Response to 11-28-2006 SEC Comment Letter

Response to 11-28-2006 SEC Comment Letter &# 160;

Protective Life Corporation

Post Office Box 2606

Birmingham, AL 35202

205-268-1000

Steven G. Walker

Senior Vice President, Controller

and Chief Accounting Officer

205-268-6775

Fax: 205-268-3541

Toll Free 800-866-3555

Email: steve.walker@protective.com

December 14, 2006

Jim B. Rosenberg

Senior Assistant Chief Accountant

Securities and Exchange Commission

100 F Street, NW

Washington, DC 20549

RE: Protective Life Corporation

Form 10-K for fiscal year ended December 31, 2005

File No. 001-11339

Dear Mr. Rosenberg:

This letter provides the response of Protective Life Corporation (“Protective”) to the comments from the staff of the Securities and Exchange Commission (the “Commission”) on the Annual Report on Form 10-K for the year ended December 31, 2005 (“2005 Annual Report”) contained in your letter dated November 28, 2006 addressed to Mr. John D. Johns. For your convenience, we have included your comments in bold type along with our responses thereto.

Form 10-K for fiscal year ended December 31, 2005

General

Comment 1:

Please specifically indicate the disclosures that you plan to include in future filings.

Response:

The following additional or revised disclosures will be included in future filings.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Results by Business Segment

Note to SEC staff: The following disclosures will be added to Management's Discussion and Analysis of Financial Condition and Results of Operations for the Life Marketing segment in future filings.

Life Marketing

The Company's practice is to defer as a part of deferred acquisitions costs (“DAC”) reinsurance allowances in excess of the ultimate allowance. Ultimate reinsurance allowances are defined as the total allowance amount paid by the reinsurer over the lifetime of a universal life policy (or through the end of the level term period for a term policy). This practice is consistent with the Company's practice of capitalizing direct commissions.

The Company determines ultimate allowances as the final level of renewal commissions to be paid over the life of a contract after higher acquisition related commissions (whether first year or renewal) are completed. Ultimate reinsurance allowances are determined by the reinsurer and set by the individual contract.

The following table summarizes reinsurance allowances paid for each period presented, including the portion deferred as a part of DAC and the portion recognized immediately as a reduction of other operating expenses. As the non-deferred portion of reinsurance allowances reduce operating expenses in the period received, these amounts represent a net increase to operating income during that period. The amounts capitalized and earned during 2005, 2004, and 2003 are quantified below:

				Change
	2005	2004	2003	2005	2004
	(dollars in thousands)
Allowances received	$ 312,830	$ 326,580	$ 314,154	(4.2) %	4.0 %
Less amount deferred	(175,205)	(198,358)	(201,293)	(11.7)	1.5
Allowances recognized (reduction in other operating expenses)	$ 137,625	$ 128,222	$ 112,861	7.3	13.6

Ultimate reinsurance allowances are determined prior to the effective date of each treaty during the initial negotiation of each reinsurance contract. Ultimate reinsurance allowances and other treaty provisions are listed within each treaty and will differ between agreements since each reinsurance contract has its own set of assumptions and ultimate reinsurance structures. The Company uses the ultimate reinsurance allowances set by the reinsurers and contained within each treaty agreement to complete its accounting responsibilities.

Ultimate reinsurance allowances of $137.6 million, $128.2 million, and $112.9 million were recognized in 2005, 2004, and 2003, respectively, resulting in reductions in operating expenses by these amounts in the same periods. Ultimate reinsurance allowances increased 7.3% and 13.6% in 2005 and 2004, compared to the prior year periods. These increases were the result of increases in the Company’s life insurance in-force.

Reinsurance allowances represent the amount the reinsurer is willing to pay for reimbursement of acquisition costs incurred by the direct writer of the business. The amount and timing of these allowances are contractually determined by the applicable reinsurance contract. The Company recognizes allowances according to the prescribed schedules in the reinsurance contracts, which may or may not bear a relationship to actual expenses incurred by the Company.

