tenants, and tenant payment history. Known events and risks, such as refinancing risks, were also considered in the fair value determination. In certain cases, fair value was based on the NPV of the expected cash flow stream or the underlying value of the real estate collateral.
The following table includes a breakdown of the Company's commercial mortgage loan portfolio by property type as of December 31, 2015 (Successor Company):
|
Type |
Percentage of
Mortgage Loans on Real Estate |
||||||
|
Retail |
60.9 |
% |
|||||
|
Office Buildings |
13.0 |
||||||
|
Apartments |
7.4 |
||||||
|
Warehouses |
8.6 |
||||||
|
Senior housing |
6.4 |
||||||
|
Other |
3.7 |
||||||
|
100.0 |
% |
||||||
F-43
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. MORTGAGE LOANS — (Continued)
The Company specializes in originating mortgage loans on either credit-oriented or credit-anchored commercial properties. No single tenant's exposure represents more than 2.0% of mortgage loans. Approximately 62.8% of the mortgage loans are on properties located in the following states:
|
State |
Percentage of
Mortgage Loans on Real Estate |
||||||
|
Alabama |
10.6 |
% |
|||||
|
Texas |
9.3 |
||||||
|
Georgia |
7.4 |
||||||
|
Florida |
6.5 |
||||||
|
Tennessee |
6.4 |
||||||
|
Utah |
5.3 |
||||||
|
North Carolina |
4.7 |
||||||
|
South Carolina |
4.5 |
||||||
|
Ohio |
4.2 |
||||||
|
California |
3.9 |
||||||
|
62.8 |
% |
||||||
During the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company funded approximately $1.4 billion and $97.4 million of new loans, with an average loan size of $6.0 million and $7.5 million, respectively. The average size mortgage loan in the portfolio as of December 31, 2015 (Successor Company), was $3.0 million, and the weighted-average interest rate was 5.30%. The largest single mortgage loan at December 31, 2015 (Successor Company) was $48.3 million.
Certain of the mortgage loans have call options between 3 and 10 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options on our existing mortgage loans commensurate with the significantly increased market rates. Assuming the loans are called at their next call dates, approximately $143.5 million would become due in 2016, $854.5 million in 2017 through 2021, $242.5 million in 2022 through 2026, and $11.3 million thereafter.
The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), approximately $449.2 million and $553.6 million, respectively, of the Company's mortgage loans have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the year ended December 31, 2014 (Predecessor Company), the Company recognized $29.8 million, $0.1 million, and $16.7 million of participating mortgage loan income, respectively.
As of December 31, 2015 (Successor Company), approximately $4.7 million of invested assets consisted of nonperforming, restructured, or mortgage loans that were foreclosed and were converted to real estate properties since February 1, 2015 (Successor Company). The Company does not expect
F-44
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. MORTGAGE LOANS — (Continued)
these investments to adversely affect its liquidity or ability to maintain proper matching of assets and liabilities. During the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company entered into certain mortgage loan transactions that were accounted for as troubled debt restructurings under Topic 310 of the FASB ASC. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in the Company's investment balance and in the allowance for mortgage loan credit losses. Transactions accounted for as troubled debt restructurings during the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company) included either the acceptance of assets in satisfaction of principal during the respective periods or at a future date, and were the result of agreements between the creditor and the debtor. During the period of February 1, 2015 to December 31, 2015 (Successor Company), the Company accepted or agreed to accept assets of $15.8 million in satisfaction of $21.1 million of principal and for the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company accepted or agreed to accept assets of $11.3 million in satisfaction of $13.8 million of principal. Of the amounts accepted or agreed to accept in satisfaction of principal during the period of February 1, 2015 to December 31, 2015 (Successor Company) $3.7 million related to foreclosures. These transactions resulted in no material realized losses in the Company's investment in mortgage loans net of existing discounts for mortgage loans losses for the period of February 1, 2015 to December 31, 2015 (Successor Company).
As of December 31, 2014 (Predecessor Company), approximately $24.5 million, or 0.05%, of invested assets consisted of nonperforming, restructured or mortgage loans that were foreclosed and were converted to real estate properties. The Company does not expect these investments to adversely affect its liquidity or ability to maintain proper matching of assets and liabilities. During the year ended December 31, 2014 (Predecessor Company), certain mortgage loan transactions occurred that were accounted for as troubled debt restructurings under Topic 310 of the FASB ASC. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for mortgage loan credit losses. Transactions accounted for as troubled debt restructurings during the year ended December 31, 2014 (Predecessor Company) included either the acceptance of assets in satisfaction of principal at a future date or the recognition of permanent impairments to principal, and were the result of agreements between the creditor and the debtor. During the year ended December 31, 2014 (Predecessor Company), the Company accepted or agreed to accept assets of $33.0 million in satisfaction of $41.7 million of principal. The Company also identified one loan whose principal of $12.6 million was permanently impaired to a value of $7.3 million. These transactions resulted in realized losses of $10.3 million and a decrease in the Company's investment in mortgage loans net of existing allowances for mortgage loans losses.
As of December 31, 2013 (Predecessor Company), approximately $15.9 million, or 0.03%, of invested assets consisted of nonperforming, restructured or mortgage loans that were foreclosed and were converted to real estate properties. We do not expect these investments to adversely affect our liquidity or ability to maintain proper matching of assets and liabilities. During the year ended December 31, 2013 (Predecessor Company), certain mortgage loan transactions occurred that were accounted for as troubled debt restructurings under Topic 310 of the FASB ASC. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for
F-45
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. MORTGAGE LOANS — (Continued)
mortgage loan credit losses. Transactions accounted for as troubled debt restructurings during the year either involved the modification of payment terms pursuant to bankruptcy proceedings or included acceptance of assets in satisfaction of principal or foreclosure on collateral property, and were the result of agreements between the creditor and the debtor. With respect to the modified loans we expect to collect all amounts due related to these loans as well as expenses incurred as a result of the restructurings. Additionally, there were no material changes to the principal balance of these loans, as a result of restructuring or modifications, which was $3.2 million as of December 31, 2013 (Predecessor Company). During the year a mortgage loan was paid off at a discount, the impact of this transaction resulted in a reduction of $0.5 million in the Company's investment in mortgage loans, net of existing allowances for mortgage loan losses as of December 31, 2013 (Predecessor Company).
The Company's mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of December 31, 2015 (Successor Company), $4.7 million of mortgage loans not subject to a pooling and servicing agreement were nonperforming, restructured, or mortgage loans that were foreclosed and were converted to real estate properties since February 1, 2015 (Successor Company). The Company foreclosed on $3.7 million of nonperforming loans during the period of February 1, 2015 to December 31, 2015 (Successor Company). The Company did not foreclose on any nonperforming loans not subject to a pooling and servicing agreement during the period of January 1, 2015 to January 31, 2015 (Predecessor Company).
As of December 31, 2015 (Successor Company), none of the loans subject to a pooling and servicing agreement were nonperforming or restructured. The Company did not foreclose on any nonperforming loans subject to pooling and servicing agreement during the periods of February 1, 2015 to December 31, 2015 (Successor Company) and January 1, 2015 to January 31, 2015 (Predecessor Company).
As of December 31, 2015 (Successor Company) there was no allowances for mortgage loan credit losses and as of December 31, 2014 (Predecessor Company), the Company had an allowance for mortgage loan credit losses of $5.7 million. Due to the Company's loss experience and nature of the loan portfolio, the Company believes that a collectively evaluated allowance would be inappropriate. The Company believes an allowance calculated through an analysis of specific loans that are believed to have a higher risk of credit impairment provides a more accurate presentation of expected losses in the portfolio and is consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Since the Company uses the specific identification method for calculating the allowance, it is necessary to review the economic situation of each borrower to determine those that have higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assesses the risk of each loan. When issues are identified, the severity of the issues are assessed and reviewed for possible credit impairment. If a loss is probable, an expected loss calculation is performed and an allowance is established for that loan based on the expected loss. The expected loss is calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan's original effective interest rate, or the current
F-46
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. MORTGAGE LOANS — (Continued)
estimated fair value of the loan's underlying collateral. A loan may be subsequently charged off at such point that the Company no longer expects to receive cash payments, the present value of future expected payments of the renegotiated loan is less than the current principal balance, or at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan.
A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property:
|
Successor Company |
Predecessor Company |
||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
As of December 31, |
|||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
|||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||
|
Beginning balance |
$ |
— |
$ |
5,720 |
$ |
3,130 |
|||||||||
|
Charge offs |
(2,561 |
) |
(861 |
) |
(675 |
) |
|||||||||
|
Recoveries |
(638 |
) |
(2,359 |
) |
(2,600 |
) |
|||||||||
|
Provision |
3,199 |
— |
5,865 |
||||||||||||
|
Ending balance |
$ |
— |
$ |
2,500 |
$ |
5,720 |
|||||||||
It is the Company's policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company's general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status. An analysis of the delinquent loans is shown in the following chart:
|
30-59
Days Delinquent |
60-89
Days Delinquent |
Greater
than 90 Days Delinquent |
Total
Delinquent |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Successor Company
As of December 31, 2015 |
|||||||||||||||||||
|
Commercial mortgage loans |
$ |
6,002 |
$ |
1,033 |
$ |
— |
$ |
7,035 |
|||||||||||
|
Number of delinquent commercial mortgage loans |
6 |
1 |
— |
7 |
|||||||||||||||
|
Predecessor Company
As of December 31, 2014 |
|||||||||||||||||||
|
Commercial mortgage loans |
$ |
8,972 |
$ |
— |
$ |
1,484 |
$ |
10,456 |
|||||||||||
|
Number of delinquent commercial mortgage loans |
4 |
— |
1 |
5 |
|||||||||||||||
F-47
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. MORTGAGE LOANS — (Continued)
The Company's commercial mortgage loan portfolio consists of mortgage loans that are collateralized by real estate. Due to the collateralized nature of the loans, any assessment of impairment and ultimate loss given a default on the loans is based upon a consideration of the estimated fair value of the real estate. The Company limits accrued interest income on impaired loans to ninety days of interest. Once accrued interest on the impaired loan is received, interest income is recognized on a cash basis. For information regarding impaired loans, please refer to the following chart:
|
Recorded
Investment |
Unpaid
Principal Balance |
Related
Allowance |
Average
Recorded Investment |
Interest
Income Recognized |
Cash Basis
Interest Income |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Successor Company
As of December 31, 2015 |
|||||||||||||||||||||||||||
|
Commercial mortgage loans: |
|||||||||||||||||||||||||||
|
With no related allowance
recorded |
$ |
1,694 |
$ |
1,728 |
$ |
— |
$ |
847 |
$ |
104 |
$ |
117 |
|||||||||||||||
|
With an allowance recorded |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||
|
Predecessor Company
As of December 31, 2014 |
|||||||||||||||||||||||||||
|
Commercial mortgage loans: |
|||||||||||||||||||||||||||
|
With no related allowance
recorded |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||||||||
|
With an allowance recorded |
19,632 |
20,603 |
5,720 |
3,272 |
1,224 |
1,280 |
|||||||||||||||||||||
As of December 31, 2015 (Successor Company), the Company did not carry any mortgage loans that have been modified in a troubled debt restructuring. Mortgage loans that were modified in a troubled debt restructuring as of December 31, 2014 (Predecessor Company) were as follows:
|
Number of
contracts |
Pre-Modification
Outstanding Recorded Investment |
Post-Modification
Outstanding Recorded Investment |
|||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||
|
Predecessor Company
As of December 31, 2014 |
|||||||||||||||
|
Troubled debt restructuring: |
|||||||||||||||
|
Commercial mortgage loans |
6 |
$ |
28,648 |
$ |
19,593 |
||||||||||
F-48
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED
Deferred policy acquisition costs
The balances and changes in DAC are as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||
|
February 1, 2015
to December 31, 2015 |
January 1, 2015
to January 31, 2015 |
As of December 31,
2014 |
|||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||
|
Balance, beginning of period |
$ |
— |
$ |
2,653,065 |
$ |
2,720,604 |
|||||||||
|
Capitalization of commissions,
sales, and issue expenses |
306,237 |
22,820 |
293,672 |
||||||||||||
|
Amortization |
(24,699 |
) |
1,080 |
(194,517 |
) |
||||||||||
|
Change in unrealized investment
gains and losses |
9,959 |
(96,830 |
) |
(166,694 |
) |
||||||||||
|
Balance, end of period |
$ |
291,497 |
$ |
2,580,135 |
$ |
2,653,065 |
|||||||||
Value of Business Acquired
The balances and changes in VOBA are as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||
|
February 1, 2015
to December 31, 2015 |
January 1, 2015
to January 31, 2015 |
As of December 31,
2014 |
|||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||
|
Balance, beginning of period |
$ |
1,278,063 |
$ |
501,981 |
$ |
756,018 |
|||||||||
|
Amortization |
(70,367 |
) |
(5,895 |
) |
(113,803 |
) |
|||||||||
|
Change in unrealized gains and
losses |
69,226 |
(79,417 |
) |
(140,234 |
) |
||||||||||
|
Other |
(6,046 |
) |
— |
— |
|||||||||||
|
Balance, end of period |
$ |
1,270,876 |
$ |
416,669 |
$ |
501,981 |
|||||||||
As of February 1, 2015, the existing DAC and VOBA balance was written off in conjunction with the Merger previously disclosed in Note 4, Dai-ichi Merger , and in accordance with ASC Topic 805 — Business Combinations .
Concurrently, a VOBA asset was created representing the actuarial estimated present value of future cash flows from the Company's insurance policies and investment contracts in-force on the date of the Merger.
F-49
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED — (Continued)
Based on the balance recorded as of December 31, 2015 (Successor Company), the expected amortization of VOBA for the next five years is as follows:
| Years |
Expected
Amortization |
||||||
|
(Dollars In Thousands) |
|||||||
| 2016 |
$ |
131,942 |
|||||
| 2017 |
122,210 |
||||||
| 2018 |
112,332 |
||||||
| 2019 |
96,942 |
||||||
| 2020 |
80,542 |
||||||
9. GOODWILL
The changes in the carrying amount of goodwill by segment are as follows:
|
Predecessor Company |
Acquisitions |
Asset
Protection |
Total
Consolidated |
||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||
|
Balance as of December 31, 2013 |
$ |
32,517 |
$ |
48,158 |
$ |
80,675 |
|||||||||
|
Tax benefit of excess tax goodwill |
(3,098 |
) |
— |
(3,098 |
) |
||||||||||
|
Balance as of December 31, 2014 |
$ |
29,419 |
$ |
48,158 |
$ |
77,577 |
|||||||||
During the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company decreased its goodwill balance by approximately $0.3 million. The decrease for the period of the Predecessor Company was due to an adjustment in the Acquisitions segment related to tax benefits realized during the period on the portion of tax goodwill in excess of GAAP basis goodwill. The goodwill balances associated with the Predecessor Company were replaced with newly established goodwill balances in conjunction with the Dai-ichi Merger, in accordance with ASC Topic 805, as described below.
As permitted by ASC Topic 805, Business Combinations , the Company measured its assets and liabilities at fair value on the date of the Merger, February 1, 2015. The purchase price in excess of the fair value of assets and liabilities of the Company resulted in the establishment of goodwill as of the date of the Merger. As of February 1, 2015 (Successor Company), the Company established an aggregate goodwill balance of $735.7 million. During the measurement period subsequent to February 1, 2015, the Company has made adjustments to provisional amounts related to certain tax balances that resulted in a decrease to goodwill of $3.3 million from the amount recorded at the Merger date. This reduction in Goodwill was applied to the Life Marketing segment's goodwill. The balance of goodwill associated with the Merger as of December 31, 2015 (Successor Company) is $732.4 million.
Refer to Note 4, Dai-ichi Merger , for more information related to the Successor Company goodwill.
10. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS
The Company issues variable universal life and VA products through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by,
F-50
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS — (Continued)
the contract holder. The Company also offers, for our VA products, certain GMDB. The most significant of these guarantees involve 1) return of the highest anniversary date account value, or 2) return of the greater of the highest anniversary date account value or the last anniversary date account value compounded at 5% interest or 3) return of premium. The GMWB rider provides the contract holder with protection against certain adverse market impacts on the amount they can withdraw and is classified as an embedded derivative and is carried at fair value on the Company's balance sheet. The VA separate account balances subject to GMWB were $9.3 billion as of December 31, 2015 (Successor Company). For more information regarding the valuation of and income impact of GMWB, please refer to Note 2, Summary of Significant Accounting Policies, Note 22, Fair Value of Financial Instruments, and Note 23, Derivative Financial Instruments .
The GMDB reserve is calculated by applying a benefit ratio, equal to the present value of total expected GMDB claims divided by the present value of total expected contract assessments, to cumulative contract assessments. This amount is then adjusted by the amount of cumulative GMDB claims paid and accrued interest. Assumptions used in the calculation of the GMDB reserve were as follows: mean investment performance of 5.87%, age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, lapse rates ranging from 2.2% — 33% (depending on product type and duration), and an average discount rate of 6.0%. Changes in the GMDB reserve are included in benefits and settlement expenses in the accompanying consolidated statements of income.
The VA separate account balances subject to GMDB were $12.2 billion as of December 31, 2015 (Successor Company). The total GMDB amount payable based on VA account balances as of December 31, 2015 (Successor Company), was $283.5 million (including $266.9 million in the Annuities segment and $16.6 million in the Acquisitions segment) with a GMDB reserve of $33.1 million and $0.3 million in the Annuities and Acquisitions segment, respectively. The average attained age of contract holders as of December 31, 2015 for the Company was 69.
These amounts exclude certain VA business which has been 100% reinsured to Commonwealth Annuity and Life Insurance Company (formerly known as Allmerica Financial Life Insurance and Annuity Company) ("CALIC") under a Modco agreement. The guaranteed amount payable associated with the annuities reinsured to CALIC was $12.8 million and is included in the Acquisitions segment. The average attained age of contract holders as of December 31, 2015, was 66 years.
Activity relating to GMDB reserves (excluding those 100% reinsured under the Modco agreement) is as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Beginning balance |
$ |
23,893 |
$ |
21,695 |
$ |
13,608 |
$ |
19,606 |
|||||||||||
|
Incurred guarantee benefits |
8,285 |
2,506 |
10,130 |
(3,133 |
) |
||||||||||||||
|
Less: Paid guarantee benefits |
2,247 |
442 |
2,043 |
2,865 |
|||||||||||||||
|
Ending balance |
$ |
29,931 |
$ |
23,759 |
$ |
21,695 |
$ |
13,608 |
|||||||||||
F-51
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS — (Continued)
Account balances of variable annuities with guarantees invested in variable annuity separate accounts are as follows:
|
Successor Company |
Predecessor Company |
||||||||||
|
As of December 31,
2015 |
As of December 31,
2014 |
||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||
|
Equity mutual funds |
$ |
5,476,366 |
$ |
7,834,480 |
|||||||
|
Fixed income mutual funds |
7,184,528 |
5,137,312 |
|||||||||
|
Total |
$ |
12,660,894 |
$ |
12,971,792 |
|||||||
Certain of the Company's fixed annuities and universal life products have a sales inducement in the form of a retroactive interest credit ("RIC"). In addition, certain annuity contracts provide a sales inducement in the form of a bonus interest credit. The Company maintains a reserve for all interest credits earned to date. The Company defers the expense associated with the RIC and bonus interest credits each period and amortizes these costs in a manner similar to that used for DAC.
Activity in the Company's deferred sales inducement asset was as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Deferred asset, beginning
of period |
$ |
— |
$ |
155,150 |
$ |
146,651 |
$ |
143,949 |
|||||||||||
|
Amounts deferred |
14,557 |
82 |
18,302 |
15,274 |
|||||||||||||||
|
Amortization |
(2,801 |
) |
(1,139 |
) |
(9,803 |
) |
(12,572 |
) |
|||||||||||
|
Deferred asset, end of period |
$ |
11,756 |
$ |
154,093 |
$ |
155,150 |
$ |
146,651 |
|||||||||||
11. REINSURANCE
The Company reinsures certain of its risks with (cedes), and assumes risks from, other insurers under yearly renewable term, coinsurance, and modified coinsurance agreements. Under yearly renewable term agreements, the Company reinsures only the mortality risk, while under coinsurance the Company reinsures a proportionate share of all risks arising under the reinsured policy. Under coinsurance, the reinsurer receives a proportionate share of the premiums less commissions and is liable for a corresponding share of all benefit payments. Modified coinsurance is accounted for in a manner similar to coinsurance except that the liability for future policy benefits is held by the ceding company, and settlements are made on a net basis between the companies.
Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to us under the terms of the reinsurance agreements. The Company monitors the concentration of credit risk the Company has with any reinsurer, as well as the financial condition of its reinsurers. As of December 31, 2015 (Successor Company), the Company had reinsured
F-52
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. REINSURANCE — (Continued)
approximately 48% of the face value of its life insurance in-force. The Company has reinsured approximately 20% of the face value of its life insurance in-force with the following three reinsurers:
• Security Life of Denver Insurance Co. (currently administered by Hanover Re)
• Swiss Re Life & Health America Inc.
• The Lincoln National Life Insurance Co. (currently administered by Swiss Re Life & Health America Inc.)
The Company has not experienced any credit losses for the years ended December 31, 2015 (Successor Company), December 31, 2014 (Predecessor Company), or December 31, 2013 (Predecessor Company) related to these reinsurers. The Company has set limits on the amount of insurance retained on the life of any one person. In 2005, the Company increased its retention for certain newly issued traditional life products from $500,000 to $1,000,000 on any one life. During 2008, the Company increased its retention limit to $2,000,000 on certain of its traditional and universal life products.
Reinsurance premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is accounted for over the reinsurance contract period. Amounts recoverable from reinsurers, for both short-duration and long-duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits associated with reinsured policies.
The following table presents the net life insurance in-force:
|
Successor Company |
Predecessor Company |
||||||||||||||
|
As of December 31, |
As of December 31, |
||||||||||||||
|
2015 |
2014 |
2013 |
|||||||||||||
|
(Dollars In Millions) |
(Dollars In Millions) |
||||||||||||||
|
Direct life insurance in-force |
$ |
727,705 |
$ |
721,036 |
$ |
726,697 |
|||||||||
|
Amounts assumed from other companies |
39,547 |
43,237 |
46,752 |
||||||||||||
|
Amounts ceded to other companies |
(368,142 |
) |
(388,890 |
) |
(416,809 |
) |
|||||||||
|
Net life insurance in-force |
$ |
399,110 |
$ |
375,383 |
$ |
356,640 |
|||||||||
|
Percentage of amount assumed to net |
10 |
% |
12 |
% |
13 |
% |
|||||||||
F-53
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. REINSURANCE — (Continued)
The following table reflects the effect of reinsurance on life, accident/health, and property and liability insurance premiums written and earned:
|
Gross
Amount |
Ceded to
Other Companies |
Assumed
from Other Companies |
Net
Amount |
Percentage of
Amount Assumed to Net |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Successor Company
February 1, 2015 to December 31, 2015 |
|||||||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
$ |
2,360,643 |
$ |
(1,058,706 |
) |
$ |
308,280 |
$ |
1,610,217 |
(1) |
19.1 |
% |
|||||||||||
|
Accident/health insurance |
70,243 |
(36,871 |
) |
18,252 |
51,624 |
35.4 |
|||||||||||||||||
|
Property and liability insurance |
228,500 |
(79,294 |
) |
6,904 |
156,110 |
4.4 |
|||||||||||||||||
|
Total |
$ |
2,659,386 |
$ |
(1,174,871 |
) |
$ |
333,436 |
$ |
1,817,951 |
||||||||||||||
|
Gross
Amount |
Ceded to
Other Companies |
Assumed
from Other Companies |
Net
Amount |
Percentage of
Amount Assumed to Net |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Predecessor Company
January 1, 2015 to January 31, 2015 |
|||||||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
$ |
204,185 |
$ |
(80,657 |
) |
$ |
28,601 |
$ |
152,129 |
(1) |
18.8 |
% |
|||||||||||
|
Accident/health insurance |
6,846 |
(4,621 |
) |
1,809 |
4,034 |
44.8 |
|||||||||||||||||
|
Property and liability insurance |
18,475 |
(6,354 |
) |
666 |
12,787 |
5.2 |
|||||||||||||||||
|
Total |
$ |
229,506 |
$ |
(91,632 |
) |
$ |
31,076 |
$ |
168,950 |
||||||||||||||
|
For The Year Ended December 31, 2014 |
|||||||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
$ |
2,603,956 |
$ |
(1,279,908 |
) |
$ |
349,934 |
$ |
1,673,982 |
(1) |
20.9 |
% |
|||||||||||
|
Accident/health insurance |
81,037 |
(42,741 |
) |
20,804 |
59,100 |
35.2 |
|||||||||||||||||
|
Property and liability insurance |
218,663 |
(73,094 |
) |
8,675 |
154,244 |
5.6 |
|||||||||||||||||
|
Total |
$ |
2,903,656 |
$ |
(1,395,743 |
) |
$ |
379,413 |
$ |
1,887,326 |
||||||||||||||
|
For The Year Ended December 31, 2013 |
|||||||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
$ |
2,371,872 |
$ |
(1,299,631 |
) |
$ |
306,921 |
$ |
1,379,162 |
(1) |
22.3 |
% |
|||||||||||
|
Accident/health insurance |
45,262 |
(20,011 |
) |
24,291 |
49,542 |
49.0 |
|||||||||||||||||
|
Property and liability insurance |
210,999 |
(67,795 |
) |
7,977 |
151,181 |
5.3 |
|||||||||||||||||
|
Total |
$ |
2,628,133 |
$ |
(1,387,437 |
) |
$ |
339,189 |
$ |
1,579,885 |
||||||||||||||
(1) Includes annuity policy fees of $77.2 million, $7.7 million, $92.8 million, and $88.7 million for the period of February 1, 2015 to December 31, 2015 (Successor Company) and January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 (Predecessor Company) and December 31, 2013 (Predecessor Company), respectively.
F-54
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. REINSURANCE — (Continued)
As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), policy and claim reserves relating to insurance ceded of $5.3 billion and $5.9 billion, respectively, are included in reinsurance receivables. Should any of the reinsurers be unable to meet its obligation at the time of the claim, the Company would be obligated to pay such claims. As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), the Company had paid $77.9 million and $120.5 million, respectively, of ceded benefits which are recoverable from reinsurers. In addition, as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), the Company had receivables of $64.9 million and $65.8 million, respectively, related to insurance assumed.
The Company's third party reinsurance receivables amounted to $5.3 billion and $5.9 billion as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), respectively. These amounts include ceded reserve balances and ceded benefit payments. The ceded benefit payments are recoverable from reinsurers. The following table sets forth the receivables attributable to our more significant reinsurance partners:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
As of December 31, |
As of December 31, |
||||||||||||||||||
|
2015 |
2014 |
||||||||||||||||||
|
Reinsurance
Receivable |
A.M. Best
Rating |
Reinsurance
Receivable |
A.M. Best
Rating |
||||||||||||||||
|
(Dollars In Millions) |
(Dollars In Millions) |
||||||||||||||||||
|
Security Life of Denver Insurance
Company |
$ |
800.6 |
A |
$ |
842.1 |
A |
|||||||||||||
|
Swiss Re Life & Health America, Inc. |
719.2 |
A+ |
820.9 |
A+ |
|||||||||||||||
|
Lincoln National Life Insurance Co. |
546.0 |
A+ |
556.3 |
A+ |
|||||||||||||||
|
Transamerica Life Insurance Co. |
396.6 |
A+ |
497.7 |
A+ |
|||||||||||||||
|
RGA Reinsurance Company |
303.5 |
A+ |
412.4 |
A+ |
|||||||||||||||
|
SCOR Global Life USA Reinsurance
Company |
320.4 |
A |
411.8 |
A |
|||||||||||||||
|
American United Life Insurance
Company |
314.2 |
A+ |
336.1 |
A+ |
|||||||||||||||
|
Scottish Re (U.S.), Inc. |
268.6 |
NR |
298.0 |
NR |
|||||||||||||||
|
Centre Reinsurance (Bermuda) Ltd |
247.6 |
NR |
260.9 |
NR |
|||||||||||||||
|
Employers Reassurance Corporation |
224.4 |
A- |
254.3 |
A- |
|||||||||||||||
The Company's reinsurance contracts typically do not have a fixed term. In general, the reinsurers' ability to terminate coverage for existing cessions is limited to such circumstances as material breach of contract or non-payment of premiums by the ceding company. The reinsurance contracts generally contain provisions intended to provide the ceding company with the ability to cede future business on a basis consistent with historical terms. However, either party may terminate any of the contracts with respect to future business upon appropriate notice to the other party.
Generally, the reinsurance contracts do not limit the overall amount of the loss that can be incurred by the reinsurer. The amount of liabilities ceded under contracts that provide for the payment of experience refunds is immaterial.
F-55
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT AND OTHER OBLIGATIONS
In conjunction with the Merger and in accordance with ASC Topic 805, the Company adjusted the carrying value of debt to fair value as of the date of the Merger, February 1, 2015. This resulted in PLC and the Company establishing premiums and discounts on PLC's outstanding debt, subordinated debentures and PLC and the Company's non-recourse funding obligations. The carrying value of the Company's revolving line of credit approximates fair value due to the nature of the borrowings and the fact the Company pays a variable rate of interest that reflects current market conditions. The fair value of PLC's senior notes and subordinated debt and PLC and the Company's non-recourse funding obligations associated with Golden Gate II Captive Insurance Company and MONY Life Insurance Company were determined using market prices as of February 1, 2015. The fair value of the Golden Gate V non-recourse funding obligation was determined using a discounted cash flow model with inputs derived from comparable financial instruments. The premiums and discounts established as of February 1, 2015 are amortized over the expected life of the instruments using the effective interest method. The amortization of premiums and discounts are recorded as a component of interest expense and are recorded in "Other operating expenses" on the Company's consolidated statements of income.
Under a revolving line of credit arrangement that was in effect until February 2, 2015 (the "Credit Facility"), the Company and PLC had the ability to borrow on an unsecured basis up to an aggregate principal amount of $750 million. The Company had the right, in certain circumstances, to request that the commitment under the Credit Facility be increased up to a maximum principal amount of $1.0 billion. Balances outstanding under the Credit Facility accrued interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC's senior unsecured long-term debt ("Senior Debt"), or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent's prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC's Senior Debt. The Credit Facility also provided for a facility fee at a rate, 0.175%, that could vary with the ratings of PLC's Senior Debt and that was calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The Credit Facility provided that PLC was liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility was July 17, 2017. The Company was not aware of any non-compliance with the financial debt covenants of the Credit Facility as of December 31, 2014 (Predecessor Company). The Company did not have an outstanding balance under the Credit Facility as of December 31, 2014 (Predecessor Company). PLC had an outstanding balance of $450.0 million bearing interest at a rate of LIBOR plus 1.20% under the Credit Facility as of December 31, 2014 (Predecessor Company). As of December 31, 2014 (Predecessor Company), the Company had used $55.0 million of borrowing capacity by executing a Letter of Credit under the Credit Facility for the benefit of an affiliated captive reinsurance subsidiary of the Company. This Letter of Credit had not been drawn upon as of December 31, 2014 (Predecessor Company).
On February 2, 2015, the Company and PLC amended and restated the Credit Facility (the "2015 Credit Facility"). Under the 2015 Credit Facility, the Company has the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company has the right in certain circumstances to request that the commitment under the 2015 Credit Facility be increased up to a maximum principal amount of $1.25 billion. Balances outstanding under the 2015 Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC's Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent's
F-56
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT AND OTHER OBLIGATIONS — (Continued)
prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC's Senior Debt. The 2015 Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC's Senior Debt and that is calculated on the aggregate amount of commitments under the 2015 Credit Facility, whether used or unused. The initial facility fee rate was 0.15% on February 2, 2015, and was adjusted to 0.125% upon PLC's subsequent ratings upgrade on February 2, 2015. The 2015 Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the 2015 Credit Facility. The maturity date of the 2015 Credit Facility is February 2, 2020. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of February 2, 2015 or the 2015 Credit Facility as of December 31, 2015 (Successor Company). PLC had an outstanding balance of $485.0 million bearing interest at a rate of LIBOR plus 1.00% as of December 31, 2015 (Successor Company). As of December 31, 2015 (Successor Company), the $55.0 million Letter of Credit, executed by the Company, was no longer issued and outstanding.
Non-Recourse Funding Obligations
Golden Gate Captive Insurance Company
Golden Gate Captive Insurance Company ("Golden Gate"), a Vermont special purpose financial insurance company and wholly owned subsidiary, had three series of non-recourse funding obligations with a total outstanding balance of $800 million as of December 31, 2015 (Successor Company). As of December 31, 2015, PLC held the entire outstanding balance of non-recourse funding obligations. As of December 31, 2015, the Series A1 non-recourse funding obligations had a balance of $400 million and accrue interest at a fixed rate of 7.375%, the Series A2 non-recourse funding obligations had a balance of $100 million and accrue interest at a fixed rate of 8%, and the Series A3 non-recourse funding obligations had a balance of $300 million and accrue interest at a fixed rate of 8.45%. In connection with the reinsurance transaction pursuant to which the Company reinsures the GLAIC Block, on January 15, 2016, Golden Gate and Steel City, LLC ("Steel City"), a newly formed wholly owned subsidiary of PLC, entered into an 18-year transaction to finance $2.188 billion of "XXX" reserves related to the acquired GLAIC Block and the other term life insurance business reinsured to Golden Gate by the Company and WCL, a direct wholly owned subsidiary. Steel City issued notes with an aggregate initial principal amount of $2.188 billion to Golden Gate in exchange for a surplus note issued by Golden Gate with an initial principal amount of $2.188 billion. Through the structure, Hannover Life Reassurance Company of America (Bermuda) Ltd., The Canada Life Assurance Company (Barbados Branch) and Nomura Americas Re Ltd. (collectively, the "Risk-Takers") provide credit enhancement to the Steel City notes for the 18-year term in exchange for credit enhancement fees. The transaction is "non-recourse" to PLC, WCL, and the Company, meaning that none of these companies are liable to reimburse the Risk-Takers for any credit enhancement payments required to be made. In connection with the transaction, PLC has entered into certain support agreements under which it guarantees or otherwise supports certain obligations of Golden Gate or Steel City, including a guarantee of the fees to the Risk-Takers. As a result of the financing transaction described above, the $800 million of Golden Gate Series A Surplus Notes held by PLC were contributed to the Company and then subsequently contributed to Golden Gate, which resulted in the extinguishment of these notes.
