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Presidential Life Corp. Reports Operating Results (10-Q)

August 05, 2010 | About:
10qk

10qk

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Presidential Life Corp. (PLFE) filed Quarterly Report for the period ended 2010-06-30.

Presidential Life Corp. has a market cap of $292.5 million; its shares were traded at around $9.89 with and P/S ratio of 1.2. The dividend yield of Presidential Life Corp. stocks is 2.5%.PLFE is in the portfolios of Michael Price of MFP Investors LLC, Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

The Corporations earnings per share were $0.13 for the first half of 2010, as compared to a loss of $0.34 for the same period in 2009. The improved results in 2010 primarily reflect an increase in investment income and a decrease in OTTI losses. Our total revenues in the first half of 2010 were $127.7 million, compared to $100.4 million in the first half of 2009. Benefits and expenses in the first six months in 2010 were $121.7 million, compared to $115.8 million for the same six month period in 2009. Net income in the first half of 2010 was $3.9 million as compared to a loss of $10.1 million for the same period in 2009.

The Corporations earnings per share were $0.06 for the three months ended June 30, 2010, as compared to a loss of $0.05 for the same period in 2009. The improved results in 2010 primarily reflect an increase in investment income and a decrease in OTTI. Our total revenues in the three months ended June 30, 2010 were $61.3 million, compared to $59.3 million in the three month period end June 30, 2009. Benefits and expenses in the quarter ended June 30, 2010 were $58.7 million, compared to $61.8 million for the same three month period in 2009. Net income for the three month period ended June 30, 2010 was $1.7 million as compared to a loss of $1.6 million for the same period in 2009.

Total annuity considerations and life and accident and health insurance premiums increased from approximately $22.3 million for the six months ended June 30, 2009 to approximately $27.9 million for the six months ended June 30, 2010. Life insurance and accident and health premiums were $8.8 million, and $7.2 million for the first six months of 2010 and 2009, respectively. Annuity considerations were approximately $19.2 million for the six months ended June 30, 2010 as compared to approximately $15.1 million for the six months ended June 30, 2009. The increase is primarily due to increased sales in our immediate annuities with life contingencies. These amounts do not include consideration from the sales of deferred annuities or immediate annuities without life contingencies. Under GAAP, such sales are reported as additions to policyholder account balances. Consideration from such sales was approximately $45.7 million and $110.0 million in the first six months of 2010 and 2009, respectively. The decrease was primarily due to the low interest rate environment that continued into the second quarter of 2010.

Realized investment gains amounted to approximately $1.1 million during the first six months of 2010, as compared to realized investment losses of approximately $4.2 million during the first six months of 2009. The improvement of approximately $5.3 million was primarily due to realized gains on fixed maturities of approximately $1.5 million in the first half of 2010 as opposed to realized losses on fixed maturities of approximately $6.9 million in the first half of 2009. During the first six months of 2010 and 2009, payor swaptions had realized losses of $390 thousand and realized gains of $2.7 million, respectively. The change in the fair value of the derivative instruments is reflected in the income statement as a realized loss or gain. The Company had no write-downs attributable to other than temporary impairments for the six months ended June 30, 2010. For the six months ended June 30, 2009, the Company had approximately $8.9 million in write-downs attributable to other than temporary impairments in fixed maturities.

The change in the net DAC for the six months ended June 30, 2010 resulted in a charge of approximately $1.5 million, as compared to a benefit of approximately $1.9 million for the six months ended June 30, 2009. Changes in DAC consist of three elements: deferred costs associated with product sales, amortization of the DAC on deferred annuity business and amortization of the DAC on the remainder of the Companys business. Deferred costs consisted of credits of $3.2 million and $5.8 million for the first six months of 2010 and 2009, respectively. Amortization of the DAC on deferred annuity business consisted of charges of $2.3 million and $1.4 million in the first six months of 2010 and 2009, respectively. Amortization of the DAC on the remainder of the Companys business consisted of charges of $2.4 million in the first half of 2010 and $2.5 million in the first half of 2009.

As of June 30, 2010, the carrying value of the Companys limited partnerships was approximately $216.0 million or 5.7% of the Company's total invested assets. Pursuant to NYSID regulations, the Company's investments in equity securities, including limited partnership interests, may not exceed 20% of the Company's total invested assets. At June 30, 2010, the Companys investments in equity securities, including limited partnership interests, were approximately 5.7% of the Companys total invested assets. Such investments are included in the Company's consolidated balance sheet under the heading "Other long-term investments." The Company is committed, if called upon during a specified period, to contribute an aggregate of approximately $75.4 million of additional capital to certain of these limited partnerships. However, management does not expect the entire amount to be drawn down, as certain of these limited partnerships are nearing the end of the period during which investors are required to make contributions. Commitments of $11.5 million, $23.6 million, $34.8 million, and $5.5 million will expire in 2010, 2011, 2012 and 2013, respectively. The commitment expirations are estimates based upon the commitment periods of each of the partnerships. Certain partnerships provide, however, that in the event capital from the investments is returned to the limited partners prior to the end of the commitment period (generally 3-5 years) the capital may be recalled. The Company may make selective investments in additional limited partnerships as opportunities arise. In general, risks associated with such limited partnerships include those related to their underlying investments (i.e., equity securities, debt securities and real estate), plus a level of illiquidity, which is mitigated by the ability of the Company to typically take quarterly distributions (to the extent that distributions are available) of partnership earnings, except for hedge fund limited partnerships. There can be no assurance that the Company will continue to achieve the same level of returns on its investments in limited partnerships as it has historically or that the Company will achieve any returns on such investments at all. Further, there can be no assurance that the Company will receive a return of all or any portion of its current or future capital investments in limited partnerships. The failure of the Company to receive the return of a material portion of its capital investments in limited partnerships, or to achieve historic levels of return on such investments, could have a material adverse effect on the Company's financial condition and results of operations.

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10qk
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