Reinsurance allowances (both first year and renewal allowances) are contractually determined by the applicable reinsurance contract and may or may not bear a relationship to the amount and incidence of expenses actually paid by the ceding company. Many of the Company’s reinsurance treaties do, in fact, have ultimate renewal allowances that exceed the direct ultimate commissions. Additionally, allowances are intended to reimburse the ceding company for some portion of the ceding company’s commissions, expenses, and taxes. As a result, first year commissions paid by the Company may be higher than first year allowances paid by the reinsurer, and reinsurance allowances may be higher in later years than renewal commissions paid by the Company.

Reinsurance allowances do not affect the methodology used to amortize DAC, or the period over which such DAC is amortized. Reinsurance allowances offset the direct expenses capitalized, reducing amounts ultimately capitalized as DAC. DAC on SFAS 97 products is 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 SFAS 97 DAC amortization patterns. The amortization pattern would vary with changes in estimated gross profits arising from the allowances. DAC on SFAS 60 policies is 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 SFAS 60 DAC amortization patterns.

The Company’s cost of reinsurance includes amounts paid to the reinsurer (ceded premiums) net of amounts reimbursed by the reinsurer (allowances.) For long duration contracts, reinsurance allowances are amortized over the life of the underlying reinsured contract in a manner consistent with the way benefits and expenses on the underlying contracts are amortized (over the pattern of estimated gross premiums of the policies in force during the initial level period for SFAS 60 products, and in proportion to estimated gross profits for SFAS 97 products.)

·	The cost of reinsurance, including both amounts paid to the reinsurer (ceded premiums) and amounts reimbursed by the reinsurer (allowances) is reflected in the table below:

				Change
	2005	2004	2003	2005	2004
	(dollars in thousands)
Ceded premiums	$902,055	$818,207	$657,778	10.2 %	24.4 %
Allowances received	312,830	326,580	314,154	(4.2)%	4.0 %
Cost of reinsurance	$589,255	$491,627	$343,624	19.9 %	43.1 %

The increases in the cost of reinsurance in 2005 and 2004 compared to the prior year periods are the result of the segment’s growth in life insurance in-force. The segment's average life insurance in-force increased 14.7% and 29.0%, respectively, in 2005 and 2004 compared to prior years.

Claim liabilities and policy benefits are calculated consistently for all policies in accordance with GAAP, 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 financial strength and credit worthiness of its reinsurance partners.

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 (IBNR) claims are reviewed by the Company’s actuarial staff to ensure that appropriate amounts are ceded.

Ceded policy reserves are calculated by various administrative systems and the Company has actuarial professionals to ensure that amounts ceded to the reinsurers are calculated in compliance with GAAP based on the nature of the specific reinsurance transactions and terms of the contracts.

The Company analyzes and monitors the credit worthiness of each of its reinsurance partners to ensure collectibility and minimize collection issues. For reinsurance companies that do not meet predetermined standards, the Company requires collateral such as assets held in trusts or letters of credit.

Note to SEC Staff: The following revised tables will be included in Managment's Discussion and Analysis of Financial Condition and Results of Operations for the Annuities and Stable Value Products segments in future filings.

Annuities

				Change
	2005	2004	2003	2005	2004
	(dollars in thousands)
REVENUES
Gross premiums and policy fees	$ 31,810	$ 30,341	$ 26,265	4.8%	15.5%
Reinsurance ceded	0	0	0	0.0	0.0
Net premiums and policy fees	31,810	30,341	26,265	4.8	15.5
Net investment income	218,700	210,888	224,332	3.7	(6.0)
Realized gains (losses) - derivatives	(351)	0	0
Other income	7,772	7,004	8,745	11.0	(19.9)
Total operating revenues	257,931	248,233	259,342	3.9	(4.3)
Realized gains (losses) - investments	30,980	9,873	22,733
Total revenues	288,911	258,106	282,075