F-57
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT AND OTHER OBLIGATIONS — (Continued)
Golden Gate II Captive Insurance Company
Golden Gate II Captive Insurance Company ("Golden Gate II"), a South Carolina special purpose financial captive insurance company and wholly owned subsidiary, had $575 million of non-recourse funding obligations outstanding as of December 31, 2015 (Successor Company). These outstanding non-recourse funding obligations were issued to special purpose trusts, which in turn issued securities to third parties. Certain of our affiliates own a portion of these securities. As of December 31, 2015 (Successor Company), securities related to $144.9 million of the outstanding balance of the non-recourse funding obligations were held by external parties, securities related to $145.3 million of the non-recourse funding obligations were held by nonconsolidated affiliates, and securities related to $284.8 million of the non-recourse funding obligations were held by consolidated subsidiaries of the Company. PLC has entered into certain support agreements with Golden Gate II obligating it to make capital contributions or provide support related to certain of Golden Gate II's expenses and in certain circumstances, to collateralize certain of PLC's obligations to Golden Gate II. These support agreements provide that amounts would become payable by PLC to Golden Gate II if its annual general corporate expenses were higher than modeled amounts or if Golden Gate II's investment income on certain investments or premium income was below certain actuarially determined amounts. As of December 31, 2015 (Successor Company), no payments have been made under these agreements and $1.9 million amounts are collateralized by PLC under these agreements. Re-evaluation and, if necessary, adjustments of any support agreement collateralization amounts occurs annually during the first quarter pursuant to the terms on the support agreement. There are no support agreements between the Company and Golden Gate II.
Golden Gate V Vermont Captive Insurance Company
On October 10, 2012, Golden Gate V Vermont Captive Insurance Company ("Golden Gate V"), a Vermont special purpose financial insurance company and Red Mountain, LLC ("Red Mountain"), both wholly owned subsidiaries, entered into a 20-year transaction to finance up to $945 million of "AXXX" reserves related to a block of universal life insurance policies with secondary guarantees issued by the Company and its subsidiary, West Coast Life Insurance Company ("WCL"). Golden Gate V issued non-recourse funding obligations to Red Mountain, and Red Mountain issued a note with an initial principal amount of $275 million, increasing to a maximum of $945 million in 2027, to Golden Gate V for deposit to a reinsurance trust supporting Golden Gate V's obligations under a reinsurance agreement with WCL, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. Through the structure, Hannover Life Reassurance Company of America ("Hannover Re"), the ultimate risk taker in the transaction, provides credit enhancement to the Red Mountain note for the 20-year term in exchange for a fee. The transaction is "non-recourse" to Golden Gate V, Red Mountain, WCL, PLC, and the Company, meaning that none of these companies are liable for the reimbursement of any credit enhancement payments required to be made. As of December 31, 2015 (Successor Company), the principal balance of the Red Mountain note was $500 million. Future scheduled capital contributions to prefund credit enhancement fees amount to approximately $134.2 million and will be paid in annual installments through 2031. In connection with the transaction, PLC has entered into certain support agreements under which it guarantees or otherwise supports certain obligations of Golden Gate V or Red Mountain. The support agreements provide that amounts would become payable by PLC if Golden Gate V's annual general corporate expenses were higher than modeled amounts or in the event
F-58
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT AND OTHER OBLIGATIONS — (Continued)
write-downs due to other-than-temporary impairments on assets held in certain accounts exceed defined threshold levels. Additionally, PLC has entered into separate agreements to indemnify Golden Gate V with respect to material adverse changes in non-guaranteed elements of insurance policies reinsured by Golden Gate V and to guarantee payment of certain fee amounts in connection with the credit enhancement of the Red Mountain note. As of December 31, 2015 (Successor Company), no payments have been made under these agreements.
In connection with the transaction outlined above, Golden Gate V had a $500 million outstanding non-recourse funding obligation as of December 31, 2015 (Successor Company). This non-recourse funding obligation matures in 2037, has scheduled increases in principal to a maximum of $945 million, and accrues interest at a fixed annual rate of 6.25%.
Non-recourse funding obligations outstanding as of December 31, 2015 (Successor Company), on a consolidated basis, are shown in the following table:
|
Issuer |
Carrying Value(1) |
Maturity Year |
Year-to-Date
Weighted-Avg Interest Rate |
||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||
|
Golden Gate Captive Insurance
Company(2) |
$ |
1,148,237 |
2037 |
4.66 |
% |
||||||||||
|
Golden Gate II Captive Insurance
Company |
236,123 |
2052 |
1.22 |
% |
|||||||||||
|
Golden Gate V Vermont Captive
Insurance Company(2) |
564,679 |
2037 |
5.12 |
% |
|||||||||||
|
MONY Life Insurance
Company(2) |
2,524 |
2024 |
6.19 |
% |
|||||||||||
|
Total |
$ |
1,951,563 |
|||||||||||||
(1) Carrying values include premiums and discounts and do no represent unpaid principal balances.
(2) Fixed rate obligations
During the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the Company did not repurchase any of its outstanding non-recourse funding obligations. For the year ended December 31, 2014 (Predecessor Company), the Company and its subsidiaries repurchased $37.7 million of its outstanding non-recourse funding obligations, at a discount. These repurchases resulted in a $7.4 million pre-tax gain for the Company. For the year ended December 31, 2013 (Predecessor Company), the Company and its subsidiaries repurchased $68.5 million of its outstanding non-recourse funding obligations, at a discount. These repurchases resulted in a $15.4 million pre-tax gain for the Company.
Letters of Credit
Golden Gate III Vermont Captive Insurance Company
Golden Gate III Vermont Captive Insurance Company ("Golden Gate III"), a Vermont special purpose financial insurance company and wholly owned subsidiary, is party to a Reimbursement Agreement (the "Reimbursement Agreement") with UBS AG, Stamford Branch ("UBS"), as issuing lender. Under the original Reimbursement Agreement, dated April 23, 2010, UBS issued a letter of credit (the "LOC")
F-59
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT AND OTHER OBLIGATIONS — (Continued)
in the initial amount of $505 million to a trust for the benefit of WCL. The Reimbursement Agreement was subsequently amended and restated effective November 21, 2011 (the "First Amended and Restated Reimbursement Agreement"), to replace the existing LOC with one or more letters of credit from UBS, and to extend the maturity date from April 1, 2018 to April 1, 2022. On August 7, 2013, Golden Gate III entered into a Second Amended and Restated Reimbursement Agreement with UBS (the "Second Amended and Restated Reimbursement Agreement"), which amended and restated the First Amended and Restated Reimbursement Agreement. Under the Second and Amended and Restated Reimbursement Agreement a new LOC in an initial amount of $710 million was issued by UBS in replacement of the existing LOC issued under the First Amended and Restated Reimbursement Agreement. The term of the LOC was extended from April 1, 2022 to October 1, 2023, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $610 million to $720 million in 2015 if certain conditions had been met. On June 25, 2014, Golden Gate III entered into a Third Amended and Restated Reimbursement Agreement with UBS (the "Third Amended and Restated Reimbursement Agreement"), which amended and restated the Second Amended and Restated Reimbursement Agreement. Under the Third Amended and Restated Reimbursement Agreement, a new LOC in an initial amount of $915 million was issued by UBS in replacement of the existing LOC issued under the Second Amended and Restated Reimbursement Agreement. The term of the LOC was extended from October 1, 2023 to April 1, 2025, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $720 million to $935 million in 2015 if certain conditions are met. The LOC is held in trust for the benefit of WCL and supports certain obligations of Golden Gate III to WCL under an indemnity reinsurance agreement originally effective April 1, 2010, as amended and restated on November 21, 2011, and as further amended and restated on August 7, 2013 and on June 25, 2014 to include additional blocks of policies, and pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. The LOC balance was $935 million as of December 31, 2015 (Successor Company). The term of the LOC is expected to be approximately 15 years from the original issuance date. This transaction is "non-recourse" to WCL, PLC, and the Company, meaning that none of these companies other than Golden Gate III are liable for reimbursement on a draw of the LOC. PLC has entered into certain support agreements with Golden Gate III obligating PLC to make capital contributions or provide support related to certain of Golden Gate III's expenses and in certain circumstances, to collateralize certain of PLC's obligations to Golden Gate III. Future scheduled capital contributions amount to approximately $122.5 million and will be paid in three installments with the last payment occurring in 2021, and these contributions may be subject to potential offset against dividend payments as permitted under the terms of the Third Amended and Restated Reimbursement Agreement. The support agreements provide that amounts would become payable by PLC to Golden Gate III if Golden Gate III's annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate III. Pursuant to the terms of an amended and restated letter agreement with UBS, PLC has continued to guarantee the payment of fees to UBS as specified in the Third Amended and Restated Reimbursement Agreement. As of December 31, 2015 (Successor Company), no payments have been made under these agreements.
F-60
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT AND OTHER OBLIGATIONS — (Continued)
Golden Gate IV Vermont Captive Insurance Company
Golden Gate IV Vermont Captive Insurance Company ("Golden Gate IV"), a Vermont special purpose financial insurance company and wholly owned subsidiary, is party to a Reimbursement Agreement with UBS AG, Stamford Branch, as issuing lender. Under the Reimbursement Agreement, dated December 10, 2010, UBS issued an LOC in the initial amount of $270 million to a trust for the benefit of WCL. The LOC balance has increased, in accordance with the terms of the Reimbursement Agreement, during 2015 and was $780 million as of December 31, 2015 (Successor Company). Subject to certain conditions, the amount of the LOC will be periodically increased up to a maximum of $790 million in 2016. The term of the LOC is expected to be 12 years from the original issuance date (stated maturity of December 30, 2022). The LOC was issued to support certain obligations of Golden Gate IV to WCL under an indemnity reinsurance agreement, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. This transaction is "non-recourse" to WCL, PLC, and the Company, meaning that none of these companies other than Golden Gate IV are liable for reimbursement on a draw of the LOC. PLC has entered into certain support agreements with Golden Gate IV obligating PLC to make capital contributions or provide support related to certain of Golden Gate IV's expenses and in certain circumstances, to collateralize certain of PLC's obligations to Golden Gate IV. The support agreements provide that amounts would become payable by PLC to Golden Gate IV if Golden Gate IV's annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate IV. PLC has also entered into a separate agreement to guarantee the payments of LOC fees under the terms of the Reimbursement Agreement. As of December 31, 2015 (Successor Company), no payments have been made under these agreements.
Repurchase Program Borrowings
While the Company anticipates that the cash flows of its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are for a term less than 90 days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of December 31, 2015 (Successor Company), the fair value of securities pledged under the repurchase program was $479.9 million and the repurchase obligation of $438.2 million was included in the Company's consolidated balance sheets (at an average borrowing rate of 36 basis points). During the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company), the maximum balance outstanding at any one point in time related to these programs was $912.7 million and $175.0 million, respectively. The average daily balance was $540.3 million and $77.4 million (at an average borrowing rate of 20 and 16 basis points, respectively) during the period
F-61
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. DEBT AND OTHER OBLIGATIONS — (Continued)
of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company), respectively. As of December 31, 2014 (Predecessor Company), the Company had a $50.0 million outstanding balance related to such borrowings. During 2014, the maximum balance outstanding at any one point in time related to these programs was $633.7 million. The average daily balance was $470.4 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2014 (Predecessor Company).
The following table provides the fair value of collateral pledged for repurchase agreements, grouped by asset class, as of December 31, 2015 (Successor Company):
Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions Accounted for as Secured Borrowings
|
Remaining Contractual Maturity of the Agreements |
|||||||||||||||||||||||
|
As of December 31, 2015 (Successor Company) |
|||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Overnight and
Continuous |
Up to 30 days |
30-90 days |
Greater Than
90 days |
Total |
|||||||||||||||||||
|
Repurchase agreements and
repurchase-to-maturity transactions |
|||||||||||||||||||||||
|
U.S. Treasury and agency
securities |
$ |
108,875 |
$ |
— |
$ |
— |
$ |
— |
$ |
108,875 |
|||||||||||||
|
State and municipal securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other asset-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Equity securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Non-U.S. sovereign debt |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Mortgage loans |
371,002 |
— |
— |
— |
371,002 |
||||||||||||||||||
|
Total borrowings |
$ |
479,877 |
$ |
— |
$ |
— |
$ |
— |
$ |
479,877 |
|||||||||||||
Other Obligations
The Company routinely receives from or pays to affiliates under the control of PLC reimbursements for expenses incurred on one another's behalf. Receivables and payables among affiliates are generally settled monthly.
Interest Expense
Interest expense on non-recourse funding obligations, letters of credit, and other temporary borrowings was $106.4 million, $10.0 million, $118.6 million, $111.4 million, for the periods of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the years ended December 31, 2014 (Predecessor Company) and December 31, 2013 (Predecessor Company), respectively.
F-62
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES
The Company leases administrative and marketing office space in approximately 17 cities, including 24,090 square feet in Birmingham (excluding the home office building), with most leases being for periods of three to ten years. The Company had rental expense of $10.2 million, $0.9 million, $10.8 million, and $11.2 million for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the years ended December 31, 2014 (Predecessor Company) and December 31, 2013 (Predecessor Company), respectively. The aggregate annualized rent was approximately $6.3 million for the year ended December 31, 2015 (Successor Company). The following is a schedule by year of future minimum rental payments required under these leases:
| Year |
Amount |
||||||
|
(Dollars In Thousands) |
|||||||
| 2016 |
$ |
4,406 |
|||||
| 2017 |
4,042 |
||||||
| 2018 |
3,829 |
||||||
| 2019 |
3,644 |
||||||
| 2020 |
3,600 |
||||||
| Thereafter |
13,145 |
||||||
Additionally, the Company leases a building contiguous to its home office. The lease was renewed in December 2013 and was extended to December 2018. At the end of the lease term the Company may purchase the building for approximately $75 million. Monthly rental payments are based on the current LIBOR rate plus a spread. The following is a schedule by year of future minimum rental payments required under this lease:
| Year |
Amount |
||||||
|
(Dollars In Thousands) |
|||||||
| 2016 |
$ |
1,385 |
|||||
| 2017 |
1,381 |
||||||
| 2018 |
76,356 |
||||||
As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), the Company had outstanding mortgage loan commitments of $601.9 million at an average rate of 4.43% and $537.7 million at an average rate of 4.61%, respectively.
Under insurance guaranty fund laws, in most states insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. In addition, from time to time, companies may be asked to contribute amounts beyond prescribed limits. Most insurance guaranty fund laws provide that an assessment may be excused or deferred if it would threaten an insurer's own financial strength. The Company does not believe its insurance guaranty fund assessments will be materially different from amounts already provided for in the financial statements.
A number of civil jury verdicts have been returned against insurers, broker dealers and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in
F-63
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES — (Continued)
awarding punitive non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. Publicly held companies in general and the financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.
The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures and estimates of reasonably possible losses or range of loss based on such reviews.
In 2012, the IRS proposed favorable and unfavorable adjustments to the Company's 2003 through 2007 reported taxable income. The Company protested certain unfavorable adjustments and sought resolution at the IRS' Appeals Division. In October 2015, the Appeals accepted the Company's earlier proposed settlement offer. In September of 2015, the IRS proposed favorable and unfavorable adjustments to the Company's 2008 through 2011 reported taxable income. The Company agreed to these adjustments. As a result, pending a routine review by Congress' Joint Committee on Taxation, the Company expected to receive an approximate $6.2 million net refund in a future period. A portion of this refund would be due to the Company. This refund will not materially affect the Company's effective tax rate.
Through the acquisition of MONY by the Company certain income tax credit carryforwards, which arose in MONY's pre-acquisition tax years, transferred to the Company. This transfer was in accordance with the applicable rules of the Internal Revenue Code and the related Regulations. In spite of this transfer, AXA, the former parent of the consolidated income tax return group in which MONY was a member, retains the right to utilize these credits in the future to offset future increases in its 2010 through 2013 tax liabilities. The Company had determined that, based on all information known as of the acquisition date and through the March 31, 2014 reporting date, it was probable that a loss of the utilization of these carryforwards had been incurred. Due to indemnification received from AXA during the quarter ending June 30, 2014, the probability of loss of these carryforwards has been eliminated. Accordingly, in the table summarizing the fair value of net assets acquired from the Acquisition, the amount of the deferred tax asset from the credit carryforwards is no longer offset by a liability.
The Company and certain of the Company's insurance subsidiaries, as well as certain other insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including uncertainty as to the legal theory or
F-64
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES — (Continued)
theories that may give rise to liability, the early stages of the audits being conducted, and, with respect to one block of life insurance policies that is co-insured by the Company, uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with such policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits probable or reasonably estimable.
The Company and certain of the Company's subsidiaries are under a targeted multi-state examination with respect to their claims paying practices and their use of the U.S. Social Security Administration's Death Master File or similar databases (a "Death Database") to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed, and substantial legal authority exists to support the position that the prevailing industry practice was lawful. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, and escheating the benefits and interest as well as penalties to the state if the beneficiary could not be found. It has been publicly reported that the life insurers have paid administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements. The Company believes it is reasonably possible that insurance regulators could demand from the Company administrative and/or examination fees relating to the targeted multi-state examination. Based on publicly reported payments by other life insurers, the Company estimates the range of such fees to be from $0 to $4.5 million.
14. SHAREOWNER'S EQUITY
PLC owns all of the 2,000 shares of non-voting preferred stock issued by the Company's subsidiary, Protective Life and Annuity Insurance Company ("PL&A"). The stock pays, when and if declared, noncumulative participating dividends to the extent PL&A's statutory earnings for the immediately preceding fiscal year exceeded $1.0 million. In 2015, 2014, and 2013, PL&A paid no dividends to PLC on its preferred stock.
15. STOCK-BASED COMPENSATION
As a result of the Merger, PLC adopted a new long-term incentive program in 2015. The program was modified to reflect the fact that PLC no longer has a publicly traded class of stock to use in its compensation programs. Prior to that time, since 1973, PLC had stock-based incentive plans designed and established to motivate management to focus on its long-range performance through the awarding of stock-based compensation. Due to change in control provision, the awards outstanding immediately prior to the Merger were cancelled and converted into the right to receive an amount in cash. For more information refer to Note 4, Dai-ichi Merger .
Performance Shares (Predecessor)
The criteria for payment of the 2014 performance awards was based on PLC's average operating return on average equity ("ROE") over a three-year period. If PLC's ROE was below 10.5%, no award was earned. If PLC's ROE was at or above 12.0%, the award maximum was earned.
F-65
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. STOCK-BASED COMPENSATION — (Continued)
The criteria for payment of the 2013 performance awards was based on PLC's average operating ROE over a three-year period. If PLC's ROE was below 10.0%, no award was earned. If PLC's ROE was at or above 11.5%, the award maximum was earned.
Performance shares were equivalent in value to one share of PLC's common stock times the award earned percentage payout. Performance share awards of 203,295 performance share awards were issued during the year ended December 31, 2014 (Predecessor Company).
Performance share awards and the estimated fair value of the awards at grant date are as follows:
|
Year
Awarded |
Performance
Shares |
Estimated
Fair Value |
|||||||||
|
(Dollars In Thousands) |
|||||||||||
| 2014 |
203,295 |
$ |
10,484 |
||||||||
| 2013 |
298,500 |
9,328 |
|||||||||
| 2012 |
306,100 |
8,608 |
|||||||||
Stock Appreciation Rights (Predecessor)
Stock Appreciation Rights ("SARs") were granted to certain officers of PLC to provide long-term incentive compensation based solely on the performance of PLC's common stock. The SARs were exercisable either 5 years after the date of grant or in three or four equal annual installments beginning one year after the date of grant (earlier upon the death, disability, or retirement of the officer, or in certain circumstances, of a change in control of PLC) and expire after ten years or upon termination of employment. The SARs activity as well as weighted-average base price was as follows:
|
Weighted-Average
Base Price Per Share |
No. of SARs |
||||||||||
|
Balance at December 31, 2012 |
$ |
22.15 |
1,641,167 |
||||||||
|
SARs exercised / forfeited |
18.54 |
(336,066 |
) |
||||||||
|
Balance at December 31, 2013 |
$ |
23.08 |
1,305,101 |
||||||||
|
SARs exercised / forfeited |
22.07 |
(1,147,473 |
) |
||||||||
|
Balance at December 31, 2014 |
$ |
30.41 |
157,628 |
||||||||
The outstanding SARs as of December 31, 2014 (Predecessor Company), were at the following base prices:
|
Base Price |
SARs
Outstanding |
Remaining Life
in Years |
Currently
Exercisable |
||||||||||||||||
|
$ |
41.05 |
10,000 |
1 |
10,000 |
|||||||||||||||
|
43.46 |
22,300 |
3 |
22,300 |
||||||||||||||||
|
38.59 |
52,000 |
4 |
52,000 |
||||||||||||||||
|
3.50 |
46,110 |
5 |
46,110 |
||||||||||||||||
|
18.36 |
27,218 |
6 |
27,218 |
||||||||||||||||
There were no SARs issued for the years ended December 31, 2014 (Predecessor Company) and December 31, 2013 (Predecessor Company). These fair values were estimated using a Black-Scholes option pricing model. The assumptions used in this pricing model varied depending on the vesting
F-66
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. STOCK-BASED COMPENSATION — (Continued)
period of awards. Assumptions used in the model for the 2010 SARs granted (the simplified method under the ASC Compensation-Stock Compensation Topic was used for the 2010 awards) were as follows: an expected volatility of 69.4%, a risk-free interest rate of 2.6%, a dividend rate of 2.4%, a zero percent forfeiture rate, and expected exercise date of 2016. Due to the change in control provision, all SARs outstanding immediately prior to the Merger were cancelled and converted into the right to receive an amount in cash.
Restricted Stock Units (Predecessor)
Restricted stock units were awarded to participants and include certain restrictions relating to vesting periods. PLC issued 98,700 restricted stock units for the year ended December 31, 2014 (Predecessor Company) and 166,850 restricted stock units for the year ended December 31, 2013 (Predecessor Company). These awards had a total fair value at grant date of $5.1 million and $5.5 million, respectively. Approximately half of these restricted stock units were to vest after three years from grant date and the remainder vest after four years.
PLC recognizes all stock-based compensation expense over the related service period of the award, or earlier for retirement eligible employees. The expense recorded by PLC for its stock-based compensation plans was $25.9 million and $15.7 million in 2014 and 2013, respectively. PLC's obligations of its stock-based compensation plans that are expected to be settled in shares of PLC's common stock are reported as a component of shareowner's equity, net of deferred taxes. As of December 31, 2014 (Predecessor Company), the total compensation cost related to non-vested stock-based compensation not yet recognized was $27.0 million. Due to the Merger, the unrecognized stock compensation expense was accelerated as of the date of the merger due to a change in control provision.
The following table provides information as of December 31, 2014 (Predecessor Company), regarding equity compensation plans under which the Company's common stock was authorized for issuance:
Securities Authorized for Issuance under Equity Compensation Plans
|
Plan category |
Number of securities
to be issued upon exercise of outstanding options, warrants and rights as of December 31, 2014(a) |
Weighted-average
exercise price of outstanding options, warrants and rights as of December 31, 2014(b) |
Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) as of of December 31, 2014(c) |
||||||||||||
|
Equity compensation plans
approved by shareowners |
1,960,959 |
(1) |
$ |
22.07 |
(3) |
4,092,546 |
(4) |
||||||||
|
Equity compensation plans not
approved by shareowners |
193,720 |
(2) |
Not applicable |
Not applicable(5) |
|||||||||||
|
Total |
2,154,679 |
$ |
22.07 |
4,092,546 |
|||||||||||
(1) Includes the following number of shares: (a) 102,458 shares issuable with respect to outstanding SARs (assuming for this purpose that one share of common stock will be payable with respect to each outstanding SAR); (b) 907,487 shares issuable with respect to outstanding performance share awards (assuming for this purpose that the awards are payable based on estimated performance under the awards as of
F-67
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. STOCK-BASED COMPENSATION — (Continued)
September 30, 2014); (c) 313,199 shares issuable with respect to outstanding restricted stock units (assuming for this purpose that shares will be payable with respect to all outstanding restricted stock units); (d) 475,386 shares issuable with respect to stock equivalents representing previously earned awards under the LTIP that the recipient deferred under PLC's Deferred Compensation Plan for Officers; and (e) 162,429 shares issuable with respect to stock equivalents representing previous awards under PLC's Stock Plan for Non-Employee Directors that the recipient deferred under PLC's Deferred Compensation Plan for Directors Who Are Not Employees of PLC.
(2) Includes the following number of shares of common stock: (a) 152,709 shares issuable with respect to stock equivalents representing (i) stock awards to PLC's Directors before June 1, 2004 that the recipient deferred pursuant to PLC's Deferred Compensation Plan for Directors Who Are Not Employees of PLC and (ii) cash retainers and fees that PLC's Directors deferred under the Company's Deferred Compensation Plan for Directors Who Are Not Employees of PLC, and (b) 41,011 shares issuable with respect to stock equivalents pursuant to PLC's Deferred Compensation Plan for Officers.
(3) Based on exercise prices of outstanding SARs.
(4) Represents shares of common stock available for future issuance under the LTIP and PLC's Stock Plan for Non-Employee Directors.
(5) The plans listed in Note (2) do not currently have limits on the number of shares of common stock issuable under such plans. The total number of shares of common stock that may be issuable under such plans will depend upon, among other factors, the deferral elections made by the plans' participants
16. EMPLOYEE BENEFIT PLANS
Due to the Dai-ichi acquisition, PLC remeasured all materially impacted benefit plans as of January 31, 2015. Financial remeasurement was performed for the defined benefit pension plan, the unfunded excess benefit plan, and the postretirement life insurance plan as of January 31, 2015. The January results for the retiree life plan were not material, and therefore, remeasurement was not deemed necessary for this plan. PLC has disclosed relevant financial information related to the January 31, 2015 remeasurement.
Beginning with the December 31, 2015 measurement, PLC changed its method used to estimate the service and interest cost components of net periodic benefit cost for pension and other postretirement benefits by applying a spot rate approach. Historically, PLC utilized a single weighted average discount rate derived from a selected yield curve used to measure the benefit obligation as of the measurement date. Under the new spot rate approach, the actual calculation of service and interest cost will reflect an array of spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. PLC made this change to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot rates from the selected yield curve. This new approach does not affect the measurement of the total benefit obligation.
Defined Benefit Pension Plan and Unfunded Excess Benefit Plan
PLC sponsors a defined benefit pension plan covering substantially all of its employees, including those of the Company. Benefits are based on years of service and the employee's compensation.
Effective January 1, 2008, PLC made the following changes to its defined benefit pension plan. These changes have been reflected in the computations within this note.
• Employees hired after December 31, 2007 will receive benefits under a cash balance plan.
• Employees active on December 31, 2007 with age plus vesting service less than 55 years, will receive a final pay-based pension benefit for service through December 31, 2007, plus a cash balance benefit for service after December 31, 2007.
F-68
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
• Employees active on December 31, 2007 with age plus vesting service equaling or exceeding 55 years, will receive a final pay-based pension benefit for service both before and after December 31, 2007, with a modest reduction in the formula for benefits earned after December 31, 2007.
• All participants terminating employment on or after December of 2007 may elect to receive a lump sum benefit.
PLC's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act ("ERISA") plus such additional amounts as PLC may determine to be appropriate from time to time. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future.
Under the Pension Protection Act of 2006 ("PPA"), a plan could be subject to certain benefit restrictions if the plan's adjusted funding target attainment percentage ("AFTAP") drops below 80%. Therefore, PLC may make additional contributions in future periods to maintain an AFTAP of at least 80%. In general, the AFTAP is a measure of how well the plan is funded and is obtained by dividing the plan's assets by the plan's funding liabilities. AFTAP is based on participant data, plan provisions, plan methods and assumptions, funding credit balances, and plan assets as of the plan valuation date. Some of the assumptions and methods used to determine the plan's AFTAP may be different from the assumptions and methods used to measure the plan's funded status on a GAAP basis.
In July of 2012, the Moving Ahead for Progress in the 21st Century Act ("MAP-21"), which includes pension funding stabilization provisions, was signed into law. These provisions establish an interest rate corridor which is designed to stabilize the segment rates used to determine funding requirements from the effects of interest rate volatility. In August of 2014, the Highway and Transportation Funding Act of 2014 ("HATFA") was signed into law. HATFA extends the funding relief provided by MAP-21 by delaying the interest rate corridor expansion. The funding stabilization provisions of MAP-21 and HATFA reduced PLC's minimum required defined benefit plan contributions for the 2013 and 2014 plan years. Since the funding stabilization provisions of MAP-21 and HATFA do not apply for Pension Benefit Guaranty Corporation ("PBGC") reporting purposes, PLC may also make additional contributions in future periods to avoid certain PBGC reporting triggers.
During January of 2015 (Predecessor Company), PLC made a $2.2 million contribution to the defined benefit pension plan for the 2014 plan year. During the period of February 1, 2015 to December 31, 2015 (Successor Company), PLC contributed $1.4 million to its defined benefit pension plan for the 2014 plan year. PLC has not yet determined what amount it will fund for 2016, but estimates that the amount will be between $1 million and $10 million.
PLC also sponsors an unfunded excess benefit plan, which is a nonqualified plan that provides defined pension benefits in excess of limits imposed on qualified plans by federal tax law.
F-69
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
The following table presents the benefit obligation, fair value of plan assets, funded status, and amounts not yet recognized as components of net periodic pension costs for PLC's defined benefit pension plan and unfunded excess benefit plan as of December 31, 2015 (Successor Company), January 31, 2015 (Predecessor Company), and December 31, 2014 (Predecessor Company):
|
Successor Company |
Predecessor Company |
||||||||||||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
December 31, 2014 |
|||||||||||||||||||||||||
|
Defined
Benefit Pension Plan |
Unfunded
Excess Benefit Plan |
Defined
Benefit Pension Plan |
Unfunded
Excess Benefit Plan |
Defined
Benefit Pension Plan |
Unfunded
Excess Benefit Plan |
||||||||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||||||||||
|
Accumulated benefit obligation,
end of year |
$ |
250,133 |
$ |
54,196 |
$ |
262,290 |
$ |
49,251 |
$ |
249,453 |
$ |
47,368 |
|||||||||||||||
|
Change in projected benefit obligation: |
|||||||||||||||||||||||||||
|
Projected benefit obligation at
beginning of year |
$ |
281,099 |
$ |
51,243 |
$ |
267,331 |
$ |
49,575 |
$ |
219,152 |
$ |
39,679 |
|||||||||||||||
|
Service cost |
11,220 |
1,229 |
974 |
95 |
9,411 |
954 |
|||||||||||||||||||||
|
Interest cost |
9,072 |
1,499 |
1,002 |
140 |
10,493 |
1,696 |
|||||||||||||||||||||
|
Amendments |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||
|
Actuarial loss/(gain) |
(19,235 |
) |
4,484 |
12,384 |
1,555 |
38,110 |
9,153 |
||||||||||||||||||||
|
Benefits paid |
(13,935 |
) |
(1,470 |
) |
(592 |
) |
(122 |
) |
(9,835 |
) |
(1,907 |
) |
|||||||||||||||
|
Projected benefit obligation at
end of year |
268,221 |
56,985 |
281,099 |
51,243 |
267,331 |
49,575 |
|||||||||||||||||||||
|
Change in plan assets: |
|||||||||||||||||||||||||||
|
Fair value of plan assets at
beginning of year |
201,820 |
— |
203,772 |
— |
180,173 |
— |
|||||||||||||||||||||
|
Actual return on plan assets |
6,751 |
— |
(3,525 |
) |
— |
17,921 |
— |
||||||||||||||||||||
|
Employer contributions(1) |
1,406 |
1,470 |
2,165 |
122 |
15,513 |
1,907 |
|||||||||||||||||||||
|
Benefits paid |
(13,935 |
) |
(1,470 |
) |
(592 |
) |
(122 |
) |
(9,835 |
) |
(1,907 |
) |
|||||||||||||||
|
Fair value of plan assets at
end of year |
196,042 |
— |
201,820 |
— |
203,772 |
— |
|||||||||||||||||||||
|
After reflecting FASB guidance: |
|||||||||||||||||||||||||||
|
Funded status |
(72,179 |
) |
(56,985 |
) |
(79,279 |
) |
(51,243 |
) |
(63,559 |
) |
(49,575 |
) |
|||||||||||||||
|
Amounts recognized in the balance
sheet: |
|||||||||||||||||||||||||||
|
Other liabilities |
(72,179 |
) |
(56,985 |
) |
(79,279 |
) |
(51,243 |
) |
(63,559 |
) |
(49,575 |
) |
|||||||||||||||
|
Amounts recognized in accumulated
other comprehensive income: |
|||||||||||||||||||||||||||
|
Net actuarial loss/(gain) |
(12,772 |
) |
4,484 |
96,965 |
22,401 |
80,430 |
20,983 |
||||||||||||||||||||
|
Prior service cost/(credit) |
— |
— |
(1,001 |
) |
23 |
(1,033 |
) |
24 |
|||||||||||||||||||
|
Total amounts recognized in AOCI |
$ |
(12,772 |
) |
$ |
4,484 |
$ |
95,964 |
$ |
22,424 |
$ |
79,397 |
$ |
21,007 |
||||||||||||||
(1) Employer contributions disclosed are based on the Company's fiscal filing year
As a result of the Merger on February 1, 2015, all unrecognized prior service costs or credits, actuarial gains or losses, and any remaining transition assets or obligations were not carried forward. Therefore, the amounts presented in the "Amounts recognized in accumulated other comprehensive income" in the chart above were set to zero on the Merger date.
F-70
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
Weighted-average assumptions used to determine benefit obligations as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company) are as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||||||||||
|
Defined Benefit
Pension Plan |
Unfunded Excess
Benefit Plan |
Defined Benefit
Pension Plan |
Unfunded Excess
Benefit Plan |
||||||||||||||||
|
Discount
rate |
4.29 |
% |
3.63 |
% |
3.95 |
% |
3.65 |
% |
|||||||||||
|
Rate of
compensation increase |
4.75
% prior to age 40/
3.75 % for age 40 and above |
4.75
% prior to age 40/
3.75 % for age 40 and above |
4.75
% prior to age 40/
3.75 % for age 40 and above |
4.75
% prior to age 40/
3.75 % for age 40 and above |
|||||||||||||||
The benefit obligations as of January 31 were determined based on the assumptions used in the 2014 year end disclosures with the following exception:
|
Predecessor Company |
|||||||||||
|
Defined Benefit
Pension Plan |
Unfunded Excess
Benefit Plan |
||||||||||
|
Discount rate |
3.55 |
% |
3.26 |
% |
|||||||
Weighted-average assumptions used to determine the net periodic benefit cost for the period of February 1, 2015 to December 31, 2015 (Successor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company) are as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||||||||||
|
For The Year Ended December 31, |
For The Year Ended December 31, |
||||||||||||||||||||||||||
|
2015 |
2015 |
2014 |
2013 |
2014 |
2013 |
||||||||||||||||||||||
|
Defined Benefit
Pension Plan |
Unfunded Excess
Benefit Plan |
Defined Benefit
Pension Plan |
Unfunded Excess
Benefit Plan |
||||||||||||||||||||||||
|
Discount rate |
3.95 |
% |
3.65 |
% |
4.86 |
% |
4.07 |
% |
4.30 |
% |
3.37 |
% |
|||||||||||||||
|
Rate of compensation
increase |
4.75
% prior to age 40/
3.75 % for age 40 and above |
4.75
% prior to age 40/
3.75 % for age 40 and above |
3.0 |
3.0 |
4.0 |
4.0 |
|||||||||||||||||||||
|
Expected long-term
return on plan assets |
7.5 |
N/A |
7.5 |
7.5 |
N/A |
N/A |
|||||||||||||||||||||
The assumed discount rates used to determine the benefit obligations were based on an analysis of future benefits expected to be paid under the plans. The assumed discount rate reflects the interest rate at which an amount that is invested in a portfolio of high-quality debt instruments on the measurement date would provide the future cash flows necessary to pay benefits when they come due.
To determine an appropriate long-term rate of return assumption, PLC obtained 25 year annualized returns for each of the represented asset classes. In addition, PLC received evaluations of market performance based on PLC's asset allocation as provided by external consultants. A combination of these statistical analytics provided results that PLC utilized to determine an appropriate long-term rate of return assumption.
F-71
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
Components of the net periodic benefit cost for the period of February 1, 2015 to December 31, 2015 (Successor Company), for the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the years ended December 31, 2014 and 2013 (Predecessor Company) are as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||||||||||||||||||
|
February 1, 2015 |
January 1, 2015 |
For The Year Ended December 31, |
|||||||||||||||||||||||||||||||||
|
to |
to |
||||||||||||||||||||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
2014 |
2013 |
||||||||||||||||||||||||||||||
|
Defined
Benefit Pension Plan |
Unfunded
Excess Benefit Plan |
Defined
Benefit Pension Plan |
Unfunded
Excess Benefit Plan |
Defined Benefit
Pension Plan |
Unfunded Excess
Benefit Plan |
||||||||||||||||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||||||||||||||||||
|
Service cost — benefits
earned during the period |
$ |
11,220 |
$ |
1,229 |
$ |
974 |
$ |
95 |
$ |
9,411 |
$ |
9,345 |
$ |
954 |
$ |
1,037 |
|||||||||||||||||||
|
Interest cost on
projected benefit obligation |
9,072 |
1,499 |
1,002 |
140 |
10,493 |
8,985 |
1,696 |
1,387 |
|||||||||||||||||||||||||||
|
Expected return on plan
assets |
(13,214 |
) |
— |
(1,293 |
) |
— |
(12,166 |
) |
(11,013 |
) |
— |
— |
|||||||||||||||||||||||
|
Amortization of prior
service cost/(credit) |
— |
— |
(33 |
) |
1 |
(392 |
) |
(392 |
) |
12 |
12 |
||||||||||||||||||||||||
|
Amortization of actuarial
losses(1) |
— |
— |
668 |
138 |
6,821 |
9,631 |
1,516 |
1,792 |
|||||||||||||||||||||||||||
|
Preliminary net periodic
benefit cost |
7,078 |
2,728 |
1,318 |
374 |
14,167 |
16,556 |
4,178 |
4,228 |
|||||||||||||||||||||||||||
|
Settlement/curtailment
expense(2) |
— |
— |
— |
— |
— |
— |
— |
928 |
|||||||||||||||||||||||||||
|
Total net periodic benefit
cost |
$ |
7,078 |
$ |
2,728 |
$ |
1,318 |
$ |
374 |
$ |
14,167 |
$ |
16,556 |
$ |
4,178 |
$ |
5,156 |
|||||||||||||||||||
(1) 2015 average remaining service period used is 9.38 years and 7.96 years for the defined benefit pension plan and unfunded excess benefit plan, respectively.
(2) The unfunded excess benefit plan triggered settlement accounting for the year ended December 31, 2013 since the total lump sum payments exceeded the settlement threshold of service cost plus interest cost.
PLC will not amortize any net actuarial loss/(gain) from other comprehensive income into net periodic benefit cost during 2016 since the net actuarial loss (gain) is less than 10% of the greater of the smooth value of assets or the projected benefit obligation.
Allocation of plan assets of the defined benefit pension plan by category as of December 31 are as follows:
|
Successor Company |
Predecessor
Company |
||||||||||||||
|
Asset Category |
Target
Allocation for 2016 |
2015 |
2014 |
||||||||||||
|
Cash and cash equivalents |
2 |
% |
2 |
% |
4 |
% |
|||||||||
|
Equity securities |
60 |
61 |
62 |
||||||||||||
|
Fixed income |
38 |
37 |
34 |
||||||||||||
|
Total |
100 |
% |
100 |
% |
100 |
% |
|||||||||
F-72
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
PLC's target asset allocation is designed to provide an acceptable level of risk and balance between equity assets and fixed income assets. The weighting towards equity securities is designed to help provide for an increased level of asset growth potential and liquidity.
Prior to July 1999, upon an employee's retirement, a distribution from pension plan assets was used to purchase a single premium annuity from the Company in the retiree's name. Therefore, amounts shown above as plan assets exclude assets relating to such retirees. Since July 1999, retiree obligations have been fulfilled from pension plan assets. The defined benefit pension plan has a target asset allocation of 60% domestic equities, 38% fixed income, and 2% cash. When calculating asset allocation, PLC includes reserves for pre-July 1999 retirees.
PLC's investment policy includes various guidelines and procedures designed to ensure assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans' actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.
The plan's equity assets are in a Russell 3000 index fund that invests in a domestic equity index collective trust managed by Northern Trust Corporation and in a Spartan 500 index fund managed by Fidelity. The plan's cash is invested in a collective trust managed by Northern Trust Corporation. The plan's fixed income assets are invested in a group deposit administration annuity contract with the Company.
Plan assets of the defined benefit pension plan by category as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company) are as follows:
|
Successor Company |
Predecessor Company |
||||||||||
|
Asset Category |
As of December 31, 2015 |
As of December 31, 2014 |
|||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||
|
Cash and cash equivalents |
$ |
3,121 |
$ |
7,968 |
|||||||
|
Equity securities: |
|||||||||||
|
Collective Russell 3000 equity
index fund |
72,663 |
79,660 |
|||||||||
|
Fidelity Spartan 500 index fund |
52,551 |
51,848 |
|||||||||
|
Fixed income |
67,707 |
64,296 |
|||||||||
|
Total investments |
196,042 |
203,772 |
|||||||||
|
Employer contribution receivable |
— |
2,165 |
|||||||||
|
Total |
$ |
196,042 |
$ |
205,937 |
|||||||
The valuation methodologies used to determine the fair values reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. The Plan's group deposit administration annuity contract with the Company is recorded at contract value, which, by utilizing a long-term view, PLC believes approximates fair value.
F-73
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to purchase annuities. Units in collective short-term and collective investment funds are valued at the unit value, which approximates fair value, as reported by the trustee of the collective short-term and collective investment funds on each valuation date. These methods of valuation may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2015 (Successor Company):
|
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Collective short-term investment fund |
$ |
3,121 |
$ |
— |
$ |
— |
$ |
3,121 |
|||||||||||
|
Collective investment funds: |
|||||||||||||||||||
|
Equity index funds |
52,551 |
72,663 |
— |
125,214 |
|||||||||||||||
|
Group deposit administration annuity contract |
— |
— |
67,707 |
67,707 |
|||||||||||||||
|
Total investments |
$ |
55,672 |
$ |
72,663 |
$ |
67,707 |
$ |
196,042 |
|||||||||||
The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2014 (Predecessor Company):
|
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Collective short-term investment fund |
$ |
7,968 |
$ |
— |
$ |
— |
$ |
7,968 |
|||||||||||
|
Collective investment funds: |
|||||||||||||||||||
|
Equity index funds |
51,848 |
79,660 |
— |
131,508 |
|||||||||||||||
|
Group deposit administration annuity contract |
— |
— |
64,296 |
64,296 |
|||||||||||||||
|
Total investments |
$ |
59,816 |
$ |
79,660 |
$ |
64,296 |
$ |
203,772 |
|||||||||||
For the period of February 1, 2015 to December 31, 2015 (Successor Company), there were no transfers between Level 2 and Level 3. For the year ended December 31, 2014 (Predecessor Company), $4.5 million was transferred into Level 3 from Level 2. This transfer was made to maintain an acceptable asset allocation as set by PLC's investment policy.
For the period of February 1, 2015 to December 31, 2015 (Successor Company) and for the year ended December 31, 2014 (Predecessor Company), there were no transfers between Level 1 and Level 2.
F-74
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
The following table summarizes the Plan investments measured at fair value based on NAV per share as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), respectively:
|
Name |
Fair Value |
Unfunded
Commitments |
Redemption
Frequency |
Redemption
Notice Period |
|||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Successor Company
As of December 31, 2015 |
|||||||||||||||||||
|
Collective short-term investment
fund |
$ |
3,121 |
Not Applicable |
Daily |
1 day | ||||||||||||||
|
Collective Russell 3000 index
fund(1) |
72,663 |
Not Applicable |
Daily |
1 day | |||||||||||||||
|
Fidelity Spartan 500 index fund |
52,551 |
Not Applicable |
Daily |
1 day | |||||||||||||||
|
Predecessor Company
As of December 31, 2014 |
|||||||||||||||||||
|
Collective short-term investment
fund |
$ |
7,968 |
Not Applicable |
Daily |
1 day | ||||||||||||||
|
Collective Russell 3000 index
fund(1) |
79,660 |
Not Applicable |
Daily |
1 day | |||||||||||||||
|
Fidelity Spartan 500 index fund |
51,848 |
Not Applicable |
Daily |
1 day | |||||||||||||||
(1) Non-lending collective trust that does not publish a daily NAV but tracks the Russell 3000 index and provides a daily NAV to the Plan.
The following table presents a reconciliation of the beginning and ending balances for the fair value measurements for the period of February 1, 2015 to December 31, 2015, for the period of January 1, 2015 to January 31, 2015, and for the year ended December 31, 2014, for which PLC has used significant unobservable inputs (Level 3):
|
Successor Company |
Predecessor Company |
||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
December 31, 2014 |
|||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||
|
Balance, beginning of year |
$ |
64,581 |
$ |
64,296 |
$ |
56,736 |
|||||||||
|
Interest income |
3,126 |
285 |
3,060 |
||||||||||||
|
Transfers from collective
short-term investments fund |
— |
— |
4,500 |
||||||||||||
|
Transfers to collective short-term
investments fund |
— |
— |
— |
||||||||||||
|
Balance, end of year |
$ |
67,707 |
$ |
64,581 |
$ |
64,296 |
|||||||||
F-75
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
The following table represents the Plan's Level 3 financial instrument, the valuation technique used, and the significant unobservable input and the ranges of values for that input as of December 31, 2015 (Successor Company):
|
Instrument |
Fair Value |
Principal
Valuation Technique |
Significant
Unobservable Inputs |
Range of
Significant Input Values |
|||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Group deposit administration
annuity contract |
$ |
67,707 |
Contract Value |
Contract Rate |
5.22 |
% - 5.41% |
|||||||||||||
Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported.
Estimated future benefit payments under the defined benefit pension plan and unfunded excess benefit plan are as follows:
| Years |
Defined Benefit
Pension Plan |
Unfunded Excess
Benefit Plan |
|||||||||
| (Dollars In Thousands) | |||||||||||
| 2016 |
$ |
16,947 |
$ |
5,470 |
|||||||
| 2017 |
18,019 |
7,682 |
|||||||||
| 2018 |
17,723 |
5,070 |
|||||||||
| 2019 |
18,517 |
9,097 |
|||||||||
| 2020 |
19,532 |
4,962 |
|||||||||
| 2021-2025 |
102,176 |
18,888 |
|||||||||
Other Postretirement Benefits
In addition to pension benefits, PLC provides limited healthcare benefits to eligible retired employees until age 65. This postretirement benefit is provided by an unfunded plan. As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), the accumulated postretirement benefit obligation associated with these benefits was $0.1 million and $0.2 million, respectively.
The change in the benefit obligation for the retiree medical plan is as follows:
|
Successor Company |
Predecessor Company |
||||||||||
|
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||
|
Change in Benefit Obligation |
|||||||||||
|
Benefit obligation, beginning of year |
$ |
247 |
$ |
447 |
|||||||
|
Service cost |
1 |
2 |
|||||||||
|
Interest cost |
2 |
4 |
|||||||||
|
Actuarial (gain)/loss |
(113 |
) |
30 |
||||||||
|
Plan participant contributions |
141 |
254 |
|||||||||
|
Benefits paid |
(141 |
) |
(490 |
) |
|||||||
|
Benefit obligation, end of year |
$ |
137 |
$ |
247 |
|||||||
F-76
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
For the retiree medical plan, PLC's discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2015 (Successor Company) is 1.54% and 1.27%, respectively.
For a closed group of retirees over age 65, PLC provides a prescription drug benefit. As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), PLC's liability related to this benefit was less than $0.1 million. PLC's obligation is not materially affected by a 1% change in the healthcare cost trend assumptions used in the calculation of the obligation.
PLC also offers life insurance benefits for retirees from $10,000 up to a maximum of $75,000 which are provided through the payment of premiums under a group life insurance policy. This plan is partially funded at a maximum of $50,000 face amount of insurance. The accumulated postretirement benefit obligation associated with these benefits is as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||
|
As of December 31, 2015 |
As of January 31, 2015 |
As of December 31, 2014 |
|||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||
|
Change in Benefit Obligation |
|||||||||||||||
|
Benefit obligation, beginning
of year |
$ |
9,781 |
$ |
9,288 |
$ |
8,653 |
|||||||||
|
Service cost |
138 |
12 |
97 |
||||||||||||
|
Interest cost |
336 |
39 |
416 |
||||||||||||
|
Actuarial (gain)/loss |
(894 |
) |
511 |
694 |
|||||||||||
|
Benefits paid |
(298 |
) |
(69 |
) |
(572 |
) |
|||||||||
|
Benefit obligation, end of year |
$ |
9,063 |
$ |
9,781 |
$ |
9,288 |
|||||||||
For the postretirement life insurance plan, PLC's discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2015 (Successor Company) is 4.6% and 4.21%, respectively. PLC's discount rate assumption used to determine benefit obligation as of January 1, 2015 (Predecessor Company) is 3.79%.
PLC's expected long-term rate of return assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2015 (Successor Company) is 2.75% and 3.14%, respectively. To determine an appropriate long-term rate of return assumption, PLC utilized 25 year average and annualized return results on the Barclay's short treasury index.
Investments of PLC's group life insurance plan are held by Wells Fargo Bank, N.A. Plan assets held by the Custodian are invested in a money market fund.
The fair value of each major category of plan assets for PLC's postretirement life insurance plan is as follows:
|
Successor Company |
Predecessor Company |
||||||||||
|
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||
|
Category of Investment |
|||||||||||
|
Money market fund |
$ |
5,653 |
$ |
5,925 |
|||||||
F-77
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
Investments are stated at fair value and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The money market funds are valued based on historical cost, which represents fair value, at year end. This method of valuation may produce a fair value calculation that may not be reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2015 (Successor Company):
|
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Money market fund |
$ |
5,653 |
$ |
— |
$ |
— |
$ |
5,653 |
|||||||||||
The following table sets forth by level, within the fair value hierarchy, the Plan's assets at fair value as of December 31, 2014 (Predecessor Company):
|
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Money market fund |
$ |
5,925 |
$ |
— |
$ |
— |
$ |
5,925 |
|||||||||||
For the year ended December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), there were no transfers between levels.
Investments are exposed to various risks, such as interest rate and credit risks. Due to the level of risk associated with investments and the level of uncertainty related to credit risks, it is at least reasonably possible that changes in risk in the near term could materially affect the amounts reported.
401( k ) PLAN
PLC sponsors a 401(k) Plan which covers substantially all employees. Employee contributions are made on a before-tax basis as provided by Section 401(k) of the Internal Revenue Code or as after-tax "Roth" contributions. Employees may contribute up to 25% of their eligible annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service ($18,000 for 2015). The Plan also provides a "catch-up" contribution provision which permits eligible participants (age 50 or over at the end of the calendar year), to make additional contributions that exceed the regular annual contribution limits up to a limit periodically set by the Internal Revenue Service ($6,000 for 2015). PLC matches the sum of all employee contributions dollar for dollar up to a maximum of 4% of an employee's pay per year per person. All matching contributions vest immediately.
Prior to 2009, employee contributions to PLC's 401(k) Plan were matched through use of an ESOP established by PLC. Beginning in 2009, PLC adopted a cash match for employee contributions to the 401(k) plan. For the period of February 1, 2015 to December 31, 2015 (Successor Company) and for the year ended December 31, 2014 (Predecessor Company), PLC recorded an expense of $6.3 million and $6.3 million, respectively.
Effective as of January 1, 2005, PLC adopted a supplemental matching contribution program, which is a nonqualified plan that provides supplemental matching contributions in excess of the limits imposed on qualified defined contribution plans by federal tax law. The first allocations under this program were made in early 2006, with respect to the 2005 plan year. The expense recorded by PLC for this employee benefit was $0.5 million, $0.4 million, and $0.5 million, respectively, in 2015, 2014, and 2013.
F-78
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. EMPLOYEE BENEFIT PLANS — (Continued)
Prior to the Merger date of February 1, 2015, PLC's outstanding and publicly traded common stock was a component of the investment options allowed to participants in the 401(k) Plan.
DEFERRED COMPENSATION PLAN
Prior to the Merger, PLC had established deferred compensation plans for directors, officers, and others. Compensation deferred was credited to the participants in cash, mutual funds, common stock equivalents, or a combination thereof. PLC, from time to time, reissued treasury shares or bought in the open market shares of common stock to fulfill its obligation under the plans. As of December 31, 2014 (Predecessor Company), the plans had 1,109,595 common stock equivalents credited to participants. PLC's obligations related to its deferred compensation plans are reported in other liabilities, unless they are to be settled in shares of its common stock, in which case they are reported as a component of shareowner's equity. On February 1, 2015, PLC became a wholly owned subsidiary of Dai-ichi Life and PLC stock ceased to be publicly traded. Thus, any common stock equivalents within the plans converted into rights to receive the merger consideration of $70.00 per common stock equivalent.
As of February 1, 2015, PLC has continued the deferred compensation plans for officers and others. Compensation deferred was credited to the participants in cash, mutual funds, or a combination thereof. As of December 31, 2015 (Successor Company), PLC's obligations related to its deferred compensation plans are reported in other liabilities.
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes the changes in the accumulated balances for each component of AOCI as of December 31, 2015 (Successor Company), January 31, 2015 (Predecessor Company), December 31, 2014 (Predecessor Company), and December 31, 2013 (Predecessor Company).
Changes in Accumulated Other Comprehensive Income (Loss) by Component
|
Successor Company |
Unrealized
Gains and Losses on Investments(2) |
Accumulated
Gain and Loss Derivatives |
Total
Accumulated Other Comprehensive Income (Loss) |
||||||||||||
|
(Dollars In Thousands, Net of Tax) |
|||||||||||||||
|
Beginning Balance, February 1, 2015 |
$ |
— |
$ |
— |
$ |
— |
|||||||||
|
Other comprehensive income (loss) before
reclassifications |
(1,263,367 |
) |
(86 |
) |
(1,263,453 |
) |
|||||||||
|
Other comprehensive income (loss) relating to other-
than-temporary impaired investments for which a portion has been recognized in earnings |
(393 |
) |
— |
(393 |
) |
||||||||||
|
Amounts reclassified from accumulated other
comprehensive income (loss)(1) |
17,369 |
86 |
17,455 |
||||||||||||
|
Net current-period other comprehensive income (loss) |
(1,246,391 |
) |
— |
(1,246,391 |
) |
||||||||||
|
Ending Balance, December 31, 2015 |
$ |
(1,246,391 |
) |
$ |
— |
$ |
(1,246,391 |
) |
|||||||
(1) See Reclassification table below for details.
(2) As of December 31, 2015 (Successor Company), net unrealized losses reported in AOCI were offset by $623.0 million due to the impact those net unrealized losses would have had on certain of the Company's insurance assets and liabilities if the net unrealized losses had been recognized in net income.
F-79
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)
Changes in Accumulated Other Comprehensive Income (Loss) by Component
|
Predecessor Company |
Unrealized
Gains and Losses on Investments(2) |
Accumulated
Gain and Loss Derivatives |
Total
Accumulated Other Comprehensive Income (Loss) |
||||||||||||
|
(Dollars In Thousands, Net of Tax) |
|||||||||||||||
|
Beginning Balance, December 31, 2014 |
$ |
1,483,293 |
$ |
(82 |
) |
$ |
1,483,211 |
||||||||
|
Other comprehensive income (loss) before
reclassifications |
482,143 |
9 |
482,152 |
||||||||||||
|
Other comprehensive income (loss) relating to other-
than-temporary impaired investments for which a portion has been recognized in earnings |
(243 |
) |
— |
(243 |
) |
||||||||||
|
Amounts reclassified from accumulated other
comprehensive income (loss)(1) |
(4,166 |
) |
23 |
(4,143 |
) |
||||||||||
|
Net current-period other comprehensive income (loss) |
477,734 |
32 |
477,766 |
||||||||||||
|
Ending Balance January 31, 2015 |
$ |
1,961,027 |
$ |
(50 |
) |
$ |
1,960,977 |
||||||||
(1) See Reclassification table below for details.
(2) As of January 31, 2015 and December 31, 2014, net unrealized losses reported in AOCI were offset by $(492.6) million and $(504.4) million due to the impact those net unrealized losses would have had on certain of the Company's insurance assets and liabilities if the net unrealized losses had been recognized in net income.
Changes in Accumulated Other Comprehensive Income (Loss) by Component
|
Unrealized
Gains and Losses on Investments(2) |
Accumulated
Gain and Loss Derivatives |
Total
Accumulated Other Comprehensive Income (Loss) |
|||||||||||||
|
(Dollars In Thousands, Net of Tax) |
|||||||||||||||
|
Beginning Balance, December 31, 2013 |
$ |
540,201 |
$ |
(1,235 |
) |
$ |
538,966 |
||||||||
|
Other comprehensive income (loss) before
reclassifications |
983,985 |
(2 |
) |
983,983 |
|||||||||||
|
Other comprehensive income (loss) relating to other-
than-temporary impaired investments for which a portion has been recognized in earnings |
3,498 |
— |
3,498 |
||||||||||||
|
Amounts reclassified from accumulated other
comprehensive income (loss)(1) |
(44,391 |
) |
1,155 |
(43,236 |
) |
||||||||||
|
Net current-period other comprehensive income (loss) |
943,092 |
1,153 |
944,245 |
||||||||||||
|
Ending Balance, December 31, 2014 |
$ |
1,483,293 |
$ |
(82 |
) |
$ |
1,483,211 |
||||||||
(1) See Reclassification table below for details.
(2) As of December 31, 2014 and 2013, net unrealized losses reported in AOCI were offset by $(504.4) million and $(189.8) million due to the impact those net unrealized losses would have had on certain of the Company's insurance assets and liabilities if the net unrealized losses had been recognized in net income.
F-80
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)
Changes in Accumulated Other Comprehensive Income (Loss) by Component
|
Unrealized
Gains and Losses on Investments(2) |
Accumulated
Gain and Loss Derivatives |
Total
Accumulated Other Comprehensive Income (Loss) |
|||||||||||||
|
(Dollars In Thousands, Net of Tax) |
|||||||||||||||
|
Beginning Balance, December 31, 2012 |
$ |
1,814,620 |
$ |
(3,496 |
) |
$ |
1,811,124 |
||||||||
|
Other comprehensive income (loss) before
reclassifications |
(1,250,416 |
) |
734 |
(1,249,682 |
) |
||||||||||
|
Other comprehensive income (loss) relating to other-
than-temporary impaired investments for which a portion has been recognized in earnings |
4,591 |
— |
4,591 |
||||||||||||
|
Amounts reclassified from accumulated other
comprehensive income (loss)(1) |
(28,594 |
) |
1,527 |
(27,067 |
) |
||||||||||
|
Net current-period other comprehensive income (loss) |
(1,274,419 |
) |
2,261 |
(1,272,158 |
) |
||||||||||
|
Ending Balance, December 31, 2013 |
$ |
540,201 |
$ |
(1,235 |
) |
$ |
538,966 |
||||||||
(1) See Reclassification table below for details.
(2) As of December 31, 2012 and 2013, net unrealized losses reported in AOCI were offset by $(204.8) million and $(189.8) million due to the impact those net unrealized losses would have had on certain of the Company's insurance assets and liabilities if the net unrealized losses had been recognized in net income.
The following table summarizes the reclassifications amounts out of AOCI for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company).
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
|
Amount
Reclassified from Accumulated Other Comprehensive Income (Loss) |
Affected Line Item in the Consolidated
Statements of Income |
||||||||||
|
(Dollars In Thousands) |
|||||||||||
|
Successor Company |
|||||||||||
|
February 1, 2015 to December 31, 2015 |
|||||||||||
|
Gains and losses on derivative instruments |
|||||||||||
|
Benefits and settlement expenses, net of |
|||||||||||
|
Net settlement (expense)/benefit(1) |
$ |
(131 |
) |
reinsurance ceded |
|||||||
|
(131 |
) |
Total before tax |
|||||||||
|
45 |
Tax (expense) or benefit |
||||||||||
|
$ |
(86 |
) |
Net of tax |
||||||||
F-81
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)
|
Amount
Reclassified from Accumulated Other Comprehensive Income (Loss) |
Affected Line Item in the Consolidated
Statements of Income |
||||||||||
|
(Dollars In Thousands) |
|||||||||||
|
Unrealized gains and losses on
available-for-sale securities |
|||||||||||
|
Realized investment gains (losses): |
|||||||||||
|
Net investment gains/losses |
$ |
271 |
All other investments |
||||||||
|
Impairments recognized in earnings |
(26,992 |
) |
Net impairment losses recognized
in earnings |
||||||||
|
(26,721 |
) |
Total before tax |
|||||||||
|
9,352 |
Tax (expense) or benefit |
||||||||||
|
$ |
(17,369 |
) |
Net of tax |
||||||||
(1) See Note 23, Derivative Financial Instruments for additional information.
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
|
Amount
Reclassified from Accumulated Other Comprehensive Income (Loss) |
Affected Line Item in the Consolidated
Statements of Income |
||||||||||
|
(Dollars In Thousands) |
|||||||||||
|
Predecessor Company |
|||||||||||
|
January 1, 2015 to January 31, 2015 |
|||||||||||
|
Gains and losses on derivative instruments |
|||||||||||
|
Benefits and settlement expenses, net of |
|||||||||||
|
Net settlement (expense)/benefit(1) |
$ |
(36 |
) |
reinsurance ceded |
|||||||
|
(36 |
) |
Total before tax |
|||||||||
|
13 |
Tax (expense) or benefit |
||||||||||
|
$ |
(23 |
) |
Net of tax |
||||||||
|
Unrealized gains and losses on
available-for-sale securities |
|||||||||||
|
Realized investment gains (losses): |
|||||||||||
|
Net investment gains/losses |
$ |
6,891 |
All other investments |
||||||||
|
Impairments recognized in earnings |
(481 |
) |
Net impairment losses recognized
in earnings |
||||||||
|
6,410 |
Total before tax |
||||||||||
|
(2,244 |
) |
Tax (expense) or benefit |
|||||||||
|
$ |
4,166 |
Net of tax |
|||||||||
(1) See Note 23, Derivative Financial Instruments for additional information.
F-82
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
|
Amount
Reclassified from Accumulated Other Comprehensive Income (Loss) |
Affected Line Item in the Consolidated
Statements of Income |
||||||||||
|
(Dollars In Thousands) |
|||||||||||
|
Predecessor Company |
|||||||||||
|
For The Year Ended December 31, 2014 |
|||||||||||
|
Gains and losses on derivative instruments |
|||||||||||
|
Benefits and settlement expenses, net of |
|||||||||||
|
Net settlement (expense)/benefit(1) |
$ |
(1,777 |
) |
reinsurance ceded |
|||||||
|
(1,777 |
) |
Total before tax |
|||||||||
|
622 |
Tax (expense) or benefit |
||||||||||
|
$ |
(1,155 |
) |
Net of tax |
||||||||
|
Unrealized gains and losses on
available-for-sale securities |
|||||||||||
|
Realized investment gains (losses): |
|||||||||||
|
Net investment gains/losses |
$ |
75,569 |
All other investments |
||||||||
|
Impairments recognized in earnings |
(7,275 |
) |
Net impairment losses recognized
in earnings |
||||||||
|
68,294 |
Total before tax |
||||||||||
|
(23,903 |
) |
Tax (expense) or benefit |
|||||||||
|
$ |
44,391 |
Net of tax |
|||||||||
(1) See Note 23, Derivative Financial Instruments for additional information.
Reclassifications Out of Accumulated Other Comprehensive Income (Loss)
|
Amount
Reclassified from Accumulated Other Comprehensive Income (Loss) |
Affected Line Item in the Consolidated
Statements of Income |
||||||||||
|
(Dollars In Thousands) |
|||||||||||
|
Predecessor Company |
|||||||||||
|
For The Year Ended December 31, 2013 |
|||||||||||
|
Gains and losses on derivative instruments |
|||||||||||
|
Benefits and settlement expenses, net of |
|||||||||||
|
Net settlement (expense)/benefit(1) |
$ |
(2,349 |
) |
reinsurance ceded |
|||||||
|
(2,349 |
) |
Total before tax |
|||||||||
|
822 |
Tax (expense) or benefit |
||||||||||
|
$ |
(1,527 |
) |
Net of tax |
||||||||
F-83
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)
|
Amount
Reclassified from Accumulated Other Comprehensive Income (Loss) |
Affected Line Item in the Consolidated
Statements of Income |
||||||||||
|
(Dollars In Thousands) |
|||||||||||
|
Unrealized gains and losses on
available-for-sale securities |
|||||||||||
|
Realized investment gains (losses): |
|||||||||||
|
Net investment gains/losses |
$ |
66,437 |
All other investments |
||||||||
|
Impairments recognized in earnings |
(22,447 |
) |
Net impairment losses recognized
in earnings |
||||||||
|
43,990 |
Total before tax |
||||||||||
|
(15,396 |
) |
Tax (expense) or benefit |
|||||||||
|
$ |
28,594 |
Net of tax |
|||||||||
(1) See Note 23, Derivative Financial Instruments for additional information.
18. INCOME TAXES
The Company's effective income tax rate related to continuing operations varied from the maximum federal income tax rate as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
Statutory federal income tax rate applied
to pre-tax income |
35.0 |
% |
35.0 |
% |
35.0 |
% |
35.0 |
% |
|||||||||||
|
State income taxes |
1.4 |
0.5 |
0.5 |
0.4 |
|||||||||||||||
|
Investment income not subject to tax |
(6.8 |
) |
(2.8 |
) |
(2.7 |
) |
(4.4 |
) |
|||||||||||
|
Uncertain tax positions |
— |
— |
0.5 |
0.1 |
|||||||||||||||
|
Other |
(0.3 |
) |
0.7 |
0.1 |
(0.1 |
) |
|||||||||||||
|
29.3 |
% |
33.4 |
% |
33.4 |
% |
31.0 |
% |
||||||||||||
The annual provision for federal income tax in these financial statements differs from the annual amounts of income tax expense reported in the respective income tax returns. Certain significant revenues and expenses are appropriately reported in different years with respect to the financial statements and the tax returns.
F-84
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. INCOME TAXES — (Continued)
The components of the Company's income tax are as follows:
The components of the Company's net deferred income tax liability are as follows:
|
Successor Company |
Predecessor Company |
||||||||||
|
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||
|
Deferred income tax assets: |
|||||||||||
|
Premium receivables and policy liabilities |
$ |
— |
$ |
154,720 |
|||||||
|
Loss and credit carryforwards |
115,667 |
35,642 |
|||||||||
|
Deferred compensation |
108,416 |
104,117 |
|||||||||
|
Invested assets (other than unrealized
gains) |
— |
2,960 |
|||||||||
|
Deferred policy acquisition costs |
267,542 |
— |
|||||||||
|
Premium on non-recourse funding
obligations |
13,872 |
— |
|||||||||
|
Net unrealized loss on investments |
671,176 |
— |
|||||||||
|
Other |
6,605 |
— |
|||||||||
|
Valuation allowance |
(3,466 |
) |
(791 |
) |
|||||||
|
1,179,812 |
296,648 |
||||||||||
|
Deferred income tax liabilities: |
|||||||||||
|
Premium receivables and policy liabilities |
202,753 |
— |
|||||||||
|
VOBA and other intangibles |
632,176 |
— |
|||||||||
|
DAC and VOBA |
— |
1,073,499 |
|||||||||
|
Invested assets (other than unrealized
gains (losses)) |
1,560,063 |
— |
|||||||||
|
Net unrealized gains (losses) on
investments |
— |
798,529 |
|||||||||
|
Other |
— |
36,484 |
|||||||||
|
2,394,992 |
1,908,512 |
||||||||||
|
Net deferred income tax liability |
$ |
(1,215,180 |
) |
$ |
(1,611,864 |
) |
|||||
F-85
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. INCOME TAXES — (Continued)
The Company's income tax returns, except for MONY which files separately, are included in PLC's consolidated U.S. income tax return.
The deferred tax assets reported above include certain deferred tax assets related to nonqualified deferred compensation and other employee benefit liabilities. These liabilities were assumed by AXA and they were not acquired by the Company in connection with the acquisition of MONY. The future tax deductions stemming from these liabilities will be claimed by the Company on MONY's tax returns in its post-acquisition periods. These deferred tax assets have been estimated as of the MONY Acquisition date (and through the December 31, 2015 reporting date) based on all available information. However, it is possible that these estimates may be adjusted in future reporting periods based on actuarial changes to the projected future payments associated with these liabilities. Any such adjustments will be recognized by the Company as an adjustment to income tax expense during the period in which they are realized.