BENEFITS AND EXPENSES
Benefits and settlement expenses	187,791	183,271	197,955	2.5	(7.4)
Amortization of deferred policy acquisition costs	12,606	25,336	19,249	(50.2)	31.6
Other operating expenses	25,601	23,159	28,765	10.5	(19.5)
Operating benefits and expenses	225,998	231,766	245,969	(2.5)	(5.8)
Amortization of DAC related to realized gains (losses) - investments	24,906	6,935	18,947
Total benefits and expenses	250,904	238,701	264,916

INCOME BEFORE INCOME TAX	38,007	19,405	17,159	95.9	13.1

Less realized gains (losses) - investments	30,980	9,873	22,733
Less related amortization of DAC	(24,906)	(6,935)	(18,947)

OPERATING INCOME	$ 31,933	$ 16,467	$ 13,373	93.9	23.1

Stable Value Products

				Change
	2005	2004	2003	2005	2004
	(dollars in thousands)
REVENUES
Net investment income	$310,715	$268,184	$233,104	15.9%	15.0%
Realized gains (losses)	(16,065)	13,225	9,756
Total revenues	294,650	281,409	242,860

BENEFITS AND EXPENSES
Benefits and settlement expenses	246,134	205,168	186,565	20.0	10.0
Amortization of deferred policy acquisition costs	4,694	3,480	2,279	34.9	52.7
Other operating expenses	5,089	6,377	5,349	(20.2)	19.2
Total benefits and expenses	255,917	215,025	194,193	19.0	10.7

INCOME BEFORE INCOME TAX	38,733	66,384	48,667	(41.7)	36.4

Less realized gains (losses)	(16,065)	13,225	9,756

OPERATING INCOME	$ 54,798	$ 53,159	$ 38,911	3.1	36.6

Note to SEC Staff: The following revised table and disclosures will be included in Management's Discussion and Analysis of Financial Condition and Results of Operations for the Corporate and Other segment in future filings.

Corporate and Other

				Change
	2005	2004	2003	2005	2004
	(Dollars in thousands)
REVENUES
Gross premiums and policy fees	$ 42,441	$ 48,376	$ 56,507	(12.3)%	(14.4)%
Reinsurance ceded	(173)	(1,017)	(4,229)	83.0	76.0
Net premiums and policy fees	42,268	47,359	52,278	(10.7)	(9.4)
Net investment income	133,638	103,514	59,283	29.1	74.6
Realized gains (losses) - investments	8,684	0	0
Realized gains (losses) - derivatives	11,393	19,222	21,087
Other income	14,452	17,363	6,698	(16.8)	159.2
Total operating revenues	210,435	187,458	139,346	12.3	34.5
Realized gains (losses) - investments	26,045	6,366	26,550
Realized gains (losses) - derivatives	(42,174)	(790)	(9,512)
Total revenues	194,306	193,034	156,384

BENEFITS AND EXPENSES
Benefits and settlement expenses	51,891	59,051	79,335	(12.1)	(25.6)
Amortization of deferred policy acquisition costs	4,063	4,484	5,544	(9.4)	(19.1)
Other operating expenses	107,252	102,363	86,419	4.8	18.4
Total benefits and expenses	163,206	165,898	171,298

INCOME BEFORE INCOME TAX	31,100	27,136	(14,914)	14.6	281.9

Less realized gains (losses) - investments	26,045	6,366	26,550
Less Realized gains (losses) - derivatives	(42,174)	(790)	(9,512)

OPERATING INCOME	$ 47,229	$ 21,560	$(31,952)	119.1	167.5

Operating revenue for the Corporate and Other segment is primarily comprised of net investment income on unallocated capital and net premiums and policy fees related to several small non-strategic lines of business. Net investment income for the Corporate and Other segment increased $30.1 million and $44.2 million for 2005 and 2004, respectively, compared to the prior year periods, while net premiums and policy fees declined $5.1 million and $4.9 million for 2005 and 2004, respectively, compared to the prior year periods.

Approximately $18.4 million of the $30.1 million increase in net investment income in 2005 as compared to 2004 is the result of higher amounts of unallocated capital. A $22.5 million increase in participating income and prepayment fees from mortgages and real estate was partially offset by lower income on trading securities of $10.8 million.

The $44.2 million increase in net investment income in 2004 over 2003 includes higher mark-to-market gains on trading securities of $4.9 million, a $5.0 million increase in prepayment fees from mortgages, and a $9.5 million increase in participating mortgage income. The increases in prepayment fees from mortgages and participating mortgage income reflect the increased transaction activity within the Company’s mortgage portfolio. The remaining $24.8 million increase was primarily the result of an increase in unallocated capital.

The declines in net premiums and policy fees in both 2005 and 2004 compared to the prior year periods are the expected result of the runoff of business in the non-strategic lines of business which are no longer being marketed by the Company.

Note to SEC Staff: The following revised Contractual Obligations table and related disclosures will be included in future filings.

Liquidity and Capital Resources

Contractual Obligations

The table below sets forth future maturities of debt, non-recourse funding obligations, subordinated debt securities, stable value products, notes payable, operating lease obligations, other property lease obligations, mortgage loan commitments, and liabilities related to variable interest entities.

		Payments due by period
		Less than			More than
	Total	1 year	1-3 years	3-5 years	5 years
	(in thousands)
Long-term debt^(a)	$ 653,386	$ 22,137	$ 44,273	$ 109,145	$ 477,831
Non-recourse funding obligations^(b)	349,000	7,000	14,000	14,000	314,000
Subordinated debt securities^(c)	940,970	22,642	45,284	45,284	827,760
Stable value products^(d)	7,097,371	1,318,561	3,090,150	1,092,211	1,596,449
Operating leases^(e)	25,331	5,406	8,702	6,528	4,695
Home office lease^(f)	78,604	3,089	75,515
Mortgage loan commitments	979,778	979,778
Liabilities related to variable interest entities^(g)	535,291	24,913	72,821	32,321	405,236
Policyholder obligations^(h)	15,512,915	1,032,876	2,014,374	1,590,972	10,874,693
Defined benefit pension obligations⁽ⁱ⁾	8,222	8,222

^(a)	Long-term debt includes all principal amounts owed on note agreements, and includes expected interest payments due over the term of the notes.

^(b)	Non-recourse funding obligations include all principal amounts owed on note agreements, and include expected interest payments due over the term of the notes.

^(c)	Subordinated debt securities includes all principal amounts owed to non-consolidated special purpose finance subsidiaries of the Company, and includes expected interest payments due over the term of the obligations.

^(d)	Anticipated stable value products cash flows, including interest.

^(e)	Includes all lease payments required under operating lease agreements.

^(f)	The lease payments shown assume the Company exercises its option to purchase the building at the end of the lease term.

^(g)	Liabilities related to variable interest entities are not the legal obligations of the Company, but will be repaid with cash flows generated by the variable interest entities. The amounts represent scheduled principal and expected interest payments.

^(h)

Estimated contractual policyholder obligations are based on mortality, morbidity, and lapse assumptions comparable to the Company’s historical experience, modified for recent observed trends. These obligations are based on current balance sheet values and include expected interest crediting, but do not incorporate an expectation of future market growth, or future deposits. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. As separate account obligations are legally insulated from general account obligations, the separate account obligations will be fully funded by cash flows from separate account assets. The Company expects to fully fund the general account obligations from cash flows from general account investments.

⁽ⁱ⁾

Estimated 2006 contributions to the Company’s defined benefit pension plan and unfunded excess benefit plan approximate the projected expense to be recognized in 2006. Key assumptions used to estimate this obligation are included in Footnote 10 to Consolidated Financial Statements. Due to the significance of the assumptions used, this amount could differ from actual results. No estimate has been made of amounts to be contributed to these plans in years subsequent to 2006.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Life Marketing

Comment 2:

Please refer to prior comment one. We continue to believe that your accounting for reinsurance activities, particularly reinsurance allowances, requires additional explanation. Please provide the following information in disclosure-type format, specifically indicating the new disclosure.