In management's judgment, the gross deferred income tax asset as of December 31, 2015 (Successor Company), will more likely than not be fully realized. The Company has recognized a valuation allowance of $5.3 million and $1.2 million as of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), respectively, related to state-based loss carryforwards that it has determined are more likely than not to expire unutilized. This resulting unfavorable change of $4.1 million, before federal income taxes, increased state income tax expense in 2015 by the same amount.
In addition, included in the deferred income tax assets above is approximately $4.5 million in state net operating loss carryforwards attributable to certain jurisdictions, which are available to offset future taxable income in the respective state jurisdictions, expiring between 2015 and 2035.
As of December 31, 2015 (Successor Company) and December 31, 2014 (Predecessor Company), some of the Company's fixed maturities were reported at an unrealized loss. If the Company were to realize a tax-basis net capital loss for a year, then such loss could not be deducted against that year's other taxable income. However, such a loss could be carried back and forward against any prior year or future year tax-basis net capital gains. Therefore, the Company has relied upon a prudent and feasible tax-planning strategy regarding its fixed maturities that were reported at an unrealized loss. The Company has the ability and the intent to either hold such fixed maturities to maturity, thereby avoiding a realized loss, or to generate an offsetting realized gain from unrealized gain fixed maturities if such unrealized loss fixed maturities are sold at a loss prior to maturity.
F-86
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. INCOME TAXES — (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
As of December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Balance, beginning of period |
$ |
105,850 |
$ |
168,076 |
$ |
85,846 |
$ |
74,335 |
|||||||||||
|
Additions for tax positions of the
current year |
2,213 |
(5,010 |
) |
57,392 |
7,464 |
||||||||||||||
|
Additions for tax positions of
prior years |
1,812 |
1,149 |
34,371 |
6,787 |
|||||||||||||||
|
Reductions of tax positions of
prior years: |
|||||||||||||||||||
|
Changes in judgment |
(644 |
) |
(58,365 |
) |
(9,533 |
) |
(2,740 |
) |
|||||||||||
|
Settlements during the period |
(100,294 |
) |
— |
— |
— |
||||||||||||||
|
Lapses of applicable statute
of limitations |
— |
— |
— |
— |
|||||||||||||||
|
Balance, end of period |
$ |
8,937 |
$ |
105,850 |
$ |
168,076 |
$ |
85,846 |
|||||||||||
Included in the end of period balance above, for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and as of December 31, 2014 and 2013 (Predecessor Company), are approximately $1.4 million, $94.9 million, $157.3 million, and $78.5 million of unrecognized tax benefits, respectively, for which the ultimate deductibility is certain but for which there is uncertainty about the timing of such deductions. Other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective income tax rate but would accelerate to an earlier period the payment of cash to the taxing authority. The total amount of unrecognized tax benefits, if recognized, that would affect the effective income tax rate is approximately $7.5 million, $11.0 million, $10.7 million, and $7.4 million for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and as of December 31, 2014 and 2013 (Predecessor Company), respectively.
Any accrued interest related to the unrecognized tax benefits and other accrued income taxes have been included in income tax expense. There were no amounts included in any period ending in 2015, 2014 or 2013, as the parent company maintains responsibility for the interest on unrecognized tax benefits. The Company has no accrued interest associated with unrecognized tax benefits as of any balance sheet date ending in 2015, 2014, or 2013.
The Company believes that in the next 12 months none of these unrecognized tax benefits will be significantly increased or reduced.
In June 2012, the IRS proposed favorable and unfavorable adjustments to the Company's 2003 through 2007 reported taxable incomes. The Company protested certain unfavorable adjustments and sought resolution at the IRS' Appeals Division. In October 2015, Appeals accepted the Company's earlier proposed settlement offer. In September 2015, the IRS proposed favorable and unfavorable adjustments to the Company's 2008 through 2011 reported taxable income. The Company agreed to these adjustments. The resulting net adjustment to the Company's current income taxes for the years 2003 through 2011 will not materially affect the Company or its effective tax rate.
F-87
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. INCOME TAXES — (Continued)
The Company is currently under audit by the IRS for the years 2012 and 2013. As of December 31, 2015, no materially adverse adjustments to reported taxable income have been proposed.
In general, the Company is no longer subject to income tax examinations by taxing authorities for tax years that began before 2012. Nevertheless, certain of these pre-2012 years have pending U.S. tax refunds. Due to their size, these refunds are being reviewed by Congress' Joint Committee on Taxation. Furthermore, due to the afore-mentioned IRS adjustments to the Company's pre-2012 taxable income, the Company is amending certain of its 2003 through 2011 state income tax returns. Such amendments will cause such years to remain open, pending the states' acceptances of the returns. At this time, the Company believes that the Joint Committee's review of its U.S. tax refunds and the states' acceptance of its amending returns will be completed this year. The underlying statutes of limitations are expected to close in due course on or before June 30, 2017.
19. SUPPLEMENTAL CASH FLOW INFORMATION
The following table sets forth supplemental cash flow information:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Cash paid / (received) during the year: |
|||||||||||||||||||
|
Interest expense |
$ |
98,232 |
$ |
21,567 |
$ |
117,776 |
$ |
110,301 |
|||||||||||
|
Income taxes |
(75,869 |
) |
(1 |
) |
159,724 |
(54,370 |
) |
||||||||||||
20. RELATED PARTY TRANSACTIONS
The Company leases furnished office space and computers to affiliates. Lease revenues were $4.6 million, $0.4 million, $4.9 million, and $4.9 million for the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company), respectively. The Company purchases data processing, legal, investment, and management services from affiliates. The costs of such services were $214.8 million, $19.0 million, $206.3 million, and $170.9 million for the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company), respectively. In addition, the Company has an intercompany payable with affiliates as of December 31, 2015 and 2014 of $22.5 million and $19.5 million, respectively. There was no intercompany receivable with affiliates balance as of December 31, 2015 or December 31, 2014.
Certain corporations with which PLC's directors were affiliated paid us premiums and policy fees or other amounts for various types of insurance and investment products, interest on bonds we own and commissions on securities underwritings in which our affiliates participated. Such amounts totaled $45.3 million, $2.6 million, $33.4 million, and $40.0 million for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company), respectively. The Company and/or PLC paid commissions, interest on debt and investment products, and fees to these same corporations totaling $10.0 million, $0.8 million, $16.5 million, and $16.4 million for the period of February 1, 2015 to December 31, 2015 (Successor Company) and the
F-88
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. RELATED PARTY TRANSACTIONS — (Continued)
period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company), respectively.
Prior to the Merger, PLC and the Company had no related party transactions with Dai-ichi Life.
PLC has guaranteed the Company's obligations for borrowings or letters of credit under the revolving line of credit arrangement to which PLC is also a party. PLC has also issued guarantees, entered into support agreements and/or assumed a duty to indemnify its indirect wholly owned captive insurance companies in certain respects. In addition, as of December 31, 2015, PLC was the sole holder of the $800 million balance of outstanding surplus notes issued by one such wholly owned captive insurance company, Golden Gate.
As of February 1, 2000, PLC guaranteed the obligations of the Company under a synthetic lease entered into by the Company, as lessee, with a non-affiliated third party, as lessor. Under the terms of the synthetic lease, financing of $75 million was available to the Company for construction of an office building and parking deck which was completed on February 1, 2000. The synthetic lease was amended and restated as of December 19, 2013, wherein as of December 31, 2015, PLC continued to guarantee the obligations of the Company thereunder.
The Company has agreements with certain of its subsidiaries under which it provides administrative services for a fee. These services include but are not limited to accounting, financial reporting, compliance, policy administration, reserve computations, and projections. In addition, the Company and its subsidiaries pay PLC for investment, legal and data processing services.
The Company and/or certain of its affiliates have reinsurance agreements in place with companies owned by PLC. These agreements relate to certain portions of our service contract business which is included within the Asset Protection segment. These transactions are eliminated at the PLC consolidated level.
The Company has reinsured GMWB and GMDB riders related to our variable annuity contracts to Shades Creek, a wholly owned insurance subsidiary of PLC. Also during 2012, PLC entered into an intercompany capital support agreement with Shades Creek which provides through a guarantee that PLC will contribute assets or purchase surplus notes (or cause an affiliate or third party to contribute assets or purchase surplus notes) in amounts necessary for Shades Creek's regulatory capital levels to equal or exceed minimum thresholds as defined by the agreement. Under this support agreement, the Company issued a $55 million Letter of Credit during 2014. As of December 31, 2015 (Successor Company), the $55 million Letter of Credit executed by the Company was no longer issued and outstanding. Also in accordance with this agreement, $120 million of additional capital was provided to Shades Creek by PLC through cash capital contributions during the period of February 1, 2015 to December 31, 2015 (Successor Company). As of December 31, 2015 (Successor Company), Shades Creek maintained capital levels in excess of the required minimum thresholds. The maximum potential future payment amount which could be required under the capital support agreement will be dependent on numerous factors, including the performance of equity markets, the level of interest rates, performance of associated hedges, and related policyholder behavior.
As of December 31, 2012, Shades Creek was a direct wholly owned insurance subsidiary of the Company. On April 1, 2013, the Company paid to its parent, PLC, a dividend that consisted of all outstanding stock of Shades Creek. The Company will continue to reinsure GMWB and GMDB riders to Shades Creek, which include a funds withheld account that is considered a derivative. For more information related to the derivative, refer to Note 22, Fair Value of Financial Instruments and Note 23, Derivative Financial Instruments . For cash flow purposes, portions of the dividend were treated as non-cash transactions.
F-89
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. RELATED PARTY TRANSACTIONS — (Continued)
The following balances from Shades Creek's balance sheet as of March 31, 2013 with the exception of cash, were excluded from the Company's cash flow statement for the year ended December 31, 2013 (Predecessor Company):
|
As of March 31, 2013 |
|||||||
|
(Dollars In Thousands) |
|||||||
|
Assets |
|||||||
|
Other long-term investments |
$ |
34,093 |
|||||
|
Short-term investments |
745 |
||||||
|
Total investments |
34,838 |
||||||
|
Cash |
44,963 |
||||||
|
Accounts and premiums receivable |
16,036 |
||||||
|
Deferred policy acquisition cost |
123,847 |
||||||
|
Other assets |
48,953 |
||||||
|
Total assets |
$ |
268,637 |
|||||
|
Liabilities |
|||||||
|
Future policy benefits and claims |
$ |
1,626 |
|||||
|
Other liabilities |
178,321 |
||||||
|
Deferred income taxes |
2,459 |
||||||
|
Total liabilities |
182,406 |
||||||
|
Total equity |
86,231 |
||||||
|
Total liabilities and equity |
$ |
268,637 |
|||||
21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS
The Company's insurance subsidiaries prepare statutory financial statements for regulatory purposes in accordance with accounting practices prescribed by the NAIC and the applicable state insurance department laws and regulations. These financial statements vary materially from GAAP. Statutory accounting practices include publications of the NAIC, state laws, regulations, general administrative rules as well as certain permitted accounting practices granted by the respective state insurance department. Generally, the most significant differences are that statutory financial statements do not reflect 1) deferred acquisition costs and VOBA, 2) benefit liabilities that are calculated using Company estimates of expected mortality, interest, and withdrawals, 3) deferred income taxes that are not subject to statutory limits, 4) recognition of realized gains and losses on the sale of securities in the period they are sold, and 5) fixed maturities recorded at fair values, but instead at amortized cost.
Statutory net income for the Company was $440.0 million, $554.2 million, and $165.5 million for the year ended December 31, 2015, 2014 and 2013, respectively. Statutory capital and surplus for the Company was $3.8 billion and $3.5 billion as of December 31, 2015 and 2014, respectively.
The Company's insurance subsidiaries are subject to various state statutory and regulatory restrictions on the insurance subsidiaries' ability to pay dividends to Protective Life Corporation. In general, dividends up to specified levels are considered ordinary and may be paid thirty days after written notice to the insurance commissioner of the state of domicile unless such commissioner objects to the dividend prior to the expiration of such period. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as ordinary dividends to the Company from our insurance subsidiaries in
F-90
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS — (Continued)
2016 is approximately $165.6 million. Additionally, as of December 31, 2015, approximately $960.2 million of consolidated shareowner's equity, excluding net unrealized gains on investments, represented restricted net assets of the Company's insurance subsidiaries needed to maintain the minimum capital required by the insurance subsidiaries' respective state insurance departments.
State insurance regulators and the National Association of Insurance Commissioners ("NAIC") have adopted risk-based capital ("RBC") requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile.
A company's risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense and reserve items. Regulators can then measure the adequacy of a company's statutory surplus by comparing it to the RBC. Under specific RBC requirements, regulatory compliance is determined by the ratio of a company's total adjusted capital, as defined by the insurance regulators, to its company action level of RBC (known as the RBC ratio), also as defined by insurance regulators. As of December 31, 2015, the Company's total adjusted capital and company action level RBC were approximately $4.1 billion and $720.6 million, respectively, providing an RBC ratio of approximately 562%.
Additionally, the Company has certain assets that are on deposit with state regulatory authorities and restricted from use. As of December 31, 2015, the Company's insurance subsidiaries had on deposit with regulatory authorities, fixed maturity and short-term investments with a fair value of approximately $43.8 million.
The states of domicile of the Company's insurance subsidiaries have adopted prescribed accounting practices that differ from the required accounting outlined in NAIC Statutory Accounting Principles ("SAP"). The insurance subsidiaries also have certain accounting practices permitted by the states of domicile that differ from those found in NAIC SAP.
Certain prescribed and permitted practices impact the statutory surplus of the Company. These practices include the non-admission of goodwill as an asset for statutory reporting and the reporting of Bank Owned Life Insurance ("BOLI") separate account amounts at book value rather than at fair value.
The favorable (unfavorable) effects of the Company's statutory surplus, compared to NAIC statutory surplus, from the use of these prescribed and permitted practices were as follows:
|
As of December 31, |
|||||||||||
|
2015 |
2014 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Non-admission of goodwill |
$ |
(295 |
) |
$ |
(310 |
) |
|||||
|
Total (net) |
$ |
(295 |
) |
$ |
(310 |
) |
|||||
The Company also has certain prescribed and permitted practices which are applied at the subsidiary level and do not have a direct impact on the statutory surplus of the Company. These practices include permission to follow the actuarial guidelines of the domiciliary state of the ceding insurer for certain captive reinsurers, accounting for the face amount of all issued and outstanding letters of credit, and a note issued by an affiliate as an asset in the statutory financial statements of certain wholly owned subsidiaries that are considered "Special Purpose Financial Captives", and a reserve difference related to a captive insurance company.
F-91
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS — (Continued)
The favorable (unfavorable) effects on the statutory surplus of the Company's insurance subsidiaries, compared to NAIC statutory surplus, from the use of these prescribed and permitted practices were as follows:
|
As of December 31, |
|||||||||||
|
2015 |
2014 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Accounting for Letters of Credit as admitted assets |
$ |
1,715 |
$ |
1,735 |
|||||||
|
Accounting for Red Mountain Note as admitted asset |
$ |
500 |
$ |
435 |
|||||||
|
Reserving based on state specific actuarial practices |
$ |
117 |
$ |
112 |
|||||||
|
Reserving difference related to a captive insurance company |
$ |
(118 |
) |
$ |
(87 |
) |
|||||
22. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company's periodic fair value measurements for non-financial assets and liabilities was not material.
The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized as follows:
• Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.
• Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:
a) Quoted prices for similar assets or liabilities in active markets
b) Quoted prices for identical or similar assets or liabilities in non-active markets
c) Inputs other than quoted market prices that are observable
d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.
• Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability.
F-92
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 (Successor Company):
|
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Assets: |
|||||||||||||||||||
|
Fixed maturity securities — available-for-sale
Residential mortgage-backed securities |
$ |
— |
$ |
1,765,270 |
$ |
3 |
$ |
1,765,273 |
|||||||||||
|
Commercial mortgage-backed securities |
— |
1,285,864 |
— |
1,285,864 |
|||||||||||||||
|
Other asset-backed securities |
— |
210,020 |
587,031 |
797,051 |
|||||||||||||||
|
U.S. government-related securities |
1,054,353 |
477,824 |
— |
1,532,177 |
|||||||||||||||
|
State, municipalities, and political subdivisions |
— |
1,603,600 |
— |
1,603,600 |
|||||||||||||||
|
Other government-related securities |
— |
17,740 |
— |
17,740 |
|||||||||||||||
|
Corporate securities |
83 |
24,876,455 |
902,119 |
25,778,657 |
|||||||||||||||
|
Preferred stock |
43,073 |
19,614 |
— |
62,687 |
|||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
1,097,509 |
30,256,387 |
1,489,153 |
32,843,049 |
|||||||||||||||
|
Fixed maturity securities — trading
Residential mortgage-backed securities |
— |
286,658 |
— |
286,658 |
|||||||||||||||
|
Commercial mortgage-backed securities |
— |
146,743 |
— |
146,743 |
|||||||||||||||
|
Other asset-backed securities |
— |
122,511 |
152,912 |
275,423 |
|||||||||||||||
|
U.S. government-related securities |
233,592 |
4,755 |
— |
238,347 |
|||||||||||||||
|
State, municipalities, and political subdivisions |
— |
313,354 |
— |
313,354 |
|||||||||||||||
|
Other government-related securities |
— |
58,827 |
— |
58,827 |
|||||||||||||||
|
Corporate securities |
— |
1,322,276 |
18,225 |
1,340,501 |
|||||||||||||||
|
Preferred stock |
2,794 |
1,402 |
— |
4,196 |
|||||||||||||||
|
Total fixed maturity securities — trading |
236,386 |
2,256,526 |
171,137 |
2,664,049 |
|||||||||||||||
|
Total fixed maturity securities |
1,333,895 |
32,512,913 |
1,660,290 |
35,507,098 |
|||||||||||||||
|
Equity securities |
620,358 |
13,063 |
66,504 |
699,925 |
|||||||||||||||
|
Other long-term investments(1) |
113,699 |
141,487 |
68,384 |
323,570 |
|||||||||||||||
|
Short-term investments |
261,659 |
2,178 |
— |
263,837 |
|||||||||||||||
|
Total investments |
2,329,611 |
32,669,641 |
1,795,178 |
36,794,430 |
|||||||||||||||
|
Cash |
212,358 |
— |
— |
212,358 |
|||||||||||||||
|
Assets related to separate accounts |
|||||||||||||||||||
|
Variable annuity |
12,829,188 |
— |
— |
12,829,188 |
|||||||||||||||
|
Variable universal life |
827,610 |
— |
— |
827,610 |
|||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
16,198,767 |
$ |
32,669,641 |
$ |
1,795,178 |
$ |
50,663,586 |
|||||||||||
|
Liabilities: |
|||||||||||||||||||
|
Annuity account balances(2) |
$ |
— |
$ |
— |
$ |
92,512 |
$ |
92,512 |
|||||||||||
|
Other liabilities(1) |
40,067 |
106,310 |
375,848 |
522,225 |
|||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
40,067 |
$ |
106,310 |
$ |
468,360 |
$ |
614,737 |
|||||||||||
(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
F-93
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 (Predecessor Company):
|
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Assets: |
|||||||||||||||||||
|
Fixed maturity securities — available-for-sale
Residential mortgage-backed securities |
$ |
— |
$ |
1,418,255 |
$ |
3 |
$ |
1,418,258 |
|||||||||||
|
Commercial mortgage-backed securities |
— |
1,177,252 |
— |
1,177,252 |
|||||||||||||||
|
Other asset-backed securities |
— |
275,415 |
563,961 |
839,376 |
|||||||||||||||
|
U.S. government-related securities |
1,165,188 |
263,707 |
— |
1,428,895 |
|||||||||||||||
|
State, municipalities, and political subdivisions |
— |
1,684,014 |
3,675 |
1,687,689 |
|||||||||||||||
|
Other government-related securities |
— |
20,172 |
— |
20,172 |
|||||||||||||||
|
Corporate securities |
132 |
26,039,963 |
1,325,683 |
27,365,778 |
|||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
1,165,320 |
30,878,778 |
1,893,322 |
33,937,420 |
|||||||||||||||
|
Fixed maturity securities — trading
Residential mortgage-backed securities |
— |
288,114 |
— |
288,114 |
|||||||||||||||
|
Commercial mortgage-backed securities |
— |
151,111 |
— |
151,111 |
|||||||||||||||
|
Other asset-backed securities |
— |
105,118 |
169,461 |
274,579 |
|||||||||||||||
|
U.S. government-related securities |
245,563 |
4,898 |
— |
250,461 |
|||||||||||||||
|
State, municipalities, and political subdivisions |
— |
325,446 |
— |
325,446 |
|||||||||||||||
|
Other government-related securities |
— |
57,032 |
— |
57,032 |
|||||||||||||||
|
Corporate securities |
— |
1,447,333 |
24,744 |
1,472,077 |
|||||||||||||||
|
Total fixed maturity securities — trading |
245,563 |
2,379,052 |
194,205 |
2,818,820 |
|||||||||||||||
|
Total fixed maturity securities |
1,410,883 |
33,257,830 |
2,087,527 |
36,756,240 |
|||||||||||||||
|
Equity securities |
590,832 |
99,267 |
66,691 |
756,790 |
|||||||||||||||
|
Other long-term investments(1) |
119,997 |
106,079 |
44,625 |
270,701 |
|||||||||||||||
|
Short-term investments |
243,436 |
3,281 |
— |
246,717 |
|||||||||||||||
|
Total investments |
2,365,148 |
33,466,457 |
2,198,843 |
38,030,448 |
|||||||||||||||
|
Cash |
268,286 |
— |
— |
268,286 |
|||||||||||||||
|
Assets related to separate accounts |
|||||||||||||||||||
|
Variable annuity |
13,157,429 |
— |
— |
13,157,429 |
|||||||||||||||
|
Variable universal life |
834,940 |
— |
— |
834,940 |
|||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
16,625,803 |
$ |
33,466,457 |
$ |
2,198,843 |
$ |
52,291,103 |
|||||||||||
|
Liabilities: |
|||||||||||||||||||
|
Annuity account balances(2) |
$ |
— |
$ |
— |
$ |
97,825 |
$ |
97,825 |
|||||||||||
|
Other liabilities(1) |
62,146 |
61,046 |
506,343 |
629,535 |
|||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
62,146 |
$ |
61,046 |
$ |
604,168 |
$ |
727,360 |
|||||||||||
(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
F-94
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Determination of Fair Values
The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company's credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.
The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a "waterfall" approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price approximately 90% of the Company's available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non-binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which we purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.
The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer's credit rating, liquidity discounts, weighted- average of contracted cash flows, risk premium, if warranted, due to the issuer's industry, and the security's time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.
For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. The Company uses a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the
F-95
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
valuation of such holdings. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the period of February 1, 2015 to December 31, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company).
The Company has analyzed the third party pricing services' valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified into Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.
Asset-Backed Securities
This category mainly consists of residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (collectively referred to as asset-backed securities or "ABS"). As of December 31, 2015 (Successor Company), the Company held $3.8 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.
After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.
As of December 31, 2015, the Company held $739.9 million of Level 3 ABS, which included $587.0 million of other asset-backed securities classified as available-for-sale and $152.9 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. As a result of the ARS market collapse during 2008, the Company prices its ARS using an income approach valuation model. As part of the valuation process the Company reviews the following characteristics of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate.
F-96
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Corporate Securities, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other Government Related Securities
As of December 31, 2015 (Successor Company), the Company classified approximately $28.7 billion of corporate securities, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the securities are considered to be the primary relevant inputs to the valuation: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.
The brokers and third party pricing service utilize valuation models that consist of a hybrid income and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.
As of December 31, 2015 (Successor Company), the Company classified approximately $920.3 million of securities as Level 3 valuations. Level 3 securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.
Equities
As of December 31, 2015 (Successor Company), the Company held approximately $79.6 million of equity securities classified as Level 2 and Level 3. Of this total, $65.7 million represents FHLB stock. The Company believes that the cost of the FHLB stock approximates fair value.
Other Long-Term Investments and Other Liabilities
Other long-term investments and other liabilities consist entirely of free-standing and embedded derivative financial instruments. Refer to Note 23, Derivative Financial Instruments for additional information related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of December 31, 2015 (Successor Company), 82% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. The remaining derivatives were priced by pricing valuation models, which predominantly utilize observable market data inputs. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate and equity market volatility indices, equity index levels, and treasury rates.
F-97
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.
Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.
Derivative instruments classified as Level 2 primarily include interest rate and inflation swaps, options, and swaptions. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.
Derivative instruments classified as Level 3 were embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.
The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.
The embedded derivatives are carried at fair value in "other long-term investments" and "other liabilities" on the Company's consolidated balance sheet. The changes in fair value are recorded in earnings as "Realized investment gains (losses) — Derivative financial instruments". Refer to Note 23, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.
The fair value of the GMWB embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and near- term equity market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table with company experience, with attained age factors varying from 44.5% — 100%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company's non-performance risk). As a result of using significant unobservable inputs, the GMWB embedded derivative is categorized as Level 3. These assumptions are reviewed on a quarterly basis.
The balance of the FIA embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the 1994 Variable Annuity MGDB Mortality Table modified with
F-98
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
company experience, with attained age factors varying from 49% — 80%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company's non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.
The balance of the indexed universal life ("IUL") embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the SOA 2015 VBT Primary Tables modified with company experience, with attained age factors varying from 38% — 153%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company's non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.
The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. As a result, these agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in earnings. The investments supporting these agreements are designated as "trading securities"; therefore changes in their fair value are also reported in earnings. As of December 31, 2015 (Successor Company), the fair value of the embedded derivative is based upon the relationship between the statutory policy liabilities (net of policy loans) of $2.5 billion and the statutory unrealized gain (loss) of the securities of $184.1 million. As a result, changes in the fair value of the embedded derivatives are largely offset by the changes in fair value of the related investments and each are reported in earnings. The fair value of the embedded derivative is considered a Level 3 valuation due to the unobservable nature of the policy liabilities.
Certain of the Company's subsidiaries have entered into interest support, a yearly renewable term ("YRT") premium support, and portfolio maintenance agreements with PLC. These agreements meet the definition of a derivative and are accounted for at fair value and are considered Level 3 valuations. The fair value of these derivatives as of December 31, 2015 (Successor Company), was $18.2 million and is included in Other long-term investments. For information regarding realized gains on these derivatives please refer to Note 23, Derivative Financial Instruments.
The Interest Support Agreement provides that PLC will make payments to Golden Gate II if actual investment income on certain of Golden Gate II's asset portfolios falls below a calculated investment income amount as defined in the Interest Support Agreement. The calculated investment income amount is a level of investment income deemed to be sufficient to support certain of Golden Gate II's obligations under a reinsurance agreement with the Company, dated July 1, 2007. The derivative is valued using an internal valuation model that assumes a conservative projection of investment income under an adverse interest rate scenario and the probability that the expectation falls below the calculated investment income amount. This derivative had a fair value of $15.8 million as of
F-99
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
December 31, 2015 (Successor Company), however, interest support agreement obligations to Golden Gate II of approximately $1.9 million have been collateralized by PLC. Re-evaluation, if necessary, adjustments of any support agreement collateralization amounts occur annually during the first quarter pursuant to the terms of the support agreement. As of December 31, 2015 (Successor Company), no payments have been triggered under this agreement.
The YRT Premium support agreement provides that PLC will make payments to Golden Gate II in the event that YRT premium rates increase. The derivative is valued using an internal valuation model. The valuation model is a probability weighted discounted cash flow model. The value is primarily a function of the likelihood and severity of future YRT premium increases. The fair value of this derivative as of December 31, 2015 (Successor Company), was $2.3 million. As of December 31, 2015 (Successor Company), no payments have been triggered under this agreement.
The portfolio maintenance agreements provide that PLC will make payments to Golden Gate V and WCL in the event of other-than-temporary impairments on investments that exceed defined thresholds. The derivatives are valued using an internal discounted cash flow model. The significant unobservable inputs are the projected probability and severity of credit losses used to project future cash flows on the investment portfolios. The fair value of the portfolio maintenance agreements as of December 31, 2015 (Successor Company), was zero. As of December 31, 2015 (Successor Company), no payments have been triggered under this agreement.
The Funds Withheld derivative results from a reinsurance agreement with Shades Creek where the economic performance of certain hedging instruments held by the Company is ceded to Shades Creek. The value of the Funds Withheld derivative is directly tied to the value of the hedging instruments held in the funds withheld account. The hedging instruments predominantly consist of derivative instruments the fair values of which are classified as a Level 2 measurement; as such, the fair value of the Funds Withheld derivative has been classified as a Level 2 measurement. The fair value of the Funds Withheld derivative as of December 31, 2015 (Successor Company), was a liability of $102.4 million.
Annuity Account Balances
The Company records certain of its FIA reserves at fair value. The fair value is considered a Level 3 valuation. The FIA valuation model calculates the present value of future benefit cash flows less the projected future profits to quantify the net liability that is held as a reserve. This calculation is done using multiple risk neutral stochastic equity scenarios. The cash flows are discounted using LIBOR plus a credit spread. Best estimate assumptions are used for partial withdrawals, lapses, expenses and asset earned rate with a risk margin applied to each. These assumptions are reviewed at least annually as a part of the formal unlocking process. If an event were to occur within a quarter that would make the assumptions unreasonable, the assumptions would be reviewed within the quarter.
The discount rate for the fixed indexed annuities is based on an upward sloping rate curve which is updated each quarter. The discount rates for December 31, 2015 (Successor Company), ranged from a one month rate of 0.61%, a 5 year rate of 2.43%, and a 30 year rate of 3.66%. A credit spread component is also included in the calculation to accommodate non-performance risk.
Separate Accounts
Separate account assets are invested in open-ended mutual funds and are included in Level 1.
F-100
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Valuation of Level 3 Financial Instruments
The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:
|
Successor
Company |
|||||||||||||||||||
|
Fair Value
As of December 31, 2015 |
Valuation
Technique |
Unobservable
Input |
Range
(Weighted Average) |
||||||||||||||||
|
(Dollars In
Thousands) |
|||||||||||||||||||
|
Assets: |
|||||||||||||||||||
|
Other asset-backed securities
|
$
587,031
|
Discounted cash flow
|
Liquidity premium
Paydown rate |
0.27
% - 1.49% (0.42%)
10.20 % - 14.72% (13.11 %) |
|||||||||||||||
|
Corporate securities
|
875,810
|
Discounted cash flow
|
Spread over treasury |
0.10 % - 19.00% (2.61%) | |||||||||||||||
|
Liabilities: |
|||||||||||||||||||
|
Embedded derivatives — GMWB(1)
|
$
18,511
|
Actuarial cash flow model
|
Mortality
Lapse |
1994 MGDB table with company experience
0.3% - 15%, depending on product/duration/funded status of guarantee |
|||||||||||||||
|
|
|
|
Utilization
|
99%. 10% of policies have a one-time over-utilization of 400% |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.18
% - 1.04%
|
|||||||||||||||
|
Annuity account balances(2) |
92,512
|
Actuarial cash flow model |
Asset earned rate
|
4.53
% - 5.67%
|
|||||||||||||||
|
Expenses |
$ 81 per policy | ||||||||||||||||||
|
Withdrawal rate |
2.20 % | ||||||||||||||||||
|
|
|
|
Mortality
Lapse |
1994 MGDB table with company experience
2.2% - 33.0%, depending on duration/surrender charge period |
|||||||||||||||
|
|
|
|
Return on assets
|
1.50% - 1.85% depending on surrender charge period |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.18
% - 1.04%
|
|||||||||||||||
F-101
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
|
Successor
Company |
|||||||||||||||||||
|
Fair Value
As of December 31, 2015 |
Valuation
Technique |
Unobservable
Input |
Range
(Weighted Average) |
||||||||||||||||
|
(Dollars In
Thousands) |
|||||||||||||||||||
|
Embedded derivative — FIA |
$
100,329
|
Actuarial cash flow model |
Expenses
|
$
81.50
per policy
|
|||||||||||||||
|
|
|
|
Withdrawal rate
|
1.1% - 4.5% depending on duration and tax qualification |
|||||||||||||||
|
|
|
|
Mortality
Lapse |
1994 MGDB table with company experience
2.5% - 40.0%, depending on duration/surrender charge period |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.18 % - 1.04% | |||||||||||||||
|
Embedded derivative — IUL
|
29,629
|
Actuarial cash flow model
|
Mortality
Lapse |
38
% - 153% of 2015
VBT Primary Tables 0.5% - 10.0%, depending on duration/distribution channel and smoking class |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.18
% - 1.04%
|
|||||||||||||||
(1) The fair value for the GMWB embedded derivative is presented as a net liability. Excludes modified coinsurance agreements.
(2) Represents liabilities related to fixed indexed annuities.
The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.
The Company has considered all reasonably available quantitative inputs as of December 31, 2015 (Successor Company), but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $197.5 million of financial instruments being classified as Level 3 as of December 31, 2015 (Successor Company). Of the $197.5 million, $152.9 million are other asset-backed securities and $44.6 million are corporate securities.
In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2015 (Successor Company), the Company held $66.5 million of financial instruments where book value approximates fair value which are predominantly FHLB stock.
F-102
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:
|
Predecessor
Company |
|||||||||||||||||||
|
Fair Value
As of December 31, 2014 |
Valuation
Technique |
Unobservable
Input |
Range
(Weighted Average) |
||||||||||||||||
|
(Dollars In
Thousands) |
|||||||||||||||||||
|
Assets: |
|||||||||||||||||||
|
Other asset-backed securities
|
$
563,752
|
Discounted cash flow
|
Liquidity premium
Paydown rate |
0.39
% - 1.49% (0.69%)
9.70 % - 15.80% (12.08%) |
|||||||||||||||
|
Corporate securities |
1,282,864
|
Discounted cash flow |
Spread over treasury |
0.33 % - 7.50% (2.19%) | |||||||||||||||
|
Liabilities: |
|||||||||||||||||||
|
Embedded derivatives — GMWB(1)
|
$
25,927
|
Actuarial cash flow model
|
Mortality
Lapse |
44.5% to 100% of 1994 MGDB table 0.25% - 17%,
depending on product/duration/funded status of guarantee |
|||||||||||||||
|
Utilization |
97 % - 101% | ||||||||||||||||||
|
|
|
|
Nonperformance risk |
0.12
% - 0.96%
|
|||||||||||||||
|
Annuity account balances(2) |
97,825
|
Actuarial cash flow model |
Asset earned rate
|
3.86
% - 5.92%
|
|||||||||||||||
|
Expenses |
$ 88 - $102 per policy | ||||||||||||||||||
|
Withdrawal rate |
2.20 % | ||||||||||||||||||
|
|
|
|
Mortality
Lapse |
49% to 80% of 1994 MGDB table
2.2% - 33.0%, depending on duration/surrender charge period |
|||||||||||||||
|
|
|
|
Return on assets
|
1.50% - 1.85% depending on surrender charge period |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.12
% - 0.96%
|
|||||||||||||||
F-103
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
|
Predecessor
Company |
|||||||||||||||||||
|
Fair Value
As of December 31, 2014 |
Valuation
Technique |
Unobservable
Input |
Range
(Weighted Average) |
||||||||||||||||
|
(Dollars In
Thousands) |
|||||||||||||||||||
|
Embedded derivative — FIA |
$
124,465
|
Actuarial cash flow model |
Expenses |
$ 83 - $97 per policy | |||||||||||||||
|
|
|
|
Withdrawal rate |
1.1% - 4.5% depending on duration and tax qualification |
|||||||||||||||
|
|
|
|
Mortality
Lapse |
49% to 80% of 1994 MGDB table
2.2% - 40.0%, depending on duration/surrender charge period |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.12 % - 0.96% | |||||||||||||||
|
Embedded derivative — IUL
|
6,691
|
Actuarial cash flow model
|
Mortality
Lapse |
37% - 74% of 2008 VBT Primary Tables
0.5% - 10%, depending on duration/distribution channel and smoking class |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.12
% - 0.96%
|
|||||||||||||||
(1) The fair value for the GMWB embedded derivative is presented as a net asset. Excludes modified coinsurance arrangements.
(2) Represents liabilities related to fixed indexed annuities.
The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.
The Company has considered all reasonably available quantitative inputs as of December 31, 2014 (Predecessor Company), but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $237.2 million of financial instruments being classified as Level 3 as of December 31, 2014 (Predecessor Company). Of the $237.2 million, $169.7 million are other asset backed securities and $67.5 million are corporate securities.
In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2014 (Predecessor Company), the Company held $70.4 million of financial instruments where book value approximates fair value. Of the $70.4 million, $66.7 million represents equity securities, which are predominantly FHLB stock and $3.7 million of other fixed maturity securities.
F-104
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity of the ARS' fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities.
The fair value of corporate securities classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by company specific and market factors. An increase in the spread can be caused by a perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease, and decreases when spreads increase.
The fair value of the GMWB embedded derivative is sensitive to changes in the discount rate which includes the Company's nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company's nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value of the liability and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GMWB where an increase in assumed utilization would result in an increase in the fair value of the liability and conversely, if there is a decrease in the assumption, the fair value would decrease.
The fair value of the FIA account balance liability is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.
The fair value of the FIA embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.
The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.
F-105
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the period of February 1, 2015 to December 31, 2015 (Successor Company), for which the Company has used significant unobservable inputs (Level 3):
|
Total
Realized and Unrealized Gains |
Total
Realized and Unrealized Losses |
||||||||||||||||||||||
|
Beginning
Balance |
Included in
Earnings |
Included in
Other Comprehensive Income |
Included in
Earnings |
Included in
Other Comprehensive Income |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Fixed maturity securities available-for-sale |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
3 |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other asset-backed securities |
603,646 |
— |
11,040 |
(92 |
) |
(17,076 |
) |
||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
States, municipals, and political subdivisions |
3,675 |
— |
— |
— |
— |
||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
1,307,259 |
4,367 |
24,490 |
(963 |
) |
(52,898 |
) |
||||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
1,914,583 |
4,367 |
35,530 |
(1,055 |
) |
(69,974 |
) |
||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other asset-backed securities |
169,473 |
6,260 |
— |
(7,967 |
) |
— |
|||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
States, municipals and political subdivisions |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
25,130 |
501 |
— |
(1,407 |
) |
— |
|||||||||||||||||
|
Total fixed maturity securities — trading |
194,603 |
6,761 |
— |
(9,374 |
) |
— |
|||||||||||||||||
|
Total fixed maturity securities |
2,109,186 |
11,128 |
35,530 |
(10,429 |
) |
(69,974 |
) |
||||||||||||||||
|
Equity securities |
66,691 |
— |
44 |
— |
— |
||||||||||||||||||
|
Other long-term investments(1) |
64,200 |
52,792 |
— |
(48,608 |
) |
— |
|||||||||||||||||
|
Short-term investments |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Total investments |
2,240,077 |
63,920 |
35,574 |
(59,037 |
) |
(69,974 |
) |
||||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
2,240,077 |
$ |
63,920 |
$ |
35,574 |
$ |
(59,037 |
) |
$ |
(69,974 |
) |
|||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
98,279 |
$ |
— |
$ |
— |
$ |
(6,156 |
) |
$ |
— |
||||||||||||
|
Other liabilities(1) |
530,118 |
278,171 |
— |
(123,901 |
) |
— |
|||||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
628,397 |
$ |
278,171 |
$ |
— |
$ |
(130,057 |
) |
$ |
— |
||||||||||||
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the period of February 1, 2015 to December 31, 2015 (Successor Company), there were no transfers of securities into Level 3.
For the period of February 1, 2015 to December 31, 2015 (Successor Company), $166.6 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market
F-106
|
Total Gains
(losses) included in Earnings related to |
|||||||||||||||||||||||||||||||||||
|
Purchases |
Sales |
Issuances |
Settlements |
Transfers
in/out of Level 3 |
Other |
Ending
Balance |
Instruments
still held at the Reporting Date |
||||||||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||||||||||||||
|
Fixed maturity securities available-for-sale |
|||||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
3 |
$ |
— |
|||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other asset-backed securities |
— |
(9,677 |
) |
— |
— |
— |
(810 |
) |
587,031 |
— |
|||||||||||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
States, municipals, and political subdivisions |
— |
(3,675 |
) |
— |
— |
— |
— |
— |
— |
||||||||||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Corporate securities |
199,924 |
(407,052 |
) |
— |
— |
(164,588 |
) |
(8,420 |
) |
902,119 |
— |
||||||||||||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
199,924 |
(420,404 |
) |
— |
— |
(164,588 |
) |
(9,230 |
) |
1,489,153 |
— |
||||||||||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other asset-backed securities |
2,000 |
(15,154 |
) |
— |
— |
(1,982 |
) |
282 |
152,912 |
(5,804 |
) |
||||||||||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
States, municipals and political subdivisions |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Corporate securities |
— |
(5,805 |
) |
— |
— |
— |
(194 |
) |
18,225 |
(1,430 |
) |
||||||||||||||||||||||||
|
Total fixed maturity securities — trading |
2,000 |
(20,959 |
) |
— |
— |
(1,982 |
) |
88 |
171,137 |
(7,234 |
) |
||||||||||||||||||||||||
|
Total fixed maturity securities |
201,924 |
(441,363 |
) |
— |
— |
(166,570 |
) |
(9,142 |
) |
1,660,290 |
(7,234 |
) |
|||||||||||||||||||||||
|
Equity securities |
— |
(231 |
) |
— |
— |
— |
— |
66,504 |
— |
||||||||||||||||||||||||||
|
Other long-term investments(1) |
— |
— |
— |
— |
— |
— |
68,384 |
4,184 |
|||||||||||||||||||||||||||
|
Short-term investments |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Total investments |
201,924 |
(441,594 |
) |
— |
— |
(166,570 |
) |
(9,142 |
) |
1,795,178 |
(3,050 |
) |
|||||||||||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
201,924 |
$ |
(441,594 |
) |
$ |
— |
$ |
— |
$ |
(166,570 |
) |
$ |
(9,142 |
) |
$ |
1,795,178 |
$ |
(3,050 |
) |
|||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
— |
$ |
— |
$ |
368 |
$ |
12,291 |
$ |
— |
$ |
— |
$ |
92,512 |
$ |
— |
|||||||||||||||||||
|
Other liabilities(1) |
— |
— |
— |
— |
— |
— |
375,848 |
154,270 |
|||||||||||||||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
— |
$ |
— |
$ |
368 |
$ |
12,291 |
$ |
— |
$ |
— |
$ |
468,360 |
$ |
154,270 |
|||||||||||||||||||
observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of December 31, 2015 (Successor Company).
For the period of February 1, 2015 to December 31, 2015 (Successor Company), $90.4 million of securities were transferred from Level 2 to Level 1.
For the period of February 1, 2015 to December 31, 2015 (Successor Company), $21.0 million of securities were transferred from Level 1.
F-107
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the period of January 1, 2015 to January 31, 2015 (Predecessor Company), for which the Company has used significant unobservable inputs (Level 3):
|
Total
Realized and Unrealized Gains |
Total
Realized and Unrealized Losses |
||||||||||||||||||||||
|
Beginning
Balance |
Included in
Earnings |
Included in
Other Comprehensive Income |
Included in
Earnings |
Included in
Other Comprehensive Income |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Fixed maturity securities available-for-sale |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
3 |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other asset-backed securities |
563,961 |
— |
— |
— |
(3,867 |
) |
|||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
States, municipals, and political subdivisions |
3,675 |
— |
— |
— |
— |
||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
1,325,683 |
— |
12,282 |
— |
(23,029 |
) |
|||||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
1,893,322 |
— |
12,282 |
— |
(26,896 |
) |
|||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other asset-backed securities |
169,461 |
586 |
— |
(139 |
) |
— |
|||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
States, municipals and political subdivisions |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
24,744 |
602 |
— |
(196 |
) |
— |
|||||||||||||||||
|
Total fixed maturity securities — trading |
194,205 |
1,188 |
— |
(335 |
) |
— |
|||||||||||||||||
|
Total fixed maturity securities |
2,087,527 |
1,188 |
12,282 |
(335 |
) |
(26,896 |
) |
||||||||||||||||
|
Equity securities |
66,691 |
— |
— |
— |
— |
||||||||||||||||||
|
Other long-term investments(1) |
44,625 |
16,617 |
— |
(15,166 |
) |
— |
|||||||||||||||||
|
Short-term investments |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Total investments |
2,198,843 |
17,805 |
12,282 |
(15,501 |
) |
(26,896 |
) |
||||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
2,198,843 |
$ |
17,805 |
$ |
12,282 |
$ |
(15,501 |
) |
$ |
(26,896 |
) |
|||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
97,825 |
$ |
— |
$ |
— |
$ |
(536 |
) |
$ |
— |
||||||||||||
|
Other liabilities(1) |
506,343 |
61 |
— |
(125,995 |
) |
— |
|||||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
604,168 |
$ |
61 |
$ |
— |
$ |
(126,531 |
) |
$ |
— |
||||||||||||
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), $43.2 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of January 31, 2015 (Predecessor Company). All transfers are recognized as of the end of the period.
F-108
|
Total Gains
(losses) included in Earnings related to |
|||||||||||||||||||||||||||||||||||
|
Purchases |
Sales |
Issuances |
Settlements |
Transfers
in/out of Level 3 |
Other |
Ending
Balance |
Instruments
still held at the Reporting Date |
||||||||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||||||||||||||
|
Fixed maturity securities available-for-sale |
|||||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
3 |
$ |
— |
|||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other asset-backed securities |
— |
(32 |
) |
— |
— |
43,205 |
379 |
603,646 |
— |
||||||||||||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
States, municipals, and political subdivisions |
— |
— |
— |
— |
— |
— |
3,675 |
— |
|||||||||||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Corporate securities |
— |
(7,062 |
) |
— |
— |
— |
(615 |
) |
1,307,259 |
— |
|||||||||||||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
— |
(7,094 |
) |
— |
— |
43,205 |
(236 |
) |
1,914,583 |
— |
|||||||||||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other asset-backed securities |
— |
(472 |
) |
— |
— |
— |
37 |
169,473 |
447 |
||||||||||||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
States, municipals and political subdivisions |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Corporate securities |
— |
(20 |
) |
— |
— |
— |
— |
25,130 |
406 |
||||||||||||||||||||||||||
|
Total fixed maturity securities — trading |
— |
(492 |
) |
— |
— |
— |
37 |
194,603 |
853 |
||||||||||||||||||||||||||
|
Total fixed maturity securities |
— |
(7,586 |
) |
— |
— |
43,205 |
(199 |
) |
2,109,186 |
853 |
|||||||||||||||||||||||||
|
Equity securities |
— |
— |
— |
— |
— |
— |
66,691 |
— |
|||||||||||||||||||||||||||
|
Other long-term investments(1) |
— |
— |
— |
— |
— |
— |
46,076 |
1,451 |
|||||||||||||||||||||||||||
|
Short-term investments |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Total investments |
— |
(7,586 |
) |
— |
— |
43,205 |
(199 |
) |
2,221,953 |
2,304 |
|||||||||||||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
— |
$ |
(7,586 |
) |
$ |
— |
$ |
— |
$ |
43,205 |
$ |
(199 |
) |
$ |
2,221,953 |
$ |
2,304 |
|||||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
— |
$ |
— |
$ |
7 |
$ |
419 |
$ |
— |
$ |
— |
$ |
97,949 |
$ |
— |
|||||||||||||||||||
|
Other liabilities(1) |
— |
— |
— |
— |
— |
— |
632,277 |
(125,934 |
) |
||||||||||||||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
— |
$ |
— |
$ |
7 |
$ |
419 |
$ |
— |
$ |
— |
$ |
730,226 |
$ |
(125,934 |
) |
||||||||||||||||||
For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), there were no transfers from Level 3 to Level 2.
For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), there were no transfers from Level 2 to Level 1 and there were no transfers out of Level 1.
F-109
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2014 (Predecessor Company), for which the Company has used significant unobservable inputs (Level 3):
|
Total
Realized and Unrealized Gains |
Total
Realized and Unrealized Losses |
||||||||||||||||||||||
|
Beginning
Balance |
Included in
Earnings |
Included in
Other Comprehensive Income |
Included in
Earnings |
Included in
Other Comprehensive Income |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Fixed maturity securities available-for-sale |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
28 |
$ |
— |
$ |
— |
$ |
— |
$ |
(1 |
) |
||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
||||||||||||||||||||
|
Other asset-backed securities |
545,808 |
— |
36,395 |
(248 |
) |
(8,033 |
) |
||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
States, municipals, and political subdivisions |
3,675 |
— |
— |
— |
— |
||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
1,549,940 |
1,183 |
67,955 |
(2 |
) |
(33,553 |
) |
||||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
2,099,451 |
1,183 |
104,350 |
(250 |
) |
(41,587 |
) |
||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
— |
11 |
— |
— |
— |
||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other asset-backed securities |
194,977 |
9,507 |
— |
(5,508 |
) |
— |
|||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
|||||||||||||||||||
|
States, municipals and political subdivisions |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
29,199 |
1,294 |
— |
(1,098 |
) |
— |
|||||||||||||||||
|
Total fixed maturity securities — trading |
224,176 |
10,812 |
— |
(6,606 |
) |
— |
|||||||||||||||||
|
Total fixed maturity securities |
2,323,627 |
11,995 |
104,350 |
(6,856 |
) |
(41,587 |
) |
||||||||||||||||
|
Equity securities |
67,979 |
— |
1,192 |
— |
(261 |
) |
|||||||||||||||||
|
Other long-term investments(1) |
98,886 |
4,979 |
— |
(59,240 |
) |
— |
|||||||||||||||||
|
Short-term investments |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Total investments |
2,490,492 |
16,974 |
105,542 |
(66,096 |
) |
(41,848 |
) |
||||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
2,490,492 |
$ |
16,974 |
$ |
105,542 |
$ |
(66,096 |
) |
$ |
(41,848 |
) |
|||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
107,000 |
$ |
— |
$ |
— |
$ |
(4,307 |
) |
$ |
— |
||||||||||||
|
Other liabilities(1) |
233,738 |
22,547 |
— |
(295,152 |
) |
— |
|||||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
340,738 |
$ |
22,547 |
$ |
— |
$ |
(299,459 |
) |
$ |
— |
||||||||||||
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the year ended December 31, 2014 (Predecessor Company), $31.0 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of December 31, 2014 (Predecessor Company).
F-110
|
Total Gains
(losses) included in Earnings related to |
|||||||||||||||||||||||||||||||||||
|
Purchases |
Sales |
Issuances |
Settlements |
Transfers
in/out of Level 3 |
Other |
Ending
Balance |
Instruments
still held at the Reporting Date |
||||||||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||||||||||||||
|
Fixed maturity securities available-for-sale |
|||||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
— |
$ |
(24 |
) |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
3 |
$ |
— |
||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other asset-backed securities |
— |
(10,064 |
) |
— |
— |
— |
103 |
563,961 |
— |
||||||||||||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
States, municipals, and political subdivisions |
— |
— |
— |
— |
— |
— |
3,675 |
— |
|||||||||||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Corporate securities |
139,029 |
(226,073 |
) |
— |
— |
(162,236 |
) |
(10,560 |
) |
1,325,683 |
— |
||||||||||||||||||||||||
|
Total fixed maturity securities —
available-for-sale |
139,029 |
(236,161 |
) |
— |
— |
(162,236 |
) |
(10,457 |
) |
1,893,322 |
— |
||||||||||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
842 |
— |
— |
— |
(853 |
) |
— |
— |
— |
||||||||||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other asset-backed securities |
— |
(30,462 |
) |
— |
— |
— |
947 |
169,461 |
1,083 |
||||||||||||||||||||||||||
|
U.S. government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
States, municipals and political subdivisions |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Corporate securities |
5,839 |
(10,770 |
) |
— |
— |
4 |
276 |
24,744 |
(121 |
) |
|||||||||||||||||||||||||
|
Total fixed maturity securities — trading |
6,681 |
(41,232 |
) |
— |
— |
(849 |
) |
1,223 |
194,205 |
962 |
|||||||||||||||||||||||||
|
Total fixed maturity securities |
145,710 |
(277,393 |
) |
— |
— |
(163,085 |
) |
(9,234 |
) |
2,087,527 |
962 |
||||||||||||||||||||||||
|
Equity securities |
9,551 |
(1,119 |
) |
— |
— |
(10,651 |
) |
— |
66,691 |
— |
|||||||||||||||||||||||||
|
Other long-term investments(1) |
— |
— |
— |
— |
— |
— |
44,625 |
(54,261 |
) |
||||||||||||||||||||||||||
|
Short-term investments |
— |
— |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||||||||
|
Total investments |
155,261 |
(278,512 |
) |
— |
— |
(173,736 |
) |
(9,234 |
) |
2,198,843 |
(53,299 |
) |
|||||||||||||||||||||||
|
Total assets measured at fair value on a
recurring basis |
$ |
155,261 |
$ |
(278,512 |
) |
$ |
— |
$ |
— |
$ |
(173,736 |
) |
$ |
(9,234 |
) |
$ |
2,198,843 |
$ |
(53,299 |
) |
|||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
— |
$ |
— |
$ |
685 |
$ |
14,167 |
$ |
— |
$ |
— |
$ |
97,825 |
$ |
— |
|||||||||||||||||||
|
Other liabilities(1) |
— |
— |
— |
— |
— |
— |
506,343 |
(272,605 |
) |
||||||||||||||||||||||||||
|
Total liabilities measured at fair value on a
recurring basis |
$ |
— |
$ |
— |
$ |
685 |
$ |
14,167 |
$ |
— |
$ |
— |
$ |
604,168 |
$ |
(272,605 |
) |
||||||||||||||||||
For the year ended December 31, 2014 (Predecessor Company), $204.7 million of securities were transferred out of Level 3. This amount was transferred into Level 2. These transfers resulted from securities that were previously valued using an internal model that utilized significant unobservable inputs but were valued internally or by independent pricing services or brokers, utilizing no significant unobservable inputs. All transfers are recognized as of the end of the reporting period.
For the year ended December 31, 2014 (Predecessor Company), there were no transfers from Level 2 to Level 1.
For the year ended December 31, 2014 (Predecessor Company), there were no transfers from Level 1.
F-111
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated statements of income (loss) or other comprehensive income (loss) within shareowners' equity based on the appropriate accounting treatment for the item.
Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.
The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.
The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.
Estimated Fair Value of Financial Instruments
The carrying amounts and estimated fair values of the Company's financial instruments as of the periods shown below are as follows:
|
Successor Company |
Predecessor Company |
||||||||||||||||||||||
|
As of
December 31, 2015 |
As of
December 31, 2014 |
||||||||||||||||||||||
|
Fair Value
Level |
Carrying
Amounts |
Fair Values |
Carrying
Amounts |
Fair Values |
|||||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Mortgage loans on real estate |
3 |
$ |
5,662,812 |
$ |
5,529,803 |
$ |
5,133,780 |
$ |
5,524,059 |
||||||||||||||
|
Policy loans |
3 |
1,699,508 |
1,699,508 |
1,758,237 |
1,758,237 |
||||||||||||||||||
|
Fixed maturities, held-to-maturity(1) |
3 |
593,314 |
515,000 |
435,000 |
458,422 |
||||||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Stable value product account balances |
3 |
$ |
2,131,822 |
$ |
2,124,712 |
$ |
1,959,488 |
$ |
1,973,624 |
||||||||||||||
|
Annuity account balances |
3 |
10,719,862 |
10,274,571 |
10,950,729 |
10,491,775 |
||||||||||||||||||
|
Debt: |
|||||||||||||||||||||||
|
Non-recourse funding obligations(2) |
3 |
$ |
1,951,563 |
$ |
1,621,773 |
$ |
1,527,752 |
$ |
1,753,183 |
||||||||||||||
Except as noted below, fair values were estimated using quoted market prices.
(1) Security purchased from unconsolidated subsidiary, Red Mountain LLC.
(2) Of this carrying amount $500.0 million, fair value of $495.5 million, as of December 31, 2015 (Successor Company) and $435.0 million, fair value of $461.4 million, as of December 31, 2014 (Predecessor Company), relates to non-recourse funding obligations issued by Golden Gate V.
F-112
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Fair Value Measurements
Mortgage Loans on Real Estate
The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company's current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company's determined representative risk adjustment assumptions related to credit and liquidity risks.
Policy Loans
The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policy holders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value.
Fixed Maturities, Held-to-Maturity
The Company estimates the fair value of its fixed maturity, held-to-maturity using internal discounted cash flow models. The discount rates used in the model were based on a current market yield for similar financial instruments.
Stable Value Product and Annuity Account Balances
The Company estimates the fair value of stable value product account balances and annuity account balances using models based on discounted expected cash flows. The discount rates used in the models were based on a current market rate for similar financial instruments.
Non-Recourse Funding Obligations
The Company estimates the fair value of its non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model were based on a current market yield for similar financial instruments.
23. DERIVATIVE FINANCIAL INSTRUMENTS
Types of Derivative Instruments and Derivative Strategies
The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company's analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into the Company's risk management program.
F-113
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit risk by entering into transactions with highly rated counterparties. The Company manages the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. The Company monitors its use of derivatives in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.
Derivatives Related to Interest Rate Risk Management
Derivative instruments that are used as part of the Company's interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions. The Company's inflation risk management strategy involves the use of swaps that requires the Company to pay a fixed rate and receive a floating rate that is based on changes in the Consumer Price Index ("CPI").
Derivatives Related to Risk Mitigation of Certain Annuity Contracts
The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VA contracts and fixed indexed annuities:
• Foreign Currency Futures
• Variance Swaps
• Interest Rate Futures
• Equity Options
• Equity Futures
• Credit Derivatives
• Interest Rate Swaps
• Interest Rate Swaptions
• Volatility Futures
• Volatility Options
• Funds Withheld Agreement
• Total Return Swaps
Other Derivatives
The Company and certain of its subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, a YRT premium support agreement, and portfolio maintenance agreements with PLC.
The Company has a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GMWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.
F-114
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
Accounting for Derivative Instruments
The Company records its derivative financial instruments in the consolidated balance sheet in "other long-term investments" and "other liabilities" in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.
For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the effective portion of their realized gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company's hedge relationships is assessed on a quarterly basis.
The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through earnings in the period of change. Changes in the fair value of derivatives that are recognized in current earnings are reported in "Realized investment gains (losses) — Derivative financial instruments".
Derivative Instruments Designated and Qualifying as Hedging Instruments
Cash-Flow Hedges
• In connection with the issuance of inflation-adjusted funding agreements, the Company has entered into swaps to essentially convert the floating CPI-linked interest rate on these agreements to a fixed rate. The Company pays a fixed rate on the swap and receives a floating rate primarily determined by the period's change in the CPI. The amounts that are received on the swaps are almost equal to the amounts that are paid on the agreements. None of these positions were held as of December 31, 2015 (Successor Company), as these funding agreements and correlating swaps matured in June 2015.
Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments
The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in earnings during the period of change.
Derivatives Related to Variable Annuity Contracts
• The Company uses equity, interest rate, currency, and volatility futures to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility.
F-115
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
• The Company uses equity options, variance swaps, and volatility options to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. In general, the cost of such benefits varies with the level of equity markets and overall volatility.
• The Company uses interest rate swaps and interest rate swaptions to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products.
• The Company markets certain VA products with a GMWB rider. The GMWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.
• The Company has a funds withheld account that consists of various derivative instruments held by the Company that are used to hedge the GMWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.
Derivatives Related to Fixed Annuity Contracts
• The Company uses equity, futures, and options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity and overall volatility.
• The Company uses equity options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity markets.
• The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.
Derivatives Related to Indexed Universal Life Contracts
• The Company uses equity, futures, and options to mitigate the risk within its indexed universal life products. In general, the cost of such benefits varies with the level of equity markets.
• The Company markets certain IUL products. The IUL component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.
Other Derivatives
• The Company uses certain interest rate swaps to mitigate the price volatility of fixed maturities. None of these positions were held as of December 31, 2015 (Successor Company).
• The Company and certain of its subsidiaries have an interest support agreement, YRT premium support agreement, and two portfolio maintenance agreements with PLC.
• The Company uses various swaps and other types of derivatives to manage risk related to other exposures.
• The Company is involved in various modified coinsurance which contain embedded derivatives. Changes in their fair value are recorded in current period earnings. The investment portfolios that support the related modified coinsurance reserves had fair value changes which substantially offset the gains or losses on these embedded derivatives.
F-116
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
The following table sets forth realized investments gains and losses for the periods shown:
Realized investment gains (losses) — derivative financial instruments
(1) These derivatives include an interest support, YRT premium support, and portfolio maintenance agreements between certain of the Company's subsidiaries and PLC.
F-117
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
The following table sets forth realized investments gains and losses for the Modco trading portfolio that is included in realized investment gains (losses) — all other investments:
Realized investment gains (losses) — all other investments
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Modco trading portfolio(1) |
$ |
(167,359 |
) |
$ |
73,062 |
$ |
142,016 |
$ |
(178,134 |
) |
|||||||||
(1) The Company elected to include the use of alternate disclosures for trading activities.
The following tables present the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship:
Gain (Loss) on Derivatives in Cash Flow Relationship
|
Amount of Gains (Losses)
Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives |
Amount and Location of
Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss) |
Amount and Location of
(Losses) Recognized in Income (Loss) on Derivatives |
|||||||||||||
|
(Effective Portion) |
(Effective Portion) |
(Ineffective Portion) |
|||||||||||||
|
|
Benefits and settlement
expenses |
Realized investment
gains (losses) |
|||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||
|
Successor Company |
|||||||||||||||
|
February 1, 2015 to December 31, 2015 |
|||||||||||||||
|
Inflation |
$ |
(131 |
) |
$ |
(131 |
) |
$ |
73 |
|||||||
|
Total |
$ |
(131 |
) |
$ |
(131 |
) |
$ |
73 |
|||||||
|
Predecessor Company |
|||||||||||||||
|
January 1, 2015 to January 31, 2015 |
|||||||||||||||
|
Inflation |
$ |
13 |
$ |
(36 |
) |
$ |
(7 |
) |
|||||||
|
Total |
$ |
13 |
$ |
(36 |
) |
$ |
(7 |
) |
|||||||
|
Predecessor Company |
|||||||||||||||
|
For The Year Ended December 31, 2014 |
|||||||||||||||
|
Inflation |
$ |
(4 |
) |
$ |
(1,777 |
) |
$ |
(223 |
) |
||||||
|
Total |
$ |
(4 |
) |
$ |
(1,777 |
) |
$ |
(223 |
) |
||||||
|
Predecessor Company |
|||||||||||||||
|
For The Year Ended December 31, 2013 |
|||||||||||||||
|
Inflation |
$ |
1,130 |
$ |
(2,349 |
) |
$ |
(190 |
) |
|||||||
|
Total |
$ |
1,130 |
$ |
(2,349 |
) |
$ |
(190 |
) |
|||||||
F-118
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
The table below presents information about the nature and accounting treatment of the Company's primary derivative financial instruments and the location in and effect on the consolidated financial statements for the periods presented below:
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
As of December 31, 2015 |
As of December 31, 2014 |
||||||||||||||||||
|
Notional
Amount |
Fair
Value |
Notional
Amount |
Fair
Value |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Other long-term investments |
|||||||||||||||||||
|
Derivatives not designated as hedging instruments: |
|||||||||||||||||||
|
Interest rate swaps |
$ |
1,435,000 |
$ |
66,408 |
$ |
1,550,000 |
$ |
50,743 |
|||||||||||
|
Derivatives with PLC(1) |
1,619,200 |
18,161 |
1,497,010 |
6,077 |
|||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
64,593 |
1,215 |
25,760 |
1,051 |
|||||||||||||||
|
Embedded derivative — GMWB |
1,723,081 |
49,007 |
1,302,895 |
37,497 |
|||||||||||||||
|
Interest rate futures |
282,373 |
1,537 |
27,977 |
938 |
|||||||||||||||
|
Equity futures |
262,485 |
1,275 |
26,483 |
427 |
|||||||||||||||
|
Currency futures |
226,936 |
2,499 |
197,648 |
2,384 |
|||||||||||||||
|
Equity options |
2,198,340 |
179,458 |
1,921,167 |
163,212 |
|||||||||||||||
|
Interest rate swaptions |
225,000 |
3,663 |
625,000 |
8,012 |
|||||||||||||||
|
Other |
242 |
347 |
242 |
360 |
|||||||||||||||
|
$ |
8,037,250 |
$ |
323,570 |
$ |
7,174,182 |
$ |
270,701 |
||||||||||||
|
Other liabilities |
|||||||||||||||||||
|
Cash flow hedges: |
|||||||||||||||||||
|
Inflation |
$ |
— |
$ |
— |
$ |
40,469 |
$ |
142 |
|||||||||||
|
Derivatives not designated as hedging instruments: |
|||||||||||||||||||
|
Interest rate swaps |
475,000 |
16,579 |
275,000 |
3,599 |
|||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
2,473,427 |
178,362 |
2,562,848 |
311,727 |
|||||||||||||||
|
Funds withheld derivative |
1,149,664 |
102,378 |
1,233,424 |
57,305 |
|||||||||||||||
|
Embedded derivative — GMWB |
1,834,308 |
67,528 |
1,702,899 |
63,460 |
|||||||||||||||
|
Embedded derivative — FIA |
1,110,790 |
100,329 |
749,933 |
124,465 |
|||||||||||||||
|
Embedded derivative — IUL |
57,760 |
29,629 |
12,019 |
6,691 |
|||||||||||||||
|
Interest rate futures |
793,763 |
1,539 |
— |
— |
|||||||||||||||
|
Equity futures |
233,412 |
2,599 |
385,256 |
15,069 |
|||||||||||||||
|
Currency futures |
46,692 |
1,115 |
— |
— |
|||||||||||||||
|
Equity options |
1,205,204 |
22,167 |
699,295 |
47,077 |
|||||||||||||||
|
$ |
9,380,020 |
$ |
522,225 |
$ |
7,661,143 |
$ |
629,535 |
||||||||||||
(1) These derivatives include an interest support, YRT premium support, and portfolio maintenance agreements between certain of the Company's subsidiaries and PLC.
The Company reclassified the remaining balance of its cash flow hedge derivative financial instruments out of accumulated other comprehensive income (loss) into earnings during the period of February 1, 2015 to December 31, 2015 (Successor Company) as these derivative financial instruments matured in June of 2015.
24. OFFSETTING OF ASSETS AND LIABILITIES
Certain of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will
F-119
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings levels, have been reached. Additionally, certain of the Company's repurchase agreements provide for net settlement on termination of the agreement. Refer to Note 12, Debt and Other Obligations for details of the Company's repurchase agreement programs.
The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2015 (Successor Company):
|
Gross |
Gross
Amounts Offset in the |
Net Amounts
of Assets Presented in the |
Gross Amounts
Not Offset in the Statement of Financial Position |
|
|||||||||||||||||||||||
|
Amounts of
Recognized Assets |
Statement of
Financial Position |
Statement of
Financial Position |
Financial
Instruments |
Cash
Collateral Received |
Net Amount |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Assets |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing
derivatives |
$ |
254,840 |
$ |
— |
$ |
254,840 |
$ |
42,382 |
$ |
105,842 |
$ |
106,616 |
|||||||||||||||
|
Total derivatives, subject to
a master netting arrangement or similar arrangement |
254,840 |
— |
254,840 |
42,382 |
105,842 |
106,616 |
|||||||||||||||||||||
|
Derivatives not subject to
a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative —
Modco reinsurance treaties |
1,215 |
— |
1,215 |
— |
— |
1,215 |
|||||||||||||||||||||
|
Embedded derivative —
GMWB |
49,007 |
— |
49,007 |
— |
— |
49,007 |
|||||||||||||||||||||
|
Derivatives with PLC |
18,161 |
— |
18,161 |
— |
— |
18,161 |
|||||||||||||||||||||
|
Other |
347 |
— |
347 |
— |
— |
347 |
|||||||||||||||||||||
|
Total derivatives, not subject
to a master netting arrangement or similar arrangement |
68,730 |
— |
68,730 |
— |
— |
68,730 |
|||||||||||||||||||||
|
Total derivatives |
323,570 |
— |
323,570 |
42,382 |
105,842 |
175,346 |
|||||||||||||||||||||
|
Total Assets |
$ |
323,570 |
$ |
— |
$ |
323,570 |
$ |
42,382 |
$ |
105,842 |
$ |
175,346 |
|||||||||||||||
F-120
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
|
Gross |
Gross
Amounts Offset in the |
Net Amounts
of Liabilities Presented in the |
Gross Amounts
Not Offset in the Statement of Financial Position |
|
|||||||||||||||||||||||
|
Amounts of
Recognized Liabilities |
Statement of
Financial Position |
Statement of
Financial Position |
Financial
Instruments |
Cash
Collateral Paid |
Net Amount |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Liabilities |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing
derivatives |
$ |
43,999 |
$ |
— |
$ |
43,999 |
$ |
42,382 |
$ |
1,617 |
$ |
— |
|||||||||||||||
|
Total derivatives, subject to
a master netting arrangement or similar arrangement |
43,999 |
— |
43,999 |
42,382 |
1,617 |
— |
|||||||||||||||||||||
|
Derivatives not subject to
a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative —
Modco reinsurance treaties |
178,362 |
— |
178,362 |
— |
— |
178,362 |
|||||||||||||||||||||
|
Funds withheld derivative |
102,378 |
— |
102,378 |
— |
— |
102,378 |
|||||||||||||||||||||
|
Embedded derivative —
GMWB |
67,528 |
— |
67,528 |
— |
— |
67,528 |
|||||||||||||||||||||
|
Embedded derivative —
FIA |
100,329 |
— |
100,329 |
— |
— |
100,329 |
|||||||||||||||||||||
|
Embedded derivative —
IUL |
29,629 |
— |
29,629 |
— |
— |
29,629 |
|||||||||||||||||||||
|
Total derivatives, not subject
to a master netting arrangement or similar arrangement |
478,226 |
— |
478,226 |
— |
— |
478,226 |
|||||||||||||||||||||
|
Total derivatives |
522,225 |
— |
522,225 |
42,382 |
1,617 |
478,226 |
|||||||||||||||||||||
|
Repurchase agreements(1) |
438,185 |
— |
438,185 |
— |
— |
438,185 |
|||||||||||||||||||||
|
Total Liabilities |
$ |
960,410 |
$ |
— |
$ |
960,410 |
$ |
42,382 |
$ |
1,617 |
$ |
916,411 |
|||||||||||||||
(1) Borrowings under repurchase agreements are for a term less than 90 days.