·	Explain the specific methods and key assumptions used to estimate ultimate reinsurance allowances for universal life and term life insurance contracts.

Response:

·	Quantify your estimate of ultimate reinsurance allowances for each period presented. Explain the nature and impact of changes in these methods and assumptions for each period presented.

Response:

The Company supplementally advises the staff that since ultimate reinsurance allowances are contractually determined by the applicable reinsurance contract, there were no changes in methods or assumptions that had any impact on the amount of ultimate reinsurance allowances recognized by the Company in the periods presented.

We understand that reinsurance allowances represent a reimbursement for acquisition expenses. Explain the extent to which reinsurance allowances recognized as a reduction in other operating expenses match the corresponding maintenance expenses incurred for each period presented. Quantify the portion of such reinsurance allowances recognized in your operating results that relate to prior, current or future periods.

Response:

The Company supplementally advises the staff that this accounting treatment is consistent with the guidance from “US GAAP for Life Insurers” 2006 edition published by the Society of Actuaries. The following guidance is provided on page 525:

“Although premiums, expenses, reserves, and benefits are shared proportionally, expense reimbursements paid by the reinsurer are subject to negotiation. The incidence of expense reimbursements may or may not bear a reasonable relationship to the amount and incidence of expenses actually paid by the ceding company.”

The Company also supplementally advises the staff that since reinsurance allowances are contractually determined, and are not directly related to expenses incurred or paid by the Company, they do not relate to prior or future periods. Reinsurance allowances reduce operating expenses in the period received to the extent they are not deferrable.

Provide us an example of how you account for first year and renewal commissions and other costs, deferred or expensed, for a typical universal life and term life policy. Link the reinsurance allowances received for each type of policy to show us how reinsurance allowances received for the first year and renewal period offset costs that you defer or expense.

Response:

The Company supplementally provides the staff with the following information and examples related to its accounting for first year and renewal commissions and other costs, deferred or expensed.

The accounting for commissions, expenses incurred and allowances is identical for universal life and term policies. The only differences are related to DAC amortization.

Assume the following:

o	Two policies (one first year and one renewal in second year)

o	Annual premium of $1,000 for each policy

o	First year commission rate 120%

o	Renewal commission rate (year two)5%

o	Ultimate commission rate 1%

o	One policy issued in the period at cost of $500

o	Maintenance expense of $200 for all policies

o	Policies are coinsured 100%

o	First year reinsurance allowance 80%

o	Renewal reinsurance allowance 10%

o	Ultimate reinsurance allowance 2%

Accounting is as follows:

DIRECT:	Debit	Credit
Premiums Received:
Cash	2,000
First Year Premium Income		1,000
Renewal Premium Income		1,000

Commissions Paid:
First Year Commission Expense	1,200
Renewal Commission Expense	50
Cash		1,250


Underwriting Expenses:
Underwriting Expense	500
Cash		500

Maintenance Expenses:
Maintenance Expense	200
Cash		200

Capitalization:
Deferred Acquisition Costs	1,730
Capitalized Expenses		1,730

Note: Capitalization is made up of capitalized first year commissions ($1,200-$10=$1,190), capitalized renewal commissions ($50 - $10 = $40) and underwriting expenses ($500), for a total of $1,730.

REINSURANCE:
Ceded Premium Paid:
First Year Ceded Premium	1,000
Renewal Ceded Premium	1,000
Cash		2,000

Ceded Allowance Received:
Cash	900
First Year Reinsurance Allowance		800
Renewal Reinsurance Allowance		100

Ceded Capitalization:
Capitalized Allowances	860
Deferred Acquisition Cost Ceded		860

Note: Ceded capitalization is made up of capitalized first year allowances ($800 - $20 = $780) and capitalized renewal allowances ($100 - $20 = $80).