F-121
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2014 (Predecessor Company).
|
Gross |
Gross
Amounts Offset in the |
Net Amounts
of Assets Presented in the |
Gross Amounts
Not Offset in the Statement of Financial Position |
|
|||||||||||||||||||||||
|
Amounts of
Recognized Assets |
Statement of
Financial Position |
Statement of
Financial Position |
Financial
Instruments |
Cash
Collateral Received |
Net Amount |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Assets |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing derivatives |
$ |
225,716 |
$ |
— |
$ |
225,716 |
$ |
53,612 |
$ |
73,935 |
$ |
98,169 |
|||||||||||||||
|
Total derivatives, subject to
a master netting arrangement or similar arrangement |
225,716 |
— |
225,716 |
53,612 |
73,935 |
98,169 |
|||||||||||||||||||||
|
Derivatives not subject to
a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative —
Modco reinsurance treaties |
1,051 |
— |
1,051 |
— |
— |
1,051 |
|||||||||||||||||||||
|
Embedded derivative —
GMWB |
37,497 |
— |
37,497 |
— |
— |
37,497 |
|||||||||||||||||||||
|
Derivatives with PLC |
6,077 |
— |
6,077 |
— |
— |
6,077 |
|||||||||||||||||||||
|
Other |
360 |
— |
360 |
— |
— |
360 |
|||||||||||||||||||||
|
Total derivatives, not subject
to a master netting arrangement or similar arrangement |
44,985 |
— |
44,985 |
— |
— |
44,985 |
|||||||||||||||||||||
|
Total derivatives |
270,701 |
— |
270,701 |
53,612 |
73,935 |
143,154 |
|||||||||||||||||||||
|
Total Assets |
$ |
270,701 |
$ |
— |
$ |
270,701 |
$ |
53,612 |
$ |
73,935 |
$ |
143,154 |
|||||||||||||||
F-122
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
|
Gross |
Gross
Amounts Offset in the |
Net Amounts
of Liabilities Presented in the |
Gross Amounts
Not Offset in the Statement of Financial Position |
|
|||||||||||||||||||||||
|
Amounts of
Recognized Liabilities |
Statement of
Financial Position |
Statement of
Financial Position |
Financial
Instruments |
Cash
Collateral Paid |
Net Amount |
||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Liabilities |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing derivatives |
$ |
65,887 |
$ |
— |
$ |
65,887 |
$ |
53,612 |
$ |
12,258 |
$ |
17 |
|||||||||||||||
|
Total derivatives, subject to
a master netting arrangement or similar arrangement |
65,887 |
— |
65,887 |
53,612 |
12,258 |
17 |
|||||||||||||||||||||
|
Derivatives not subject to
a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative —
Modco reinsurance treaties |
311,727 |
— |
311,727 |
— |
— |
311,727 |
|||||||||||||||||||||
|
Funds withheld derivative |
57,305 |
— |
57,305 |
— |
— |
57,305 |
|||||||||||||||||||||
|
Embedded derivative —
GMWB |
63,460 |
— |
63,460 |
— |
— |
63,460 |
|||||||||||||||||||||
|
Embedded derivative —
FIA |
124,465 |
— |
124,465 |
— |
— |
124,465 |
|||||||||||||||||||||
|
Embedded derivative —
IUL |
6,691 |
— |
6,691 |
— |
— |
6,691 |
|||||||||||||||||||||
|
Total derivatives, not subject
to a master netting arrangement or similar arrangement |
563,648 |
— |
563,648 |
— |
— |
563,648 |
|||||||||||||||||||||
|
Total derivatives |
629,535 |
— |
629,535 |
53,612 |
12,258 |
563,665 |
|||||||||||||||||||||
|
Repurchase
agreements(1) |
50,000 |
— |
50,000 |
— |
— |
50,000 |
|||||||||||||||||||||
|
Total Liabilities |
$ |
679,535 |
$ |
— |
$ |
679,535 |
$ |
53,612 |
$ |
12,258 |
$ |
613,665 |
|||||||||||||||
(1) Borrowings under repurchase agreements are for a term less than 90 days.
F-123
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. OPERATING SEGMENTS
The Company has several operating segments each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments, as prescribed in the ASC Segment Reporting Topic, and makes adjustments to its segment reporting as needed. There were no changes to the Company's operating segments made or required to be made as a result of the Merger on February 1, 2015. A brief description of each segment follows.
• The Life Marketing segment markets fixed UL, IUL, VUL, BOLI, and level premium term insurance ("traditional") products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, and independent marketing organizations.
• The Acquisitions segment focuses on acquiring, converting, and servicing policies acquired from other companies. The segment's primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment's acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.
• The Annuities segment markets fixed and variable annuity products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.
• The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the FHLB, and markets GICs to 401(k) and other qualified retirement savings plans. The Company recently terminated its funding agreement-backed notes program registered with the SEC and, on October 2, 2015, established an unregistered funding agreement-backed notes program.
• The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers' investments in automobiles and recreational vehicles. In addition, the segment markets a guaranteed asset protection ("GAP") product. GAP coverage covers the difference between the loan pay-off amount and an asset's actual cash value in the case of a total loss.
• The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated overhead, and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations.
The Company uses the same accounting policies and procedures to measure segment operating income (loss) and assets as it uses to measure consolidated net income and assets. Segment operating income (loss) is income before income tax, excluding realized gains and losses on investments and derivatives net of the amortization related to DAC, VOBA, and benefits and settlement expenses. Operating earnings exclude changes in the GMWB embedded derivatives (excluding the
F-124
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. OPERATING SEGMENTS — (Continued)
portion attributed to economic cost), actual GMWB incurred claims and the related amortization of DAC/VOBA attributed to each of these items.
Segment operating income (loss) represents the basis on which the performance of the Company's business is internally assessed by management. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC/VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable. The goodwill as of December 31, 2015 (Successor Company), was the result of the Dai-ichi Merger. The purchase price was allocated to the segments in proportion to the segment's respective fair value. The allocated purchase price in excess of the fair value of assets and liabilities of each segment resulted in the establishment of that segment's goodwill as of the date of the Merger.
There were no significant intersegment transactions during the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company).
The following tables summarize financial information for the Company's segments (Predecessor and Successor period are not comparable):
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
Revenues |
|||||||||||||||||||
|
Life Marketing |
$ |
1,316,832 |
$ |
133,361 |
$ |
1,421,795 |
$ |
1,324,409 |
|||||||||||
|
Acquisitions |
1,333,430 |
139,761 |
1,720,179 |
1,186,579 |
|||||||||||||||
|
Annuities |
396,651 |
130,918 |
785,176 |
569,004 |
|||||||||||||||
|
Stable Value Products |
79,670 |
8,181 |
127,708 |
122,974 |
|||||||||||||||
|
Asset Protection |
294,657 |
24,566 |
305,396 |
296,782 |
|||||||||||||||
|
Corporate and Other |
65,802 |
22,859 |
103,953 |
104,922 |
|||||||||||||||
|
Total revenues |
$ |
3,487,042 |
$ |
459,646 |
$ |
4,464,207 |
$ |
3,604,670 |
|||||||||||
|
Segment Operating Income (Loss) |
|||||||||||||||||||
|
Life Marketing |
$ |
54,864 |
$ |
(2,271 |
) |
$ |
116,875 |
$ |
106,812 |
||||||||||
|
Acquisitions |
194,654 |
20,134 |
254,021 |
154,003 |
|||||||||||||||
|
Annuities |
146,828 |
11,363 |
204,015 |
166,278 |
|||||||||||||||
|
Stable Value Products |
56,581 |
4,529 |
73,354 |
80,561 |
|||||||||||||||
|
Asset Protection |
17,632 |
1,907 |
26,274 |
20,148 |
|||||||||||||||
|
Corporate and Other |
(118,832 |
) |
(16,662 |
) |
(99,048 |
) |
(74,620 |
) |
|||||||||||
|
Total segment operating income |
351,727 |
19,000 |
575,491 |
453,182 |
|||||||||||||||
|
Realized investment (losses) gains —
investments(1)(3) |
(185,202 |
) |
89,414 |
151,035 |
(140,236 |
) |
|||||||||||||
|
Realized investment (losses) gains —
derivatives(2) |
87,663 |
24,433 |
12,263 |
109,553 |
|||||||||||||||
|
Income tax expense |
(74,491 |
) |
(44,325 |
) |
(246,838 |
) |
(130,897 |
) |
|||||||||||
|
Net income |
$ |
179,697 |
$ |
88,522 |
$ |
491,951 |
$ |
291,602 |
|||||||||||
F-125
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. OPERATING SEGMENTS — (Continued)
|
Successor Company |
Predecessor Company |
||||||||||||||||||
|
February 1, 2015
to |
January 1, 2015
to |
For The Year Ended
December 31, |
|||||||||||||||||
|
December 31, 2015 |
January 31, 2015 |
2014 |
2013 |
||||||||||||||||
|
(Dollars In Thousands) |
(Dollars In Thousands) |
||||||||||||||||||
|
(1) Investment gains (losses) |
$ |
(193,928 |
) |
$ |
80,672 |
$ |
198,027 |
$ |
(143,984 |
) |
|||||||||
|
Less: amortization related to
DAC/VOBA and benefits and settlement expenses |
(8,726 |
) |
(8,742 |
) |
46,992 |
(3,748 |
) |
||||||||||||
|
Realized investment gains
(losses) — investments |
$ |
(185,202 |
) |
$ |
89,414 |
$ |
151,035 |
$ |
(140,236 |
) |
|||||||||
|
(2) Derivative gains (losses) |
$ |
58,436 |
$ |
22,031 |
$ |
(13,492 |
) |
$ |
82,161 |
||||||||||
|
Less: VA GMWB economic cost |
(29,227 |
) |
(2,402 |
) |
(25,755 |
) |
(27,392 |
) |
|||||||||||
|
Realized investment gains
(losses) — derivatives |
$ |
87,663 |
$ |
24,433 |
$ |
12,263 |
$ |
109,553 |
|||||||||||
|
Net investment income |
|||||||||||||||||||
|
Life Marketing |
$ |
446,518 |
$ |
47,622 |
$ |
553,006 |
$ |
521,219 |
|||||||||||
|
Acquisitions |
639,422 |
71,088 |
874,653 |
617,298 |
|||||||||||||||
|
Annuities |
296,839 |
37,189 |
465,849 |
468,329 |
|||||||||||||||
|
Stable Value Products |
78,459 |
6,888 |
107,170 |
123,798 |
|||||||||||||||
|
Asset Protection |
14,042 |
1,540 |
18,830 |
19,046 |
|||||||||||||||
|
Corporate and Other |
57,516 |
278 |
78,505 |
86,498 |
|||||||||||||||
|
Total net investment income |
$ |
1,532,796 |
$ |
164,605 |
$ |
2,098,013 |
$ |
1,836,188 |
|||||||||||
|
Amortization of DAC and VOBA |
|||||||||||||||||||
|
Life Marketing |
$ |
107,811 |
$ |
4,813 |
$ |
175,807 |
$ |
25,774 |
|||||||||||
|
Acquisitions |
2,035 |
5,033 |
60,031 |
72,762 |
|||||||||||||||
|
Annuities |
(41,071 |
) |
(6,999 |
) |
47,448 |
31,498 |
|||||||||||||
|
Stable Value Products |
43 |
25 |
380 |
398 |
|||||||||||||||
|
Asset Protection |
26,219 |
1,858 |
24,169 |
23,603 |
|||||||||||||||
|
Corporate and Other |
27 |
87 |
485 |
625 |
|||||||||||||||
|
Total amortization of DAC and VOBA |
$ |
95,064 |
$ |
4,817 |
$ |
308,320 |
$ |
154,660 |
|||||||||||
(3) Includes credit related other-than-temporary impairments of $27.0 million, $0.5 million, $7.3 million, and $22.4 million for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company), respectively.
F-126
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
25. OPERATING SEGMENTS — (Continued)
|
Successor Company |
|||||||||||||||||||
|
Operating Segment Assets
As of December 31, 2015 |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Life
Marketing |
Acquisitions |
Annuities |
Stable Value
Products |
||||||||||||||||
|
Investments and other assets |
$ |
13,258,639 |
$ |
19,879,988 |
$ |
19,715,901 |
$ |
2,006,263 |
|||||||||||
|
Deferred policy acquisition costs and
value of business acquired |
1,119,515 |
(178,662 |
) |
578,742 |
2,357 |
||||||||||||||
|
Other intangibles |
319,623 |
39,658 |
196,780 |
9,389 |
|||||||||||||||
|
Goodwill |
200,274 |
14,524 |
336,677 |
113,813 |
|||||||||||||||
|
Total assets |
$ |
14,898,051 |
$ |
19,755,508 |
$ |
20,828,100 |
$ |
2,131,822 |
|||||||||||
|
Asset
Protection |
Corporate
and Other |
Adjustments |
Total
Consolidated |
||||||||||||||||
|
Investments and other assets |
$ |
766,294 |
$ |
9,464,906 |
$ |
— |
$ |
65,091,991 |
|||||||||||
|
Deferred policy acquisition costs and
value of business acquired |
40,421 |
— |
— |
1,562,373 |
|||||||||||||||
|
Other intangibles |
79,681 |
— |
— |
645,131 |
|||||||||||||||
|
Goodwill |
67,155 |
— |
— |
732,443 |
|||||||||||||||
|
Total assets |
$ |
953,551 |
$ |
9,464,906 |
$ |
— |
$ |
68,031,938 |
|||||||||||
|
Predecessor Company |
|||||||||||||||||||
|
Operating Segment Assets
As of December 31, 2014 |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Life
Marketing |
Acquisitions |
Annuities |
Stable Value
Products |
||||||||||||||||
|
Investments and other assets |
$ |
13,858,491 |
$ |
19,858,284 |
$ |
20,678,948 |
$ |
1,958,867 |
|||||||||||
|
Deferred policy acquisition costs and
value of business acquired |
1,973,156 |
600,482 |
539,965 |
621 |
|||||||||||||||
|
Goodwill |
— |
29,419 |
— |
— |
|||||||||||||||
|
Total assets |
$ |
15,831,647 |
$ |
20,488,185 |
$ |
21,218,913 |
$ |
1,959,488 |
|||||||||||
|
Asset
Protection |
Corporate
and Other |
Adjustments |
Total
Consolidated |
||||||||||||||||
|
Investments and other assets |
$ |
832,887 |
$ |
9,572,018 |
$ |
— |
$ |
66,759,495 |
|||||||||||
|
Deferred policy acquisition costs and
value of business acquired |
40,503 |
319 |
— |
3,155,046 |
|||||||||||||||
|
Goodwill |
48,158 |
— |
— |
77,577 |
|||||||||||||||
|
Total assets |
$ |
921,548 |
$ |
9,572,337 |
$ |
— |
$ |
69,992,118 |
|||||||||||
F-127
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26. CONSOLIDATED QUARTERLY RESULTS — UNAUDITED
The Company's unaudited consolidated quarterly operating data for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company), and for the year ended December 31, 2014 (Predecessor Company) is presented below. In the opinion of management, all adjustments (consisting only of normal recurring items) necessary for a fair statement of quarterly results have been reflected in the following data. It is also management's opinion, however, that quarterly operating data for insurance enterprises are not necessarily indicative of results that may be expected in succeeding quarters or years. In order to obtain a more accurate indication of performance, there should be a review of operating results, changes in shareowner's equity, and cash flows for a period of several quarters.
|
First
Quarter(1) |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Successor Company
February 1, 2015 to December 31, 2015 |
|||||||||||||||||||
|
Premiums and policy fees |
$ |
506,386 |
$ |
828,058 |
$ |
793,572 |
$ |
864,806 |
|||||||||||
|
Reinsurance ceded |
(146,813 |
) |
(351,196 |
) |
(312,256 |
) |
(364,606 |
) |
|||||||||||
|
Net of reinsurance ceded |
359,573 |
476,862 |
481,316 |
500,200 |
|||||||||||||||
|
Net investment income |
272,211 |
408,147 |
413,544 |
438,894 |
|||||||||||||||
|
Realized investment gains (losses) |
(40,004 |
) |
(97,515 |
) |
37,140 |
(35,113 |
) |
||||||||||||
|
Other income |
49,181 |
75,459 |
74,671 |
72,476 |
|||||||||||||||
|
Total revenues |
640,961 |
862,953 |
1,006,671 |
976,457 |
|||||||||||||||
|
Total benefits and expenses |
616,425 |
898,520 |
850,550 |
867,359 |
|||||||||||||||
|
Income before income tax |
24,536 |
(35,567 |
) |
156,121 |
109,098 |
||||||||||||||
|
Income tax expense |
8,116 |
(9,991 |
) |
42,542 |
33,824 |
||||||||||||||
|
Net income |
$ |
16,420 |
$ |
(25,576 |
) |
$ |
113,579 |
$ |
75,274 |
||||||||||
(1) First quarter includes February 1, 2015 to March 31, 2015
|
First
Quarter |
Second
Quarter |
Third
Quarter |
Fourth
Quarter |
||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||
|
Predecessor Company
For The Year Ended December 31, 2014 |
|||||||||||||||||||
|
Premiums and policy fees |
$ |
812,323 |
$ |
848,183 |
$ |
755,300 |
$ |
867,263 |
|||||||||||
|
Reinsurance ceded |
(333,506 |
) |
(348,255 |
) |
(283,104 |
) |
(430,878 |
) |
|||||||||||
|
Net of reinsurance ceded |
478,817 |
499,928 |
472,196 |
436,385 |
|||||||||||||||
|
Net investment income |
514,037 |
525,576 |
532,861 |
525,539 |
|||||||||||||||
|
Realized investment gains (losses) |
30,981 |
42,386 |
39,299 |
71,869 |
|||||||||||||||
|
Other income |
65,514 |
71,296 |
72,404 |
85,119 |
|||||||||||||||
|
Total revenues |
1,089,349 |
1,139,186 |
1,116,760 |
1,118,912 |
|||||||||||||||
|
Total benefits and expenses |
937,738 |
966,571 |
932,640 |
888,469 |
|||||||||||||||
|
Income before income tax |
151,611 |
172,615 |
184,120 |
230,443 |
|||||||||||||||
|
Income tax expense |
49,062 |
56,572 |
62,287 |
78,917 |
|||||||||||||||
|
Net income |
$ |
102,549 |
$ |
116,043 |
$ |
121,833 |
$ |
151,526 |
|||||||||||
F-128
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26. CONSOLIDATED QUARTERLY RESULTS — (Continued)
|
January 1, 2015
to January 31, 2015 |
|||||||
|
(Dollars In Thousands) |
|||||||
|
Predecessor Company |
|||||||
|
Premiums and policy fees |
$ |
260,582 |
|||||
|
Reinsurance ceded |
(91,632 |
) |
|||||
|
Net of reinsurance ceded |
168,950 |
||||||
|
Net investment income |
164,605 |
||||||
|
Realized investment gains (losses) |
102,703 |
||||||
|
Other income |
23,388 |
||||||
|
Total revenues |
459,646 |
||||||
|
Total benefits and expenses |
326,799 |
||||||
|
Income before income tax |
132,847 |
||||||
|
Income tax expense |
44,325 |
||||||
|
Net income |
$ |
88,522 |
|||||
27. SUBSEQUENT EVENTS
On January 15, 2016, the Company completed the transaction contemplated by the Master Agreement with GLAIC. Pursuant to the Master Agreement, on January 15, 2016, the Company entered into a reinsurance agreement (the "Reinsurance Agreement") under the terms of which the Company coinsures certain term life insurance business of GLAIC (the "GLAIC Block"). In connection with the reinsurance transaction, on January 15, 2016, Golden Gate Captive Insurance Company ("Golden Gate"), a wholly owned subsidiary of the Company, and Steel City, LLC ("Steel City"), a newly formed wholly owned subsidiary of PLC, entered into an 18-year transaction to finance $2.188 billion of "XXX" reserves related to the acquired GLAIC Block and the other term life insurance business reinsured to Golden Gate by the Company and West Coast Life Insurance Company ("WCL"), a direct wholly owned subsidiary. Steel City issued notes with an aggregate initial principal amount of $2.188 billion to Golden Gate in exchange for a surplus note issued by Golden Gate with an initial principal amount of $2.188 billion. Through the structure, Hannover Life Reassurance Company of America (Bermuda) Ltd., The Canada Life Assurance Company (Barbados Branch) and Nomura Americas Re Ltd. (collectively, the "Risk-Takers") provide credit enhancement to the Steel City notes for the 18-year term in exchange for credit enhancement fees. The transaction is "non-recourse" to PLC, WCL and the Company, meaning that none of these companies are liable to reimburse the Risk-Takers for any credit enhancement payments required to be made. In connection with the transaction, PLC entered into certain support agreements under which it guarantees or otherwise supports certain obligations of Golden Gate or Steel City, including a guarantee of the fees to the Risk-Takers. The estimated average annual expense of the credit enhancement under generally accepted accounting principles is approximately $3.1 million, after-tax. As a result of the financing transaction described above, the $800 million of Golden Gate Series A Surplus Notes held by PLC were contributed to the Company and then subsequently contributed to Golden Gate, which resulted in the extinguishment of these notes. Also on January 15, 2016, Golden Gate paid an extraordinary dividend of $300 million to the Company as approved by the Vermont Department of Financial Regulation.
F-129
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27. SUBSEQUENT EVENTS — (Continued)
The Company has evaluated the effects of events subsequent to December 31, 2015 (Successor Company), and through the date we filed our consolidated financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in our consolidated financial statements.
F-130
SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES
|
Segment |
Deferred
Policy Acquisition Costs and Value of Businesses Acquired |
Future Policy
Benefits and Claims |
Unearned
Premiums |
Stable Value
Products, Annuity Contracts and Other Policyholders' Funds |
Net
Premiums and Policy Fees |
Net
Investment Income(1) |
Benefits
and Settlement Expenses |
Amortization
of Deferred Policy Acquisitions Costs and Value of Businesses Acquired |
Other
Operating Expenses(1) |
Premiums
Written(2) |
|||||||||||||||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||||||||||||||||||
|
Successor Company
February 1, 2015 to December 31, 2015 |
|||||||||||||||||||||||||||||||||||||||||||
|
Life Marketing |
$ |
1,119,515 |
$ |
13,869,102 |
$ |
134 |
$ |
371,618 |
$ |
882,171 |
$ |
446,518 |
$ |
1,109,840 |
$ |
107,811 |
$ |
58,609 |
$ |
148 |
|||||||||||||||||||||||
|
Acquisitions |
(178,662 |
) |
14,508,877 |
3,082 |
4,254,579 |
690,741 |
639,422 |
1,067,482 |
2,035 |
89,960 |
32,134 |
||||||||||||||||||||||||||||||||
|
Annuities |
578,742 |
1,196,131 |
— |
7,090,171 |
62,583 |
296,839 |
224,934 |
(41,071 |
) |
123,585 |
— |
||||||||||||||||||||||||||||||||
|
Stable Value
Products |
2,357 |
— |
— |
2,131,822 |
— |
78,459 |
19,348 |
43 |
2,620 |
— |
|||||||||||||||||||||||||||||||||
|
Asset
Protection |
40,421 |
60,585 |
647,186 |
— |
168,780 |
14,042 |
99,216 |
26,219 |
151,590 |
161,869 |
|||||||||||||||||||||||||||||||||
|
Corporate
and Other |
— |
68,495 |
803 |
73,066 |
13,676 |
57,516 |
14,568 |
27 |
176,038 |
13,583 |
|||||||||||||||||||||||||||||||||
|
Total |
$ |
1,562,373 |
$ |
29,703,190 |
$ |
651,205 |
$ |
13,921,256 |
$ |
1,817,951 |
$ |
1,532,796 |
$ |
2,535,388 |
$ |
95,064 |
$ |
602,402 |
$ |
207,734 |
|||||||||||||||||||||||
|
Predecessor Company
For The Year Ended December 31, 2014 |
|||||||||||||||||||||||||||||||||||||||||||
|
Life Marketing |
$ |
1,973,156 |
$ |
14,077,360 |
$ |
772,880 |
$ |
349,698 |
$ |
854,186 |
$ |
553,006 |
$ |
1,075,386 |
$ |
175,807 |
$ |
47,688 |
$ |
151 |
|||||||||||||||||||||||
|
Acquisitions |
600,482 |
14,740,562 |
3,473 |
4,770,181 |
772,020 |
874,653 |
1,247,836 |
60,031 |
122,349 |
35,857 |
|||||||||||||||||||||||||||||||||
|
Annuities |
539,965 |
1,015,928 |
120,850 |
7,190,908 |
75,446 |
465,849 |
314,488 |
47,448 |
115,643 |
— |
|||||||||||||||||||||||||||||||||
|
Stable Value
Products |
621 |
— |
— |
1,959,488 |
— |
107,170 |
35,559 |
380 |
1,413 |
— |
|||||||||||||||||||||||||||||||||
|
Asset
Protection |
40,503 |
46,963 |
616,908 |
— |
169,212 |
18,830 |
93,193 |
24,169 |
161,760 |
160,948 |
|||||||||||||||||||||||||||||||||
|
Corporate
and Other |
319 |
63,664 |
890 |
70,267 |
16,462 |
78,505 |
20,001 |
485 |
181,782 |
16,388 |
|||||||||||||||||||||||||||||||||
|
Total |
$ |
3,155,046 |
$ |
29,944,477 |
$ |
1,515,001 |
$ |
14,340,542 |
$ |
1,887,326 |
$ |
2,098,013 |
$ |
2,786,463 |
$ |
308,320 |
$ |
630,635 |
$ |
213,344 |
|||||||||||||||||||||||
|
For The Year Ended December 31, 2013 |
|||||||||||||||||||||||||||||||||||||||||||
|
Life Marketing |
$ |
2,071,470 |
$ |
13,504,869 |
$ |
812,929 |
$ |
311,290 |
$ |
796,109 |
$ |
521,219 |
$ |
1,143,132 |
$ |
25,774 |
$ |
46,263 |
$ |
173 |
|||||||||||||||||||||||
|
Acquisitions |
799,255 |
15,112,574 |
4,680 |
4,734,487 |
519,477 |
617,298 |
851,386 |
72,762 |
78,244 |
24,781 |
|||||||||||||||||||||||||||||||||
|
Annuities |
554,974 |
1,037,348 |
102,734 |
7,228,119 |
80,343 |
468,329 |
318,173 |
31,498 |
110,266 |
— |
|||||||||||||||||||||||||||||||||
|
Stable Value
Products |
1,001 |
— |
— |
2,559,552 |
— |
123,798 |
41,793 |
398 |
1,805 |
— |
|||||||||||||||||||||||||||||||||
|
Asset
Protection |
49,276 |
49,362 |
578,755 |
1,556 |
165,807 |
19,046 |
97,174 |
23,603 |
155,857 |
157,629 |
|||||||||||||||||||||||||||||||||
|
Corporate
and Other |
646 |
67,805 |
1,296 |
64,181 |
18,149 |
86,498 |
22,330 |
625 |
161,088 |
18,141 |
|||||||||||||||||||||||||||||||||
|
Total |
$ |
3,476,622 |
$ |
29,771,958 |
$ |
1,500,394 |
$ |
14,899,185 |
$ |
1,579,885 |
$ |
1,836,188 |
$ |
2,473,988 |
$ |
154,660 |
$ |
553,523 |
$ |
200,724 |
|||||||||||||||||||||||
(1) Allocations of Net Investment Income and Other Operating Expenses are based on a number of assumptions and estimates and results would change if different methods were applied.
(2) Excludes Life Insurance
S-1
SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES (Continued)
|
Segment |
Net
Premiums and Policy Fees |
Net
Investment Income(1) |
Benefits
and Settlement Expenses |
Amortization
of Deferred Policy Acquisitions Costs and Value of Businesses Acquired |
Other
Operating Expenses(1) |
Premiums
Written(2) |
|||||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||||||
|
Predecessor Company
January 1, 2015 to January 31, 2015 |
|||||||||||||||||||||||||||
|
Life Marketing |
$ |
84,926 |
$ |
47,622 |
$ |
123,179 |
$ |
4,813 |
$ |
7,124 |
$ |
12 |
|||||||||||||||
|
Acquisitions |
62,343 |
71,088 |
101,926 |
5,033 |
9,041 |
2,134 |
|||||||||||||||||||||
|
Annuities |
6,355 |
37,189 |
30,047 |
(6,999 |
) |
9,333 |
— |
||||||||||||||||||||
|
Stable Value Products |
— |
6,888 |
2,255 |
25 |
79 |
— |
|||||||||||||||||||||
|
Asset Protection |
13,983 |
1,540 |
7,447 |
1,858 |
13,354 |
13,330 |
|||||||||||||||||||||
|
Corporate and Other |
1,343 |
278 |
1,721 |
87 |
16,476 |
1,345 |
|||||||||||||||||||||
|
Total |
$ |
168,950 |
$ |
164,605 |
$ |
266,575 |
$ |
4,817 |
$ |
55,407 |
$ |
16,821 |
|||||||||||||||
(1) Allocations of Net Investment Income and Other Operating Expenses are based on a number of assumptions and estimates and results would change if different methods were applied.
(2) Excludes Life Insurance
S-2
SCHEDULE IV — REINSURANCE
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
|
Successor Company |
|||||||||||||||||||||||
|
Gross
Amount |
Ceded to
Other Companies |
Assumed
from Other Companies |
Net
Amount |
Percentage of
Amount Assumed to Net |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
February 1, 2015 to December 31, 2015 |
|||||||||||||||||||||||
|
Life insurance in-force |
$ |
727,705,256 |
$ |
(368,142,294 |
) |
$ |
39,546,742 |
$ |
399,109,704 |
9.9 |
% |
||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
2,360,643 |
(1,058,706 |
) |
308,280 |
1,610,217 |
(1) |
19.1 |
% |
|||||||||||||||
|
Accident/health insurance |
70,243 |
(36,871 |
) |
18,252 |
51,624 |
35.4 |
|||||||||||||||||
|
Property and liability
insurance |
228,500 |
(79,294 |
) |
6,904 |
156,110 |
4.4 |
|||||||||||||||||
|
Total |
$ |
2,659,386 |
$ |
(1,174,871 |
) |
$ |
333,436 |
$ |
1,817,951 |
||||||||||||||
|
Predecessor Company |
|||||||||||||||||||||||
|
Gross
Amount |
Ceded to
Other Companies |
Assumed
from Other Companies |
Net
Amount |
Percentage of
Amount Assumed to Net |
|||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
January 1, 2015 to January 31, 2015(2) |
|||||||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
$ |
204,185 |
$ |
(80,657 |
) |
$ |
28,601 |
$ |
152,129 |
(1) |
18.8 |
% |
|||||||||||
|
Accident/health insurance |
6,846 |
(4,621 |
) |
1,809 |
4,034 |
44.8 |
|||||||||||||||||
|
Property and liability
insurance |
18,475 |
(6,354 |
) |
666 |
12,787 |
5.2 |
|||||||||||||||||
|
Total |
$ |
229,506 |
$ |
(91,632 |
) |
$ |
31,076 |
$ |
168,950 |
||||||||||||||
|
For The Year Ended December 31, 2014: |
|||||||||||||||||||||||
|
Life insurance in-force |
$ |
721,036,332 |
$ |
(388,890,060 |
) |
$ |
43,237,358 |
$ |
375,383,630 |
11.5 |
% |
||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
2,603,956 |
(1,279,908 |
) |
349,934 |
1,673,982 |
(1) |
20.9 |
% |
|||||||||||||||
|
Accident/health insurance |
81,037 |
(42,741 |
) |
20,804 |
59,100 |
35.2 |
|||||||||||||||||
|
Property and liability
insurance |
218,663 |
(73,094 |
) |
8,675 |
154,244 |
5.6 |
|||||||||||||||||
|
Total |
$ |
2,903,656 |
$ |
(1,395,743 |
) |
$ |
379,413 |
$ |
1,887,326 |
||||||||||||||
|
For The Year Ended December 31, 2013: |
|||||||||||||||||||||||
|
Life insurance in-force |
$ |
726,697,151 |
$ |
(416,809,287 |
) |
$ |
46,752,176 |
$ |
356,640,040 |
13.1 |
% |
||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
2,371,872 |
(1,299,631 |
) |
306,921 |
1,379,162 |
(1) |
22.3 |
% |
|||||||||||||||
|
Accident/health insurance |
45,262 |
(20,011 |
) |
24,291 |
49,542 |
49.0 |
|||||||||||||||||
|
Property and liability
insurance |
210,999 |
(67,795 |
) |
7,977 |
151,181 |
5.3 |
|||||||||||||||||
|
Total |
$ |
2,628,133 |
$ |
(1,387,437 |
) |
$ |
339,189 |
$ |
1,579,885 |
||||||||||||||
(1) Includes annuity policy fees of $77.2 million, $7.7 million $92.8 million, and $88.7 million for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014, and 2013 (Predecessor Company), respectively.
(2) January 31, 2015 (Predecessor Company) balance sheet information is not presented in our consolidated financial statements, therefore January 31, 2015 Life Insurance In-Force has been omitted from this schedule.