·	Explain why renewal allowances you received were significantly higher than renewal commissions you paid each year.

Response:

Reinsurance allowances (both first year and renewal allowances) are contractually determined by the applicable reinsurance contract and may or may not bear a relationship to the amount and incidence of expenses actually paid by the ceding company. Many of the Company's reinsurance treaties do, in fact, have ultimate renewal allowances that exceed the direct ultimate commissions. Additionally, allowances are intended to reimburse the ceding company for some portion of the ceding company’s commissions, expenses, and taxes. As a result, first year commissions paid by the Company may be higher than first year allowances paid by the reinsurer, and reinsurance allowances may be higher in later years than renewal commissions paid by the Company.

·	Explain how DAC amortization patterns are affected by reinsurance allowances.

Response:

·	Explain the differences between the amounts shown in the table on page 3 of your response letter and amounts shown in your reconciliation of other operating expenses disclosed in the MD&A section of your 2005 Form 10-K.

Response:

The Company supplementally advises the staff that there was an inconsistency in the treatment of intercompany eliminations between the table on page 3 of the previous response letter and the MD&A section of the 2005 Form 10-K. The amounts reported in the 2005 Form 10-K are correct. The table on page 3 of the previous response letter has been updated to treat these intercompany eliminations consistently with the MD&A presentation. The revised table is as follows:

				Change
	2005	2004	2003	2005	2004
	(dollars in thousands)
Allowances received	$312,830	$326,580	$314,154	(4.2)%	4.0%
Less amount deferred	(175,205)	(198,358)	(201,293)	(11.7)%	1.5%
Allowances recognized (reduction in other operating expenses)	$137,625	$128,222	$112,861	7.3 %	13.6%

·	Explain more specifically the primary components for cost of reinsurance and how you account for such costs for long duration contracts.

Response:

The Company supplementally advises the staff that reinsurance affects the Company’s results throughout the income statements. Ceded premium reduces premium revenue as an offset to revenue (contra revenue item). Similarly, ceded expenses and benefits reduce direct expenses for claims and other benefits (such as reserve changes) and operating expenses (through allowances to cover commissions and general administrative expenses). Capitalized reinsurance allowances increase the net expenses as debits to the capitalized allowance accounts in the income statement. The recognition of previously deferred reinsurance allowances is amortized into income by reducing direct DAC amortization.

·	Quantify the cost of reinsurance for all contracts by segment for each period presented. Explain variations in such costs that have materially impacted your operating results.

Response:

The cost of reinsurance, including both amounts paid the reinsurer (ceded premiums) and amounts reimbursed by the reinsurer (allowances) is reflected in the table below:

				Change
	2005	2004	2003	2005	2004
	(dollars in thousands)
Ceded premiums	$902,055	$818,207	$657,778	10.2 %	24.4 %
Allowances received	312,830	326,580	314,154	(4.2)%	4.0 %
Cost of reinsurance	$589,255	$491,627	$343,624	19.9 %	43.1 %

You estimate amounts recoverable from reinsurers for both short-duration and long-duration contracts “in a manner consistent with the claim liabilities and policy benefits associated with the reinsured policies.” Explain more specifically how you estimate amounts recoverable from reinsurers, particularly how you consider the terms of the reinsurance contracts and collectibility in this accounting process.

Response:

Claim liabilities and policy benefits are calculated consistently for all policies in accordance with GAAP, 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 its reinsurance partners.

* * * * *

In connection with our response, we acknowledge that:

·	The Company is responsible for the adequacy and accuracy of the disclosure in the filings;

·	staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

·	the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope that this response satisfies your concerns. As always, we look forward to continued dialogue on financial reporting issues. If you have any questions concerning this response, please do not hesitate to contact me at (205) 268-6775 or Charles Evers, Vice President of Corporate Accounting, at (205) 268-3596.

Sincerely,

/s/ Steven G. Walker

Steven G. Walker

Senior Vice President, Controller

and Chief Accounting Officer