S-3
SCHEDULE V — VALUATION AND QUALIFYING ACCOUNTS
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
|
Successor Company |
|||||||||||||||||||||||
|
Additions |
|||||||||||||||||||||||
|
Description |
Balance
at beginning of period |
Charged to
costs and expenses |
Charges
to other accounts |
Deductions |
Balance
at end of period |
||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
As of December 31, 2015 |
|||||||||||||||||||||||
|
Allowance for losses on commercial
mortgage loans |
$ |
— |
$ |
2,561 |
$ |
— |
$ |
(2,561 |
) |
$ |
— |
||||||||||||
|
Predecessor Company |
|||||||||||||||||||||||
|
Additions |
|||||||||||||||||||||||
|
Description |
Balance
at beginning of period |
Charged to
costs and expenses |
Charges
to other accounts |
Deductions |
Balance
at end of period |
||||||||||||||||||
|
(Dollars In Thousands) |
|||||||||||||||||||||||
|
As of January 31, 2015 |
|||||||||||||||||||||||
|
Allowance for losses on commercial
mortgage loans |
$ |
5,720 |
$ |
(2,359 |
) |
$ |
— |
$ |
(861 |
) |
$ |
2,500 |
|||||||||||
|
As of December 31, 2014 |
|||||||||||||||||||||||
|
Allowance for losses on commercial
mortgage loans |
$ |
3,130 |
$ |
3,265 |
$ |
— |
$ |
(675 |
) |
$ |
5,720 |
||||||||||||
S-4
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
All required financial statements are included in Part A and Part B of this Registration Statement.
(b) Exhibits:
1. Resolution of the Board of Directors of Protective Life Insurance Company ("PLICO") authorizing establishment of the Protective Life Variable Annuity Separate Account (1)
2. Not applicable
3. (a) Distribution Agreement between IDI and PLICO (11)
(b) Second Amended Distribution Agreement between IDI and PLICO (16)
4. (a) Form of Individual Flexible Premium Deferred Variable and Fixed Annuity Contract (14)
(b) Contract Schedule for Individual Contracts (14)
(c) Guaranteed Account Endorsement (14)
(d) Qualified Retirement Plan Endorsement (13)
(e) Roth IRA Endorsement (13)
(f) Traditional IRA Endorsement (13)
(g) Return of Purchase Payments Death Benefit Rider (14)
(h) Annuitization Bonus Endorsement (13)
(i) Waiver of Surrender Charge for Terminal Illness or Nursing Home Confinement (13)
(j) Allocation Adjustment Program Endorsement (14)
5. (a) Form of Contract Application for Individual Flexible Premium Deferred Variable and Fixed Annuity Contract (14)
6. (a) 2011 Amended and Restated Charter of Protective Life Insurance Company (12)
(b) 2011 Amended and Restated Bylaws of Protective Life Insurance Company (12)
7. Reinsurance Agreement not applicable
8. (a) Participation Agreement (Oppenheimer Variable Account Funds) (2)
(b) Participation Agreement (MFS Variable Insurance Trust) (2)
(c) Participation Agreement (Lord Abbett Series Fund) (4)
(d) Form of Participation Agreement for Service Class Shares (Oppenheimer Variable Account Funds) (3)
(e) Form of Amended and Restated Participation Agreement (MFS Variable Insurance Trust) (3)
(f) Form of Participation Agreement (Goldman Sachs Variable Insurance Trust) (5)
(i) Amendment to Participation Agreement re Summary Prospectus (Goldman Sachs Variable Insurance Trust) (10)
(g) Participation Agreement (Fidelity Variable Insurance Products) (6)
(h) Amended and Restated Participation Agreement (Fidelity Variable Insurance Products) (7)
(i) Participation Agreement (Franklin Templeton Variable Insurance Products Trust) (7)
(i) Amendment to Participation Agreement re Summary Prospectus (Franklin Templeton Variable Insurance Products Trust) (10)
(j) Rule 22c-2 Shareholder Information Agreement (Fidelity Variable Insurance Products) (8)
(k) Rule 22c-2 Shareholder Information Agreement (Franklin Templeton Variable Insurance Products Trust) (8)
(l) Rule 22c-2 Shareholder Information Agreement (Goldman Sachs Variable Insurance Trust) (8)
(m) Rule 22c-2 Shareholder Information Agreement (Lord Abbett Series Fund) (8)
(n) Rule 22c-2 Shareholder Information Agreement (MFS Variable Insurance Trust) (8)
(o) Rule 22c-2 Shareholder Information Agreement (Oppenheimer Variable Account Funds) (8)
(p) Participation Agreement (Legg Mason) (9)
C-1
(q) Participation Agreement (PIMCO) (9)
(i) Form of Novation of and Amendment to Participation Agreement (PIMCO) (10)
(ii) Form of Amendment to Participation Agreement re Summary Prospectuses (PIMCO) (10)
(r) Participation Agreement (Royce Capital) (9)
(s) Rule 22c-2 Information Sharing Agreement (Royce) (9)
(t) Participation Agreement (AIM Variable Insurance Funds (Invesco Variable Insurance Funds)) (10)
(u) Participation Agreement (Rydex and Guggenheim) (15)
(v) Participation Agreement (Clayton Street Trust) (17)
(w) Rule 22c-2 Agreement (Clayton Street Trust)
9. Opinion and Consent of Max Berueffy, Esq. (14)
10. (a) Consent of Sutherland, Asbill & Brennan, LLP (17)
(b) Consent of PricewaterhouseCoopers LLP (17)
11. No financial statements will be omitted from Item 23
12. Not applicable
13. Powers of attorney (17)
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to the Form N-4 Registration Statement, (File No. 33-70984) filed with the Commission on February 23, 1994.
(2) Incorporated herein by reference to Post-Effective Amendment No. 5 to the Form N-4 Registration Statement, (File No. 33-70984) filed with the Commission on April 30, 1997.
(3) Incorporated herein by reference to Post-Effective Amendment No. 47 to the Form N-4 Registration Statement, (File No. 333-94047), filed with the Commission on April 30, 2003.
(4) Incorporated herein by reference to Post-Effective Amendment No. 3 to the Form N-4 Registration Statement (File No. 333-94047), filed with the Commission on April 25, 2002.
(5) Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (File No. 333-112892), filed with the Commission on February 17, 2004.
(6)
Incorporated herein by reference to Pre-Effective Amendment No.1 to the Form N-4 Registration Statement
(File No. 333-107331), filed with the Commission on November 26, 2003.
(7) Incorporated herein by reference to Post-Effective Amendment No. 2 to the Form N-4 Registration Statement (File No. 333-116813), filed with the Commission on April 28, 2006.
(8) Incorporated herein by reference to Post-Effective Amendment No. 17 (File No. 33-70984), filed with the Commission on April 27, 2007.
(9) Incorporated herein by reference to Post-Effective Amendment No. 15 to the Form N-4 Registration Statement (File No. 333-113070), filed with the Commission on October 28, 2009.
(10) Incorporated herein by reference to Post-Effective Amendment No. 19 to the Form N-4 Registration Statement (File No. 333-113070), filed with the Commission on April 25, 2011.
(11) Incorporated herein by reference to Post-Effective Amendment No. 7 to the Form N-4 Registration Statement (File No. 333-153041), filed with the Commission on September 16, 2011.
(12)
Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement
(File No. 333-176657), filed with the Commission on September 2, 2011.
(13)
Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement
(File No. 333-179649), filed with the Commission on February 23, 2012.
(14) Incorporated herein by reference to the initial filing of the Form N-4 Registration Statement (333-190294), filed with the Commission on August 1, 2013.
(15) Incorporated herein by reference to Pre-Effective Amendment No. 2 to the Form N-4 Registration Statement (File No. 333-190294), filed with the Commission on October 25, 2013.
(16) Incorporated herein by reference to Post-Effective Amendment No. 2 to the Form N-4 Registration Statement (File No. 333-190294), filed with the Commission on April 25, 2014.
(17) Filed herewith.
C-2
Item 25. Directors and Officers of Depositor.
|
Name and Principal Business Address |
Position and Offices with Depositor |
||||||
|
John D. Johns
Richard J. Bielen Carl S. Thigpen Deborah J. Long Michael G. Temple Steve G. Walker D. Scott Adams John Sawyer Nancy Kane Frank Sottosanti Lance Black Scott Karchunas Wayne E. Stuenkel Phil Passafiume Robert Bedwell Mark Cyphert Stephane Goyer Richard Kurtz Aaron C. Seurkamp Steve M. Callaway David M. Loper Barrie B. Stokes Wade V. Harrison Kevin B. Borie Matthew Riebel K. Todd Thompson Paul R. Wells Vincent Cirulli Wendy L. Evesque Derry W. Herring Matthew Kohler Chandrasekhar Pisupati Lucinda S. Williams |
Chairman of the Board, Chief Executive Officer, and Director
President, Chief Operating Officer, and Director Executive Vice President, Chief Investment Officer and Director Executive Vice President, General Counsel, Secretary, and Chief Legal Officer Executive Vice President, Finance and Risk, and Chief Risk Officer Executive Vice President, Chief Financial Officer, and Controller Executive Vice President and Chief Administrative Officer Senior Vice President and Chief Distribution Officer Senior Vice President, Acquisitions and Corporate Development Senior Vice President and Chief Marketing Officer Senior Vice President and Treasurer Senior Vice President, Asset Protection Division Senior Vice President and Chief Actuary Senior Vice President and Director, Fixed Income Senior Vice President, Mortgage Loans Senior Vice President and Chief Information and Operations Officer Senior Vice President and Head of Insurance Risk Senior Vice President, Dealer Sales, APD Senior Vice President, Life Sales Senior Vice President and Senior Associate Counsel Senior Vice President and Senior Associate Counsel Senior Vice President and Senior Associate Counsel Senior Vice President and Chief Product Actuary Senior Vice President and Chief Valuation Actuary Senior Vice President, IDG Sales and Marketing Administration Senior Vice President, BD National Annuity Sales Manager Senior Vice President, LAD Chief Financial Officer Senior Vice President, Derivatives and VA Hedging Senior Vice President, Chief Human Resource Officer Senior Vice President, Chief Auditor Senior Vice President, Chief Technology Officer Senior Vice President, Credit and Market Risk Senior Vice President, Customer Experience |
||||||
* Unless otherwise indicated, principal business address is 2801 Highway 280 South, Birmingham, Alabama 35223.
Item 26. Persons Controlled by or Under Common Control With the Depositor and Registrant.
The registrant is a segregated asset account of the Company and is therefore owned and controlled by the Company. All of the Company's outstanding voting common stock is owned by Protective Life Corporation, a subsidiary of The Dai-ichi Life Insurance Company, Limited. Protective Life Corporation is described more fully in the prospectus included in this registration statement. Various companies and other entities controlled by Protective Life Corporation may therefore be considered to be under common control with the registrant or the Company. Such other companies and entities, together with the identity of their controlling persons (where applicable), are set forth in Exhibit 21 to Form 10-K of Protective Life Corporation for the fiscal year ended December 31, 2015 (File No. 1-11339) filed with the Commission on February 25, 2016.
Item 27. Number of Contractowners.
As of March 31, 2016, there were 6,001 contract owners of Protective Variable Annuity Investors Series individual flexible premium deferred variable and fixed annuity contracts offered by Registrant.
C-3
Item 28. Indemnification of Directors and Officers.
Article XI of the By-laws of Protective Life provides, in substance, that any of Protective Life's directors and officers, who is a party or is threatened to be made a party to any action, suit or proceeding, other than an action by or in the right of Protective Life, by reason of the fact that he is or was an officer or director, shall be indemnified by Protective Life against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such claim, action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Protective Life and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. If the claim, action or suit is or was by or in the right of Protective Life to procure a judgment in its favor, such person shall be indemnified by Protective Life against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of Protective Life, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to Protective Life unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. To the extent that a director or officer has been successful on the merits or otherwise in defense of any such action, suit or proceeding, or in defense of any claim, issue or matter therein, he shall be indemnified by Protective Life against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith, not withstanding that he has not been successful on any other claim issue or matter in any such action, suit or proceeding. Unless ordered by a court, indemnification shall be made by Protective Life only as authorized in the specific case upon a determination that indemnification of the officer or director is proper in the circumstances because he has met the applicable standard of conduct. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to, or who have been successful on the merits or otherwise with respect to, such claim action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion or (c) by the shareholders.
In addition, the executive officers and directors are insured by PLC's Directors' and Officers' Liability Insurance Policy including Company Reimbursement and are indemnified by a written contract with PLC which supplements such coverage.
Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Item 29. Principal Underwriter.
(a) Investment Distributors, Inc. ("IDI") is the principal underwriter of the Contracts as defined in the Investment Company Act of 1940. IDI is also principal underwriter for the Protective Variable Life Separate Account and Variable Annuity Account A of Protective Life.
(b) The following information is furnished with respect to the officers and directors of Investment Distributors, Inc.
C-4
|
Name and Principal
Business Address* |
Position and Offices |
Position and Offices with Registrant |
|||||||||
|
Edwin V. Caldwell
|
President and Director
|
Vice President, New Business
Operations, Life and Annuity Division |
|||||||||
|
Barry K. Brown |
Assistant Secretary |
Second Vice President, LLC Commissions |
|||||||||
|
Letitia Morsch
|
Assistant Secretary
|
Second Vice President, Annuity and
VUL Administration |
|||||||||
|
Steve M. Callaway |
Chief Compliance Officer, Secretary and Director |
None |
|||||||||
|
Julena Johnson |
Assistant Compliance Officer |
Senior Compliance Analyst II |
|||||||||
|
Carol Majewski |
Assistant Compliance Officer |
Director I, Compliance Officer |
|||||||||
|
Joseph F. Gilmer
|
Assistant Financial Officer and Director |
Assistant Vice President, Annuity Financial
Reporting |
|||||||||
|
Lawrence J. Debnar |
Assistant Financial Officer |
Vice President, Financial Reporting |
|||||||||
|
Rayburn Tennent |
Chief Financial Officer |
None |
|||||||||
* Unless otherwise indicated, principal business address is 2801 Highway 280 South, Birmingham, Alabama, 35223.
(c) The following commissions were received by each principal underwriter, directly or indirectly, from the Registrant during the Registrant's last fiscal year:
|
(1) Name of Principal
Underwriter |
(2) Net Underwriting
Discounts and Commissions |
(3) Compensation on
Redemption |
(4) Brokerage
Commissions |
(5) Other
Compensation |
|||||||||||||||
|
Investment Distributors, Inc. |
N/A |
None |
N/A |
N/A |
|||||||||||||||
Item 30. Location of Accounts and Records.
All accounts and records required to be maintained by Section 31(c) of the Investment Company Act of 1940 and the rules thereunder are maintained by Protective Life Insurance Company at 2801 Highway 280 South, Birmingham, Alabama 35223.
Item 31. Management Services.
All management contracts are discussed in Part A or Part B.
Item 32. Undertakings.
(a) Registrant hereby undertakes to file a post-effective amendment to this registration statement as frequently as is necessary to ensure that the audited financial statements in the registration statement are never more than sixteen (16) months old for so long as payments under the variable annuity contracts may be accepted.
(b) Registrant hereby undertakes to include either (1) as part of any application to purchase a contract offered by the Prospectus, a space that an applicant can check to request a Statement of Additional Information, or (2) a postcard or similar written communication affixed to or included in the Prospectus that the applicant can remove to send for a Statement of Additional Information.
(c) Registrant hereby undertakes to deliver any Statement of Additional Information and any financial statement required to be made available under this Form promptly upon written or oral request.
(d) Protective Life hereby represents that the fees and charges deducted under the Contract, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by Protective Life.
C-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant of this Registration Statement hereby certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Registration Statement and has duly caused this Post-effective Amendment to the Registration Statement on Form N-4 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Birmingham, State of Alabama, on April 26, 2016.
PROTECTIVE VARIABLE ANNUITY SEPARATE ACCOUNT
By: *
Richard J. Bielen,
President
Protective Life Insurance Company
PROTECTIVE LIFE INSURANCE COMPANY
By: *
Richard J. Bielen,
President
Protective Life Insurance Company
As required by the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement on Form N-4 has been signed by the following persons in the capacities and on the dates indicated:
| Signature |
Title |
Date |
|||||||||
|
*
John D. Johns |
Chairman of the Board, Chief Executive Officer and Director
(Principal Executive Officer) |
April 26, 2016 |
|||||||||
|
*
Richard J. Bielen |
President, Chief Operating Officer and Director
(Principal Operating Officer) |
April 26, 2016 |
|||||||||
|
*
Steven G. Walker |
Executive Vice President, Controller and
Chief Financial Officer (Principal Accounting Officer) |
April 26, 2016 |
|||||||||
|
*
Carl S. Thigpen |
Executive Vice President, Chief Investment Officer and Director |
April 26, 2016 |
|||||||||
|
*BY: /S/ MAX BERUEFFY
Max Berueffy Attorney-in-Fact |
April 26, 2016 |
||||||||||
C-6
Exhibit Index
8. (v) Participation Agreement (Clayton Street Trust)
(w) Rule 22c-2 Agreement (Clayton Street Trust)
10. (a) Consent of Sutherland, Asbill & Brennan, LLP
(b) Consent of PricewaterhouseCoopers LLP
13. Powers of attorney
C-7
Exhibit 99.8(v)
FUND PARTICIPATION AGREEMENT
Clayton Street Trust
THIS AGREEMENT is made this day of , between Janus Distributors LLC (the “Distributor”) and Janus Services LLC (“Janus Services”), each a Delaware limited liability company, and Protective Life Insurance Company, a life insurance company organized under the laws of the State of Tennessee (the “Company”), on its own behalf and on behalf of each segregated asset account of the Company set forth on Schedule A, as may be amended from time to time (the “Accounts”).
W I T N E S S E T H :
WHEREAS, the Distributor serves as the Distributor and principal underwriter for Clayton Street Trust ( the “Trust”), an open-end management investment company registered with the Securities and Exchange Commission (the “SEC”) under the Investment Company Act of 1940 (the “1940 Act”); and
WHEREAS, the Trust is comprised of a number of investment portfolios (each, a “Portfolio”) and issues a separate series of shares of beneficial interest (the “Shares”) for each Portfolio representing a fractional undivided interest in that Portfolio. Each series of shares may be divided into several classes (“Classes”); and
WHEREAS, all Shares of the Trust are registered with the SEC under the Securities Act of 1933, as amended (the “1933 Act”) on Form N-1A. The term “registration statement,” as used herein, means the Trust’s 1933 Act registration statement on Form N-1A filed with the SEC, including all prospectuses therein (each, a “Prospectus”), statements of additional information therein (each, an “SAI”) and exhibits thereto, as of the effective date of the most recent post-effective amendment thereto; and
WHEREAS, Janus Services serves as the transfer agent for the Trust and has been designated by the Trust and the Distributor as the party authorized to receive orders for transactions in Shares; and
WHEREAS, the Company desires to submit orders to effect transactions in Shares of one or more of the Portfolios as set forth on Schedule B (attached hereto) for separate accounts established for variable life insurance policies and variable annuity contracts to be offered by the Company; and
WHEREAS, the Distributor and Company are members in good standing of the National Securities Clearing Corporation (the “NSCC”) and have access to the NSCC’s Defined Contribution Clearance and Settlement system (“DCC&S”) and/or Fund/SERV system (“Fund/SERV”) (collectively, the “NSCC Systems”); and
WHEREAS, the Company has registered or will register (unless registration is not required under applicable law) certain variable life insurance policies and/or variable annuity contracts under the 1933 Act (the “Contracts”); and
WHEREAS, the Company has registered or will register each Account as a unit investment trust under the 1940 Act; and
WHEREAS, the Company desires to utilize the Shares of one or more Portfolios as an investment vehicle of the Accounts.
NOW, THEREFORE, in consideration of their mutual promises, the parties agree as follows:
ARTICLE I
Sale of Trust Shares
1.1 The Distributor agrees to make Shares available for purchase at the applicable net asset value per share by the Company and its Accounts on those days on which the Trust calculates its net asset value pursuant to rules of the SEC. The Trust shall use reasonable efforts to calculate such net asset value on each day which the New York Stock Exchange is open for trading.
1.2 The Company shall submit orders for the purchase, redemption or exchange of Shares in accordance with Schedule C to this Agreement. The Distributor shall make Shares of the Portfolios listed on Schedule B available to the Accounts at the net asset value next computed after receipt of such purchase order by Janus Services, as established in accordance with the provisions of the then current Prospectus of the Trust. Shares of a particular Portfolio of the Trust shall be ordered in such quantities and at such times as determined by the Company to be necessary to meet the requirements of the Contracts. The Trustees of the Trust (the “Trustees”) may refuse to sell Shares of any Portfolio to any person, or suspend or terminate the offering of Shares of any Portfolio if such action is required by law or by regulatory authorities having jurisdiction or is, in the sole discretion of the Trustees acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, necessary in the best interests of the shareholders of such Portfolio (it being understood that for this purpose shareholders means Contract owners). The Distributor or Janus Services shall provide to Company, on behalf of the Trust, notice of the Trustees’ election to suspend or terminate the offering of Shares at least 10 business days, or as soon as otherwise reasonably practicable before such suspension or termination in order to give the Company sufficient time to prepare for such suspension or termination. With respect to payment of purchase price by the Company and of redemption proceeds by the Trust, the Company and Janus Services shall remit gross purchase and sale orders with respect to each Portfolio and shall transmit one net payment per Portfolio in accordance with the provisions of this Article I.
1.3 Janus Services will redeem any full or fractional Shares of any Portfolio when requested by the Company on behalf of an Account at the net asset value next computed after
receipt by Janus Services of the request for redemption, as established in accordance with the provisions of the then current Prospectus of the Trust. Janus Services shall make payment for such Shares in the manner established from time to time by Janus Services, but in no event shall payment be delayed for a greater period than is permitted by the 1940 Act.
1.4 For the purposes of Sections 1.1 and 1.2, Janus Services hereby appoints the Company as its agent for the limited purpose of receiving and accepting purchase and redemption orders resulting from investment in and payments under the Contracts, and receipt by such agent shall constitute receipt by Janus Services and the Trust.
1.5 Janus Services shall furnish prompt notice to the Company of any income dividends or capital gain distributions payable on the Trust’s Shares. The Company hereby elects to receive all such income dividends and capital gain distributions as are payable on a Portfolio’s Shares in additional Shares of that Portfolio. Janus Services shall notify the Company of the number of Shares so issued as payment of such dividends and distributions.
1.6 Janus Services shall make the net asset value per Share for each Portfolio available to the Company on a daily basis as soon as reasonably practical after the net asset value per Share is calculated (normally 6:30 p.m. Eastern time) and shall use its best efforts to make such net asset value per Share available by 7:00 p.m. Eastern time. If Janus Services is unable to meet the 7:00 p.m. Eastern time for the communication of net asset value information, Janus Services shall provide additional time for the Company to place orders for the purchase and redemption of Shares and make any applicable purchase payment. If Janus Services provides the Company with materially incorrect share net asset value information, Janus Services shall make an adjustment to the number of shares purchased or redeemed for the Accounts to reflect the correct net asset value per share. Janus Services shall make the determination as to whether an error in net asset value has occurred and is a material error in accordance with its own internal policies, which are consistent with SEC materiality guidelines. Any material error in the calculation or reporting of net asset value per share, dividend or capital gains information shall be reported promptly upon discovery to the Company. Any administrative or other costs or losses incurred for correcting underlying Contract owner accounts shall be at the Trust’s or Janus Services’ expense.
1.7 The Distributor agrees that Shares will be sold only to insurance companies and their separate accounts and to certain “qualified” pension and retirement plans, as defined by the Internal Revenue Service. No Shares of any Portfolio will be sold directly to the general public. The Company agrees that Trust Shares will be used only for the purposes of funding the Contracts and Accounts listed in Schedule A, as amended from time to time.
1.8 (a) All orders accepted by the Company shall be subject to the terms of the then current Prospectus of each Portfolio, including without limitation, policies regarding excessive trading. The Company shall use its best efforts, and shall reasonably cooperate with, Janus Services to enforce stated Prospectus policies regarding transactions in Shares, particularly those related to excessive trading and short-term trading. The Company acknowledges that orders accepted by it in violation of the Trust’s stated policies may be subsequently revoked or cancelled by the Trust or Janus Services and that neither the Trust, Janus Services nor the
Distributor shall be responsible for any losses incurred by the Company or Contract or Account as a result of such cancellation. Janus Services shall notify the Company of such cancellation prior to 12:00 p.m. New York time on the next Business Day after any such cancellation.
(b) The Company acknowledges and agrees that all orders for Shares are subject to acceptance or rejection by the Trust in its sole discretion and the Trust may, in its discretion, suspend or withdraw the sale of Shares of any Portfolios, including the sale of such Shares to the Company for the account of any Contract owner. In addition, the Company acknowledges that the Trust has the right to refuse any purchase order for any reason, particularly if the Trust determines that a Portfolio would be unable to invest the money effectively in accordance with its investment policies or would otherwise be adversely affected due to the size of the transaction, frequency of trading by the account, or other factors. Janus Services shall provide to Company, on behalf of the Trust, notice of the Trustees’ election to suspend or terminate the offering of Shares at least 10 business days, or as soon as otherwise reasonably practicable, before such suspension or termination in order to give the Company sufficient time to prepare for such suspension or termination. In an effort to reduce the risk of the Trust or Janus Services rejecting a purchase order or delaying a redemption order for a large trade, the Company agrees to use its best efforts to provide advance notice to Janus Services of an order in the amount of or over $1 million as soon as the Company has a reasonable basis to believe such order is valid.
1.9 The Company certifies that it is following all relevant rules and regulations, as well as internal policies and procedures, regarding “forward pricing” and the handling of mutual fund orders on a timely basis. As evidence of its compliance, the Company shall provide, upon request, certification to Janus Services or the Distributor that it is following all relevant rules, regulations, and internal policies and procedures regarding “forward pricing” and the handling of mutual fund orders on a timely basis.
ARTICLE II
Obligations of the Parties
2.1 The Trust shall prepare and be responsible for filing with the SEC and any state regulators requiring such filing all shareholder reports, notices, proxy materials (or similar materials such as voting instruction solicitation materials), Prospectuses and SAIs of the Trust. The Trust shall bear the costs of registration and qualification of its shares, preparation and filing of the documents listed in this Section 2.1 and all taxes to which an issuer is subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Distributor on behalf of the Trust shall either (a) provide the Company (at the Company’s expense) with as many copies of the Trust’s Shares’ current Prospectus, annual report, semi-annual report and other shareholder communications, including any amendments or supplements to any of the foregoing, as the Company shall reasonably request; or (b) provide the Company with a camera ready copy of such documents in a form suitable for printing. The Distributor shall provide the Company with a copy of the Shares’ SAI in a form suitable for duplication by the Company. The Distributor (at its or the Trust’s expense) shall provide the Company with copies of any Trust-sponsored proxy materials in such
quantity as the Company shall reasonably require for distribution to Contract owners.
2.3 (a) If the Company elects to print shareholder communications pursuant to 2.2(b) above, the Company shall bear the costs of printing and distributing the Trust’s prospectus, SAI, shareholder reports and other shareholder communications to owners of and applicants for policies for which Shares of the Trust are serving or are to serve as an investment vehicle. The Distributor or the Trust shall bear the costs of distributing proxy materials (or similar materials such as voting solicitation instruction) to Contract owners. The Company assumes sole responsibility for ensuring that such materials are delivered to Contract owners in accordance with applicable federal and state securities laws.
(b) If the Company elects to include any materials provided by the Distributor, specifically Prospectuses, SAIs, shareholder reports and proxy materials, on its web site or in any other computer or electronic format, the Company assumes sole responsibility for maintaining such materials in the form provided by the Distributor and for promptly replacing such materials with all updates provided by the Distributor.
2.4 The Company agrees and acknowledges that Janus International Holding LLC (“Janus Holding”) or its affiliate is the sole owner of the name and mark “Janus.” All references contained in this Agreement to “the name or mark ‘Janus’” shall include but not be limited to the Janus logo, the website www.janus.com and any and all electronic links relating to such website. Neither the Company, nor its affiliates, employees, or agents shall, without prior written consent of Janus Holding, use the name or mark “Janus” or make representations regarding the Distributor, Janus Services, the Trust, Janus Holding, or their affiliates, or any products or services sponsored, managed, advised, or administered by the Trust, Janus Holding, or their affiliates, except those contained in the then-current Prospectus and the then-current printed sales literature for the Shares of the Portfolios. The Company will make no use of the name or mark “Janus” except as expressly provided in this Agreement or expressly authorized by Janus Holding in writing. All goodwill associated with the name and mark “Janus” shall inure to the benefit of Janus Holding or its affiliate. Upon termination of this Agreement for any reason, the Company shall immediately cease any and all use of any Janus mark(s).
2.5 The Company shall furnish, or cause to be furnished, to the Distributor or its designee, a copy of each Contract prospectus or statement of additional information in which the Trust or its investment adviser is named prior to the filing of such document with the SEC. The Company shall furnish, or shall cause to be furnished, to the Distributor or its designee, each piece of sales literature or other promotional material in which the Trust or its investment adviser is named, at least ten (10) Business Days prior to its use, or such lesser time as the Distributor may agree to in writing for a specific piece from time to time. No such material shall be used if the Distributor or its designee reasonably objects to such use within ten (10) Business Days after receipt of such material. The Distributor may, but is not obligated, to agree to a lesser time for review for a specific piece, upon reasonable request by the Company.
2.6 The Company shall not give any information or make any representations or statements on behalf of the Trust or concerning the Trust or its investment adviser in connection with the sale of the Contracts other than information or representations contained in and
accurately derived from the registration statement or Prospectus for the Trust Shares (as such registration statement and Prospectus may be amended or supplemented from time to time), reports of the Trust, Trust-sponsored proxy statements, or in sales literature or other promotional material approved by the Distributor or its designee, except as required by legal process or regulatory authorities or with the written permission of the Distributor or its designee.
2.7 The Distributor, or its designee shall furnish, or shall cause to be furnished, to the Company or its designee, each piece of sales literature or other promotional material in which the Company and/or its Accounts, are named at least ten (10) Business Days prior to its use. The Company reserves the right to reasonably object to the continued use of such material and no material shall be used if the Company so objects. The Company may, but is not obligated, to agree to a lesser time for review for a specific piece, upon reasonable request by the Distributor.
2.8 Neither the Distributor, the Portfolios’ investment manager nor any of their designees, shall give any information or make any representations or statements on behalf of the Company or concerning the Company, the Accounts or the Contracts other than information or representations contained in and accurately derived from the registration statement or prospectus for the Contracts (as such registration statement and prospectus may be amended or supplemented from time to time), or in materials approved by the Company for distribution including sales literature or other promotional materials, except as required by legal process or regulatory authorities or with the written permission of the Company.
2.9 The Distributor, on behalf of the Trust, will provide to the Company at least one definitive copy of all registration statements, prospectuses, SAIs, reports, proxy materials, sales literature and other promotional materials, and all supplements and amendments thereto, that relate to the Trust or its Shares, contemporaneously with the filing of such document with the SEC or the Financial Industry Regulatory Authority (“FINRA”) or as soon as reasonably practical thereafter.
2.10 The Company will provide to the Distributor at least one definitive copy of all registration statements, prospectuses, SAIs, and all supplements and amendments thereto, that relate to the Trust or its Shares, contemporaneously with the filing of such document with the SEC, or as soon as reasonably practical thereafter.
2.11 So long as, and to the extent that the SEC interprets the 1940 Act to require pass-through voting privileges for variable Contract owners, the Company will provide pass-through voting privileges to Contract owners whose cash values are invested, through the Accounts, in shares of the Trust. The Distributor shall require all Participating Insurance Companies to calculate voting privileges in the same manner and the Company shall be responsible for assuring that the Accounts calculate voting privileges in the manner established by the Distributor. With respect to each Account, the Company will vote Shares of the Trust held by the Account and for which no timely voting instructions from Contract owners are received as well as Shares it owns that are held by that Account, in the same proportion as those Shares for which voting instructions are received.
ARTICLE III
Representations and Warranties
3.1 The Company represents and warrants that:
(a) it is an insurance company duly organized and in good standing under the laws of the State of Tennessee and that it has legally and validly established each Account as a segregated asset account under such law on the date set forth in Schedule A;
(b) each Account has been registered or, prior to any issuance or sale of the Contracts, will be registered as a unit investment trust in accordance with the provisions of the 1940 Act;
(c) the Contracts or interests in the Accounts (1) are or, prior to issuance, will be registered as securities under the 1933 Act or, alternatively (2) are not registered because they are properly exempt from registration under the 1933 Act or will be offered exclusively in transactions that are properly exempt from registration under the 1933 Act. The Company further represents and warrants that the Contracts will be issued in compliance in all material respects with all applicable federal and state laws, and that it has adopted procedures reasonably designed to comply in all material respects with applicable suitability and/or fiduciary requirements imposed by state or federal law in connection with the offer and sale of Contracts. The Company acknowledges that the Distributor is not responsible for the offering and sale of the Contracts.
(d) it is, and shall carry out its activities under this Agreement, in compliance with all applicable anti-money laundering laws, rules and regulations including, but not limited to, the U.S.A. PATRIOT Act of 2001, P.L. 107-56. The Company further represents that it has policies and procedures in place to detect money laundering and terrorist financing, including the reporting of suspicious activity.
(e) The Company is a “financial intermediary” as defined by SEC Rule 22c-2 of the 1940 Act (“The Rule”), and has entered into an appropriate agreement with the Distributor or one of its affiliates pursuant to the requirements of The Rule.
3.2 The Distributor represents and warrants that:
(a) it is duly organized and validly existing under the laws of the State of Delaware;
(b) it is a member in good standing of the FINRA and is registered as a broker-dealer with the SEC;
(c) the Trust is lawfully organized and validly existing under the laws of the State of Delaware and that it does and will comply in all material respects with the 1940 Act;
(d) the Trust Shares offered and sold pursuant to this Agreement will be
registered under the 1933 Act and the Trust shall be registered under the 1940 Act prior to any issuance or sale of such Shares. The Trust shall amend its registration statement under the 1933 Act and the 1940 Act from time to time as required in order to effect the continuous offering of its Shares. The Trust shall register and qualify its Shares for sale in accordance with the laws of the various states only if and to the extent deemed advisable by the Trust;
(e) the investment adviser for the Trust is and shall remain duly registered in all material respects under all applicable federal and state securities laws and that the investment adviser shall perform its obligations for the Trust in compliance in all material respects with the laws of the State of Delaware and any applicable state and federal securities laws; and
3.3 (a) The Distributor, on behalf of the Trust, represents that the Trust will at all times invest money from the Contracts in such a manner to ensure that the Contracts will be treated as variable contracts under the Code and the regulations issued thereunder. Without limiting the scope of the foregoing, the Trust will at all times comply with Section 817(h) of the Code and Treasury Regulation 1.817.5, relating to the diversification requirements for variable annuity, endowment, or life insurance contracts and any amendments or other modifications to such Section or Regulations.
(b) Under the terms of the Trust’s investment advisory agreement with the investment adviser, the investment adviser is and will be responsible for managing each Portfolio in compliance with that Portfolio’s investment objectives, policies and restrictions as set forth in the Trust prospectus. The Distributor, on behalf of the Trust, represents that these investment objectives, policies, and restrictions do and will include operating as a regulated investment company (“RIC”) in compliance with Subchapter M of the Code and Section 817(h) of the Code and regulations thereunder.
(c) The Trust has adopted and will maintain procedures for ensuring that each Portfolio is managed in compliance with Subchapter M and regulations thereunder. The Trust’s investment adviser will maintain procedures for ensuring that each Portfolio is managed in compliance with Section 817(h) and regulations thereunder. In the event of a breach of this Section, the Distributor, on behalf of the Trust, represents that the Trust will take all reasonable steps (a) to notify the Company of such breach and the (b) to adequately diversify the affected Portfolio so as to achieve compliance within the grace period afforded by Regulation 1.817-5.
(d) No later than 10 days after the end of each calendar quarter, the Trust will provide a certification to the Company stating that each Portfolio has complied with the diversification requirements of Section 817(h) of the Code, or if it has not complied with those requirements, setting forth the reason(s) for failing to comply and the steps the Trust will take to achieve compliance with these diversification requirements as to achieve compliance within the grace period afforded by Regulation 1.817-5.
(e) The Distributor, on behalf of the Trust, represents that each Portfolio is or will be qualified as a RIC under Subchapter M of the Code, and that the Trust will make every effort to maintain such qualification (under Subchapter M or any successor or similar provisions)
and that the Trust will notify the Company immediately upon having a reasonable basis for believing that a Portfolio has ceased to so qualify or that it might not so qualify in the future.
3.4 In the event of any noncompliance regarding the status of any Portfolio as a RIC in compliance with Subchapter M and/or noncompliance under Section 817(h), the Distributor, on behalf of the Trust, represents that the Trust will pursue those efforts necessary to enable that Portfolio to qualify once again for treatment as a RIC in compliance with Subchapter M and/or to be in compliance with Section 817(h), including cooperation in good faith with the Company. If the Trust does not so cure the noncompliance regarding that Portfolio’s status as a RIC under Subchapter M and/or the noncompliance under Section 817(h), the Distributor, on behalf of the Trust, represents that the Trust will cooperate in good faith with the Company’s efforts to obtain a ruling and closing agreement, as provided in Revenue Procedure 92-25 issued by the Internal Revenue Service (or any applicable ruling or procedure subsequently issued by the Internal Revenue Service), that the Portfolio satisfies the requirements of Subchapter M and/or compliance with Section 817(h), for the period or periods of noncompliance.
ARTICLE IV
Indemnification
4.1 Indemnification By the Company . The Company agrees to indemnify and hold harmless the Trust, Distributor, Janus Services and each of its Trustees, officers, employees and agents and each person, if any, who controls the Trust, Distributor or Janus Services within the meaning of Section 15 of the 1933 Act, excluding any other insurance company whose separate account(s) invests in shares of the Trust,(collectively, the “Janus Indemnified Parties” for purposes of this Article IV) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Company) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, “Losses”), to which the Janus Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses relate to the sale or acquisition of, or investment in, the Trust’s Shares or the Contracts and:
(a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in a registration statement or prospectus for the Contracts or in the Contracts themselves or in sales literature relating to the Company on behalf of the Contracts or Accounts (or any amendment or supplement to any of the foregoing) (collectively, the “Company Documents” for the purposes of this Article IV), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Janus Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was in conformity with written information furnished to the Company by or on behalf of the Distributor, the Trust, or the investment adviser to the Trust for use in Company Documents or otherwise for use in connection with the sale of the Contracts or the Shares; or
(b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from the Trust Documents as defined in Section 4.2(a)) or wrongful conduct of the Company or persons under its control, with respect to the sale or acquisition of the Contracts or the Shares; or
(c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in the Trust Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and in conformity with written information furnished to the Distributor by or on behalf of the Company; or
(d) arise out of or result from any material failure by the Company to provide the services or furnish the materials required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any representation and/or warranty made by the Company in this Agreement or arise out of or result from any other material breach of this Agreement by the Company.
The Janus Indemnified Parties will promptly notify the Company of the commencement of any litigation or proceedings against them in connection with the issuance or sale of the Trust Shares (or shares of any Portfolio) or the Contracts or the operation of the Trust (or any Portfolio) to the extent such litigation or proceedings impact the Company’s indemnification obligations.
4.2 Indemnification By the Distributor and Janus Services . The Distributor and Janus Services agree to indemnify and hold harmless the Company and each of its directors, officers, employees and agents and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act (collectively, the “Company Indemnified Parties” for purposes of this Article IV) against any and all losses, claims, damages, liabilities (including amounts paid in settlement with the written consent of the Distributor and/or Janus Services) or expenses (including the reasonable costs of investigating or defending any alleged loss, claim, damage, liability or expense and reasonable legal counsel fees incurred in connection therewith) (collectively, “Losses”), to which the Company Indemnified Parties may become subject under any statute or regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or alleged untrue statements of any material fact contained in the registration statement or Prospectus for the Trust (or any amendment or supplement thereto), (collectively, the “Trust Documents” for the purposes of this Article IV), or arise out of or are based upon the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, provided that this indemnity shall not apply as to any Company Indemnified Party if such statement or omission or such alleged statement or omission was made in reliance upon and was accurately derived from written information furnished to the Distributor or its agent by or on behalf of the Company for use in the Trust Documents or otherwise for use in connection with the sale of the Contracts or the Shares; or
(b) arise out of or result from statements or representations (other than statements or representations contained in and accurately derived from the Company Documents) or wrongful conduct of the Distributor or persons under its control, with respect to the sale or acquisition of the Contracts or the Shares; or
(c) arise out of or result from any untrue statement or alleged untrue statement of a material fact contained in the Company Documents or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Distributor, the Trust, or the investment adviser to the Trust; or
(d) arise out of or result from any material failure by the Distributor or Janus Services to provide the services or furnish the materials required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any representation and/or warranty made by the Distributor in this Agreement or arise out of or result from any other material breach of this Agreement by the Distributor or Janus Services.
4.3 Neither the Company, the Distributor nor Janus Services shall be liable under the indemnification provisions of Sections 4.1 or 4.2, as applicable, with respect to any Losses incurred or assessed against an indemnified party that arise from such indemnified party’s willful misfeasance, bad faith or negligence in the performance of such indemnified party’s duties or by reason of such indemnified party’s reckless disregard of obligations or duties under this Agreement.
4.4 Neither the Company, the Distributor nor Janus Services shall be liable under the indemnification provisions of Sections 4.1 or 4.2, as applicable, with respect to any claim made against an indemnified party unless such indemnified party shall have notified the other party in writing within a reasonable time after the summons, or other first written notification, giving information of the nature of the claim shall have been served upon or otherwise received by such indemnified party (or after such indemnified party shall have received notice of service upon or other notification to any designated agent), but failure to notify the party against whom indemnification is sought of any such claim shall not relieve that party from any liability which it may have to the indemnified party in the absence of Sections 4.1 and 4.2.
4.5 In case any such action is brought against the indemnified parties, the indemnifying party shall be entitled to participate, at its own expense, in the defense of such action. The indemnifying party also shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to the party named in the action. After notice from the indemnifying party to the indemnified party of an election to assume such defense, the indemnified party shall bear the fees and expenses of any additional counsel retained by it, and the indemnifying party will not be liable to the indemnified party under this Agreement for any legal or other expenses subsequently incurred by such party independently in connection with the defense thereof other than reasonable costs of investigation.
ARTICLE V
Termination
5.1 This Agreement shall continue in full force and effect until the first to occur:
(a) termination by either party for any reason by one hundred and eighty (180) days advance written notice delivered to the other party.
(b) termination by the Company by written notice to the Distributor with respect to any Portfolio based upon the Company’s determination that shares of such Portfolio are not reasonably available to meet the requirements of the Contracts, provided that such termination shall apply only to the Portfolio not reasonably available; or
(c) termination by the Company by written notice to the Distributor with respect to any Portfolio in the event any of the Portfolio’s shares are not registered, issued or sold in accordance with applicable state and/or federal law or such law precludes the use of such shares as the underlying investment media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company or Distributor by written notice to the other party, if the party determines, in its sole judgment exercised in good faith, that either the Distributor, Trust, investment adviser to the Trust, or Company has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity; or
(e) termination by the Company by written notice to the Distributor upon the sale, acquisition or change of control of the investment adviser to the Trust; or
(f) termination by the Company or the Distributor by written notice to the other party upon a material breach of the Agreement by the other party; provided that the non-breaching counter party determines in its sole judgment exercised in good faith, that such breach would not be cured within a reasonable period of time or that such breach would have a material adverse effect upon the ability of any party to perform their obligations under this Agreement; or
(g) termination by the Company in the event that formal administrative proceedings are instituted against the Trust, the investment adviser to the Trust, or the Distributor by the FINRA, the SEC, or any state securities or insurance department or any other regulatory body; provided, however, that the Company determines in its sole judgment exercised in good faith, that any such administrative proceedings will have a material adverse effect upon the ability of the Trust to serve as a funding vehicle for the Contracts or the Distributor to perform its obligations under this Agreement; or
(h) termination by the Company by written notice to the Distributor with respect to any Portfolio in the event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under any successor or similar provision, or if the Company reasonably believes that the Fund may fail to so qualify; or
(i) termination by the Company by written notice to the Distributor with respect to any Portfolio in the event that such Portfolio fails to meet the diversification requirements specified in Article III hereof.
5.2 Notwithstanding any termination of this Agreement, the Distributor shall, at the option of the Company, continue to make available additional shares of the Trust (or any Portfolio) pursuant to the terms and conditions of this Agreement for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as “Existing Contracts”). The parties agree to work in good faith, considering the circumstances that brought about the termination of the Agreement, to accommodate existing shareholders that continue to invest in the Trust, provided Sections 2.2 and 2.3 remain in effect.
5.3 The provisions of Article IV shall survive the termination of this Agreement, and the provisions of Section 2.11 shall survive the termination of this Agreement as long as Shares of the Trust are held on behalf of Contract owners in accordance with Section 5.2.
ARTICLE VI
Notices
Any notice shall be sufficiently given when sent by registered or certified mail to the other party at the address of such party set forth below or at such other address as such party may from time to time specify in writing to the other party.
If to the
Distributor:
Janus Distributors LLC
151 Detroit Street
Denver, Colorado 80206
Attention: General Counsel
Janus Services:
Janus Services LLC
151 Detroit Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
Protective Life Insurance Company
2801 Highway 280 South
Birmingham, AL 35223
Attention: Todd Thompson, Senior Vice President, Annuities
With a copy to:
Senior Associate Counsel — Variable Products
2801 Highway 280 South
Birmingham, AL 35223
ARTICLE VII
Miscellaneous
7.1 The captions in this Agreement are included for convenience of reference only and in no way define or delineate any of the provisions hereof or otherwise affect their construction or effect.
7.2 This Agreement may be executed simultaneously in two or more counterparts, each of which taken together shall constitute one and the same instrument.
7.3 If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Agreement shall not be affected thereby.
7.4 This Agreement shall be construed and the provisions hereof interpreted under and in accordance with the laws of State of New York.
7.5 Each party shall cooperate with each other party and all appropriate governmental authorities (including without limitation the SEC, the Financial Industry Regulatory Authority and state insurance regulators) and shall permit such authorities reasonable access to its books and records in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby, to the extent practicable and except where a party’s respective interests are adverse to or in conflict with another party’s interests.
7.6 The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, which the parties hereto are entitled to under state and federal laws.
7.8 Neither this Agreement nor any rights or obligations hereunder may be assigned by either party without the prior written approval of the other party.
7.9 No provisions of this Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by both parties.
7.10 Subject to the requirements of legal process and regulatory authority, each party hereto shall treat as confidential the names and addresses of the owners of the Contracts and all information reasonably identified as confidential in writing by any other party hereto and, except as permitted by this Agreement, shall not disclose, disseminate or utilize such names and addresses and other confidential information until such time as it may come into the public domain without the express written consent of the affected party.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this Participation Agreement as of the date and year first above written.
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Janus Services LLC |
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Protective Life Insurance Company |
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Schedule A
Separate Accounts and Associated Contracts
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Schedule B
List of Portfolios
The Company may purchase Shares of the following Portfolios of the Trust. This Schedule B may be updated from time to time by written agreement of the Company and the Distributor.
Protective Life Dynamic Allocation Series — Conservative Portfolio
Protective Life Dynamic Allocation Series — Moderate Portfolio
Protective Life Dynamic Allocation Series — Growth Portfolio
Schedule C
Order Submission and Processing
1. Receipt of Instructions and Transmittal of Orders . The Company represents that it has adopted and implemented procedures reasonably designed to ensure that all Instructions delivered to Janus Services on any Business Day shall have been received by the Company from the Account by the close of trading (typically 4:00 p.m. Eastern Time (“ET”)) on the New York Stock Exchange (the “Close of Trading”) on such Business Day and that any Instructions received by it after the Close of Trading on any given Business Day will be transmitted to Janus Services on the next Business Day.
2. Manual Transactions . Company may submit orders for purchase or redemption of shares by means of manual transactions via facsimile or other electronic transmission acceptable to Janus Services, in accordance with the following provisions shall apply:
(a) Next Day Transmission of Orders. The Company will notify the Janus Services by 9:30 a.m. ET, on the next Business Day the aggregate amounts of purchase orders and redemption orders, that were placed by Contractholders in each Account by 4:00 p.m. ET on the prior Business Day (the “Trade Date”). Company represents that orders it receives after 4:00 p.m. ET on any given Business Day will be transmitted to the Janus Services using the following Business Day’s net asset value. Janus Services may process orders it receives after the 9:30 a.m. deadline using the net asset value next determined.
(i) Purchases . All orders received by Company by 4:00 p.m. on a Business Day and communicated to the Janus Services by the 9:30 a.m. deadline shall be treated by the Janus Services as if received as of the close of trading on the Trade Date and the Janus Services will therefore execute orders at the net asset values determined as of the close of trading on the Trade Date. Company will initiate payment by wire transfer to a custodial account designated by Janus Services for the aggregate purchase amounts prior to 4:00 p.m. ET on the next Business Day following Trade Date.
(ii) Redemptions . Aggregate orders for redemption of shares of the Portfolios will be paid in cash and wired from the Trust’s custodial account to an account designated by the Company. Janus Services will initiate payment by wire to Company or its designee proceeds of such redemptions on the next Business Day following Trade Date.
3. Submission of Orders through NSCC . If the parties mutually agree to use the Fund/SERV system, Janus Services will accept trades submitted via the NSCC Systems in accordance with the following terms.
(a) Obligations of Janus Services.
(i) Transactions Subject to Fund/SERV . On each business day that the New York Stock Exchange is open for business on which the Portfolios determine their per share net asset values (“Business Day”), Janus Services shall accept, and effect, changes in its records
upon receipt of purchase, redemption, exchanges, and registration instructions from the Company electronically through Fund/SERV (“Instructions”) without supporting documentation from the Accounts in accordance with the terms and conditions set forth in this Schedule 4. On each Business Day, Janus Services shall accept for processing any Instructions from the Company and shall process such Instructions in a timely manner. Purchases to an Account’s Portfolio account shall be posted to such account through nightly processing after both the account registration and purchase settlement have been received. Such purchase shall appear on the account record the following Business Day. Shares are ineligible for redemption until they are posted and appear on the account record.
(ii) Performance of Duties . Janus Services shall perform any and all duties, functions, procedures and responsibilities assigned to it under this Agreement and as otherwise established by the NSCC. Janus Services shall maintain facilities, equipment and skilled personnel sufficient to perform the foregoing activities and to otherwise comply with the terms of this Agreement. Janus Services shall conduct each of the foregoing activities in a competent manner and in compliance with all applicable laws, rules and regulations, including NSCC rules and procedures relating to Fund/SERV, and in compliance with the then-current Prospectuses and SAIs of the Portfolios.
(iii) Accuracy of Information, Transmissions Through, and Access to Fund/SERV . Confirmed trades and any other information provided by Janus Services to the Company through Fund/SERV and pursuant to this Agreement shall be accurate, complete, and in the format prescribed by the NSCC. Janus Services shall adopt, implement and maintain procedures reasonably designed to ensure the accuracy of all transmissions through Fund/SERV and to limit the access to, and the inputting of data into, Fund/SERV to persons specifically authorized by Janus Services.
(iv) Notice of Prospectus and SAI Revisions . The Portfolios shall provide the Company with reasonable notice of any material revisions to the Portfolios’ Prospectuses and SAIs as are necessary to enable the Company to fulfill its obligations under this Agreement.
(b) Obligations of the Company.
(i) Transactions Subject to Fund/SERV . Except with respect to Instructions on behalf of business trading under NSCC indicator codes F through O (which include 529 underlying fund trades, share class conversion, health savings account, insurance fund transaction, non-qualified retirement plan, qualified retirement plan, omnibus distribution reconciliation, variable annuity, wrap program, and/or defined benefit plan) (“DCC&S Platform Business”), the Company represents that it has adopted and implemented procedures reasonably designed to ensure that all such Instructions received by it from an Account by the Close of Trading on any Business Day will be delivered to Janus Services on such Business Day. With respect to processing of Instructions on behalf of DCC&S Platform Business that the Company received by the Close of Trading on a Business Day, the Company will exercise its best efforts to:
(1) transmit such Instructions to Janus Services through Fund/SERV by 6:00 a.m. ET on the next Business Day, or
(2) otherwise notify Janus Services of such Instructions by 10:00 a.m. ET on the next Business Day. If the Company must deliver any Instructions to Janus Services on a certain Business Day for processing as of the prior Business Day due to systems problems or errors, such Instructions must be delivered by 10:00 a.m. ET to Janus Services on such Business Day. If Janus Services receives such Instructions after the 10:00 a.m. ET deadline and processes the Instructions, resulting in a loss to the Portfolios, the Company agrees to reimburse Janus Services for such loss upon receipt of a reclaim letter from Janus Services. Janus Services appoints the Company as its agent for the limited purpose of accepting orders for the purchase and redemption of shares of the Portfolios by the Company on behalf of its Accounts.
(ii) Performance of Duties . The Company shall perform any and all servicing, duties, functions, procedures and responsibilities assigned to it under this Agreement and as otherwise established by the NSCC for customer accounts. The Company acknowledges that it may not set up customer accounts which require Janus Services to provide any services directly to underlying investors. The Company shall maintain facilities, equipment and skilled personnel sufficient to perform the foregoing activities and to otherwise comply with the terms of this Agreement. The Company shall conduct each of the forgoing activities in a competent manner and in compliance with all applicable laws, rules and regulations, including NSCC rules and procedures relating to Fund/SERV, and in compliance with the then-current Prospectuses and SAIs of the Portfolios.
(iii) Accuracy of Information, Transmissions Through, and Access to Fund/SERV . The Company has adopted and implemented procedures reasonably designed to ensure that trade, registration, and if applicable, broker/dealer information provided by the Company to Janus Services through Fund/SERV and pursuant to this Agreement shall be accurate, complete and, in the format prescribed by the NSCC. All Instructions by the Company regarding each Fund/SERV account shall be true and correct and will have been duly authorized by the Account under whose name the account appears in the records of the Company. The Company shall adopt, implement and maintain procedures reasonably designed to ensure the accuracy of all transmissions through Fund/SERV and to limit the access to, and the inputting of data into, Fund/SERV to persons specifically authorized by the Company.
(iv) Information Relating to Fund/SERV Transactions . For each Fund/SERV transaction, including transactions establishing a customer account with Janus Services, the Company shall provide the Portfolios and Janus Services with all information necessary or appropriate to establish and maintain each Fund/SERV transaction (and any subsequent changes to such information) which the Company hereby certifies is, and shall remain, true and correct. The Company shall maintain documents required by the Portfolios or by applicable law, rules or regulations to effect Fund/SERV transactions.
(v) As-of Transactions . Processing errors which result from any delay or error caused by the Company may be adjusted through Fund/SERV by the Company by the necessary
transactions on an as-of basis and the cost to the Portfolio or Janus Services of such transactions shall be borne by the Company. As-of transactions more than 180 days old must be processed manually by Janus Services.
(vi) Duplicate Transactions and Payments . The Company acknowledges that as a result of the automated settlement features of NSCC’s Fund/SERV program, Janus Services’ compliance with redemption and/or settlement instructions involves a risk that the shareholder whose account is being redeemed may issue an inconsistent instruction, that the account being redeemed may be subject to backup or penalty withholding, or that a record date may occur while the redemption transaction is pending, resulting in a duplication transaction, overpayment, or dividend payment to the record owner. If Janus Services’ compliance with redemption and settlement instructions result in a duplicate transaction or overpayment, in addition to the procedures described above, the Company will, within two (2) business days after receipt of notice, refund all or any appropriate portion of any sums received by it in connection with such duplicate transaction or overpayment.
(vii) Trade Confirmation . Any information provided by Janus Services to the Company electronically through Fund/SERV and pursuant to this Agreement, shall satisfy the delivery obligations as outlined by SEC Rule 10b-10 and, as such, Janus Services has the informed consent of the Company to suppress the delivery of this information using paper-media. The Company will promptly verify accuracy of confirmations of transactions and records received by Janus Services through Fund/SERV.
(viii) Shareholder Reports and Other Documents; Solicitation of Proxies . The Company shall timely deliver to each Account all reports and other documents provided to it by the Portfolios or the Distributor as is required by applicable securities law and the Company’s agreement with the Account, provided that the Company has timely received copies of such reports and/or documents. The Portfolio or the Distributor and the Company shall cooperate with each other in the solicitation and voting of proxies on behalf of the Portfolios according to the Company’s fiduciary responsibility as written in the trust agreement or as required by state law or Federal Regulation.
(ix) Settlement of Transactions . For any purchase or redemption of Shares processed through Fund/SERV, Janus Services and the Company will settle all trades on the next Business Day following transmission of Instructions by the Company to Janus Services (the “Settlement Date”) in the manner provided by NSCC Fund/SERV Rules unless otherwise agreed to by the parties.
4. Overpayments .
(a) By Janus Services . In the event any overpayment is made to the Company by Janus Services, the Company shall promptly repay such overpayment to Janus Services after the Company receives notice of such overpayment.
(b) By the Company . In the event any overpayment is made to Janus Services by the
Company, Janus Services shall promptly repay such overpayment to the Company after Janus Services receives notice of such overpayment.
5. Pricing Adjustments . In the event an adjustment is made to the computation of the net asset value of Portfolio shares as reported to Company under paragraph 7, (1) the correction will be handled in a manner consistent with SEC guidelines and the Investment Company Act of 1940, as amended and (2) Janus Services shall notify Company as soon as practicable after discovering the need for any such adjustment. Notification may be made in the following manner:
(a) Method of Communication
(i) Manual Transactions . If the parties are not able to transmit or receive information through Fund/SERV, any corrections to the Portfolio prices should be communicated by electronic transmission acceptable to Janus Services, and will include for each day on which an adjustment has occurred the incorrect Portfolio price, the correct price, and corrective action to the Company’s back-office. Janus Services agrees that the Company may send a derivation of this notification (so long as such derivation is approved in advance by Janus Services) to Contract owners whose accounts are affected by the adjustment.
(ii) Fund/SERV Transactions . If Company uses the National Securities Clearing Corporation’s Mutual Fund Settlement, Entry and Registration Verification (“Fund/SERV”) system, any corrections to the Portfolio prices for the prior trade date may be submitted through the Mutual Fund Profile in Fund/SERV with the correct Portfolio prices and applicable date.
(b) To the extent a price adjustment results in a deficiency or excess to a Contractholder’s account, Company and Janus Services agree to evaluate the situation together on a case-by-case basis with the goal towards pursuing an appropriate course of action. To the extent the price adjustment was due to Janus Services’ error, Janus Services shall reimburse Contractholder’s account. Any administrative costs incurred for correcting Contractholder accounts will be at Company’s expense.
Exhibit 99.8(w)
April 12, 2007
Protective Life Insurance Company
(formerly Chase Insurance Life and Annuity Company)
Attn: General Counsel
1600 McConnor Parkway
Schaumburg, IL 60196-6801
Re: Action Requested — Distribution, Shareholder Servicing, Administrative Servicing and Fund/SERV Agreements relating to Janus Adviser Series, Janus Aspen Series and/or Janus Investment Fund.
Dear Client:
Effective December 4, 2006, the Securities and Exchange Commission adopted amendments to Rule 22-c(2) (and as may be amended from time to time, the “Rule”) of the Investment Company Act of 1940 (the “1940 Act”). The Rule requires that, by April 16, 2007, Janus enter into written agreements with its financial intermediaries (as such term is defined in the Rule) whereby each such financial intermediary agrees to provide Janus with certain shareholder identity and transaction information and to carry out certain instructions from Janus. These requirements are designed to allow Janus to more effectively enforce its market timing policies in an effort to protect Janus and its shareholders from the harmful effects of short-term trading.
You (“Intermediary”) are currently party to one or more of the above (or similar) agreements with one or more of the Janus entities (all such agreements of which you are currently a party are collectively referred to herein as the “Current Agreements”). In order to comply with the Rule, Janus and Intermediary desire to supplement the Current Agreements pursuant to and in accordance with this letter agreement (“Letter Agreement”). In no event, however, shall the provisions of this supplement require any actions of Intermediary that would be inconsistent with the Rule.
For good and valuable consideration, the receipt of which is hereby acknowledged, Janus and Intermediary hereby agree to supplement the Current Agreements as follows:
1. Shareholder Information
1.1 Agreement to Provide Information. Intermediary agrees to provide Janus, upon written request, the taxpayer identification number (“TIN”), if known, of any or all Shareholder(s) of the account and the amount, date, name or other identifier of any investment professional(s) associated with the Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of every Shareholder-Initiated Transaction held through an account of Janus maintained by the Intermediary during the period
covered by the request. Additionally, in the event that Janus deems necessary in order to investigate compliance with policies established by Janus for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by Janus, upon Janus’ request, Intermediary agrees to provide the foregoing shareholder information for Excluded Transactions.
1.1.1 Period Covered by Request. Requests must set forth a specific period, not to exceed ninety (90) days from the date of the request, for which Shareholder-Initiated Transaction information is sought. Janus may request Shareholder Initiated Transaction or Excluded Transactions, if information older than ninety (90) days from the date of the request as it deems necessary to investigate compliance with policies established by Janus for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by Janus.
1.1.2 Form and Timing of Response. Intermediary agrees to transmit the requested Shareholder-Initiated Transaction information (or Excluded Transactions information if applicable) that is on its books and records to Janus or its designee promptly, but in any event not later than ten (10) business days, after receipt of a request. If the requested information is not on the Intermediary’s books and records, Intermediary agrees to: (i) use its best efforts to identify any accountholders who are themselves intermediaries, and obtain and forward (or have forwarded) the underlying shareholder identity and transaction information from those indirect intermediaries; or (ii) if directed by Janus, block further purchases of fund Shares from the indirect intermediary. In such instance, Intermediary agrees to inform Janus whether it plans to perform (i) or (ii). Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to Janus should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, an “indirect intermediary” has the same meaning as provided for in the Rule.
1.1.3 Limitations on Use of Information. Janus agrees not to use the information received for marketing or any other similar purpose without the prior written consent of the Intermediary.
1.2 Agreement to Restrict Trading. Intermediary agrees to execute written instructions from Janus to restrict or prohibit further purchases or exchanges of Shares by a Shareholder that has been identified by Janus as having engaged in transactions of the fund’s Shares (directly or indirectly through the Intermediary’s account) that violate policies established by Janus for the purpose of eliminating or reducing any dilution of the value of the outstanding Shares issued by Janus.
1.2.1 Form of Instructions. Instructions must include the TIN, if known, and the specific restriction(s) to be executed. If the TIN is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates.
1.2.2 Timing of Response. Intermediary agrees to execute instructions as soon as reasonably practicable, but not later than five (5) business days after receipt of the instructions by the Intermediary.
1.2.3 Confirmation by Intermediary. Intermediary must provide written confirmation to Janus that instructions have been executed. Intermediary agrees to provide confirmation as soon as reasonably practicable, but not later than ten (10) business days after the instructions have been executed.
1.3. Definitions For purposes of this Letter Agreement:
1.3.1 For purposes of this provision, an “indirect intermediary” has the same meaning as in SEC Rule 22c-2 under the 1940 Act.
1.3.2 The term “Shares” means the interests of Shareholders corresponding to the redeemable securities of record issued by Janus under the 1940 Act that are held by the Intermediary.
1.3.3 The term “Shareholder” means:
a. the beneficial owner of Shares, whether the Shares are held directly or by the Intermediary in nominee name;
b. as this Letter Agreement relates to retirement plan accounts, the Plan participant notwithstanding that the Plan may be deemed to be the beneficial owner of the Shares; and
c. as this Letter Agreement relates to accounts of variable annuities or variable life insurance contracts, the holder of interest in a variable annuity or variable life insurance contract issued by the Intermediary.
1.3.4 The term “Shareholder-Initiated Transaction” means a transaction that is initiated or directed by a Shareholder that results in a transfer of assets within a Contract into or out of a Fund, but does not include transactions that are executed: (i) automatically pursuant to a contractual or systematic program or enrollments such as transfer of assets within a Contract to a Fund as a result of “dollar cost averaging” programs, insurance company approved asset allocation programs, or automatic rebalancing programs; (ii) pursuant to a Contract death benefit; (iii) pursuant to a Contract death benefit as a one-time set-up in Contract value; (iv) to allocate assets to a Fund through a Contract as a result of payments such as loan repayments, scheduled contributions, retirement plan salary reduction contributions, or planned premium payments to the Contract; (v) as pre-arranged transfers at the conclusion of a required free look period; (vi) automatically pursuant to a contractual or systematic program or enrollments such as transfer of assets within a Contract out of a Fund as a result of annuity payouts, loans, systematic withdrawal programs, insurance company approved asset allocation programs and automatic rebalancing programs; (vii) as a result of any
deduction or charge or fees under a Contract;(iii) within a Contract out of a Fund as a result of scheduled withdrawals or surrenders from a Contract; or (viii) as a result of payment of a death benefit from a Contract (collectively “Excluded Transactions”).
1.3.5 The term “written” includes electronic writings and facsimile transmissions.
2. Effectiveness of Agreement .
2.1 Effective Date. The provisions of this Letter Agreement shall become effective as of the final compliance date included in the Rule.
Please acknowledge your agreement to this Letter Agreement by signing where indicated below and return it to the following address:
Janus Distributors LLC
151 Detroit Street
Denver, CO 80206
Attn: Denise Roberson
Please address all questions or comments to Denise Roberson at 303-316-5765 or at denise.roberson@janus.com.
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Sincerely, |
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Michelle Rosenberg |
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Assistant Vice President |
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AGREED AND ACKNOWLEDGED: |
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PROTECTIVE LIFE INSURANCE COMPANY |
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formerly CHASE INSURANCE LIFE AND ANNUITY COMPANY |
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/s/ Carolyn M. Johnson |
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Carolyn M Johnson |
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Senior Vice President and Chief Operating Officer, Life and Annuity Division |
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JANUS SERVICES LLC |
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By: |
/s/ Russell Paul Shipman |
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Name: |
Russell Paul Shipman |
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Senior Vice President |
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Exhibit 99.10(a)
[SUTHERLAND ASBILL & BRENNAN LLP]
THOMAS E. BISSET
DIRECT LINE: 202.383.0118
E-mail: thomas.bisset@sutherland.com
April 26, 2016
VIA EDGAR
Board of Directors
Protective Life Insurance Company
2801 Highway 280 South
Birmingham, Alabama 35223
Re: Protective Variable Annuity Investors Series
Post-Effective Amendment No. 4
Directors:
We hereby consent to the reference to our name under the caption “Legal Matters” in the Statement of Additional Information filed as part of Post-Effective Amendment No. 4 to the Registration Statement on Form N-4 (File No. 333-190294) by Protective Life Insurance Company and Protective Variab le Annuity Separate Account with the Securities and Exchange Commission. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933.
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Very truly yours, |
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SUTHERLAND ASBILL & BRENNAN LLP |
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/s/ Thomas E. Bisset |
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Thomas E. Bisset |
Exhibit 99.10(b)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form N-4 (File No. 333-190294) of our reports dated March 18, 2016, relating to the consolidated financial statements and financial statement schedules of Protective Life Insurance Company and subsidiaries which appears in such Registration Statement. We also consent to the use in this Registration Statement on Form N-4 (File No. 333-190294) of our report dated April 25, 2016, relating to the financial statements of Protective Variable Annuity Separate Account, which appears in such Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Birmingham, Alabama
April 26, 2016
Exhibit 99.13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors and the Chief Accounting Officer of Protective Life Insurance Company, a Tennessee corporation, (“Company”) by his execution hereof or upon an identical counterpart hereof, does hereby constitute and appoint John D. Johns, Max Berueffy or Steven G. Walker, and each or any of them, his true and lawful attorney-in-fact and agent, for him and in his name, place and stead, to execute and sign the Registration Statement on Form N-4 filed by the Company for Protective Investors Series Variable Annuity (File No. 333-190294), an individual flexible premium deferred variable and fixed annuity product, with the Securities and Exchange Commission, pursuant to the provisions of the Securities Exchange Act of 1933 and the Investment Company Act of 1940 and, further, to execute and sign any and all pre-effective amendments and post-effective amendments to such Registration Statement, and to file same, with all exhibits and schedules thereto and all other documents in connection therewith, with the Securities and Exchange Commission and with such state securities authorities as may be appropriate, granting unto said attorney-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes of the undersigned might or could do in person, hereby ratifying and confirming all the acts of said attorney-in-fact and agent or any of them which they may lawfully do in the premises or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand and seal this 24 th day of April, 2016.
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/s/ John D. Johns |
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/s/ Richard J. Bielen |
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John D. Johns |
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Richard J. Bielen |
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/s/ Carl S. Thigpen |
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/s/ Steven G. Walker |
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Carl S. Thigpen |
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Steven G. Walker |
WITNESS TO ALL SIGNATURES:
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/s/ Max Berueffy |
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Max Berueffy |
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