OPERATING SEGMENTS

6 Months Ended

Jun. 30, 2011

OPERATING SEGMENTS

OPERATING SEGMENTS

16.          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. A brief description of each segment follows.

· The Life Marketing segment markets UL, variable universal life, bank-owned life insurance (“BOLI”), and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, stockbrokers, 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. In the ordinary course of business, the Acquisitions segment regularly considers acquisitions of blocks of policies or insurance companies. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, and market dynamics. Policies acquired through the Acquisitions segment are typically “closed” blocks of business (no new policies are being marketed). Therefore, in such instances, 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 guaranteed funding agreements (“GFAs”) to special purpose entities that in turn issue notes or certificates in smaller, transferable denominations. The segment also markets fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, institutional investors, bank trust departments, and money market funds. In addition, the segment issues funding agreements to the FHLB, and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans.

· The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers’ investments in automobiles, watercraft, 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 (including the impact of carrying excess liquidity), expenses not attributable to the segments above (including interest on debt), and a trading portfolio that was previously part of a variable interest entity. 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 available to PLC’s common shareowners and assets. Segment operating income (loss) is income before income tax excluding net realized investment gains and losses (net of the related amortization of deferred acquisition costs (“DAC”) and value of business acquired (“VOBA”) and participating income from real estate ventures), and the cumulative effect of change in accounting principle. Periodic settlements of derivatives associated with corporate debt and certain investments and annuity products are included in realized gains and losses but are considered part of operating income because the derivatives are used to mitigate risk in items affecting consolidated and segment operating income (loss). 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.

During the first quarter of 2010, the Company recorded a $7.8 million decrease in reserves related to the final settlement in the runoff Lender’s Indemnity line of business.

During the first quarter of 2011, the Company recorded $8.5 million of pre-tax earnings in the Corporate and Other business segment relating to the settlement of a dispute with respect to certain investments.

There were no significant intersegment transactions during the six months ended June 30, 2011 and 2010.

The following tables summarize financial information for the Company’s segments:

	For The						For The
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	(Dollars In Thousands)
Revenues
Life Marketing	$	326,427		$	298,128		$	656,764		$	607,132
Acquisitions	242,771			177,579			442,894			376,296
Annuities	153,602			85,475			283,734			226,055
Stable Value Products	46,421			37,273			91,136			85,229
Asset Protection	69,777			67,769			137,680			134,200
Corporate and Other	63,786			45,878			127,656			74,960
Total revenues	$	902,784		$	712,102		$	1,739,864		$	1,503,872
Segment Operating Income (Loss)
Life Marketing	$	33,704		$	35,755		$	59,943		$	76,433
Acquisitions	39,429			30,190			71,820			61,559
Annuities	24,375			605			37,460			18,792
Stable Value Products	19,142			10,979			28,337			22,006
Asset Protection	5,530			6,616			12,072			19,683
Corporate and Other	3,977			377			13,998			(15,755		)
Total segment operating income	126,157			84,522			223,630			182,718
Realized investment (losses) gains - investments(1)(3)	49,617			50,578			47,493			86,394
Realized investment (losses) gains - derivatives(2)	(32,797		)	(70,513		)	(24,000		)	(103,176		)
Income tax expense	(49,909		)	(23,216		)	(86,538		)	(54,786		)
Net income available to PLC’s common shareowners	$	93,068		$	41,371		$	160,585		$	111,150
(1) Realized investment (losses) gains - investments	$	49,430		$	50,906		$	48,239		$	86,936
Less: related amortization of DAC/VOBA	(187		)	328			746			542
	$	49,617		$	50,578		$	47,493		$	86,394
(2) Realized investment gains (losses) - derivatives	$	(34,993	)	$	(119,888	)	$	(47,679	)	$	(142,960	)
Less: settlements on certain interest rate swaps	—			42			—			84
Less: derivative activity related to certain annuities	(2,196		)	(49,417		)	(23,679		)	(39,868		)
	$	(32,797	)	$	(70,513	)	$	(24,000	)	$	(103,176	)

(3)Includes other-than-temporary impairments of $9.5 million and $15.2 million for the three and six months ended June 30, 2011, respectively, and $16.8 million and $28.7 million for the three and six months ended June 30, 2010, respectively.

	Operating Segment Assets
	As of June 30, 2011
	(Dollars In Thousands)
	Life						Stable Value
	Marketing		Acquisitions		Annuities		Products
Investments and other assets	$	10,165,308	$	11,677,513	$	14,140,861	$	2,562,165
Deferred policy acquisition costs and value of business acquired	2,532,898		892,883		518,129		3,070
Goodwill	10,192		40,263		—		—
Total assets	$	12,708,398	$	12,610,659	$	14,658,990	$	2,565,235

	Asset		Corporate				Total
	Protection		and Other		Adjustments		Consolidated
Investments and other assets	$	698,051	$	7,580,311	$	21,979	$	46,846,188
Deferred policy acquisition costs and value of business acquired	78,192		3,280		—		4,028,452
Goodwill	62,671		83		—		113,209
Total assets	$	838,914	$	7,583,674	$	21,979	$	50,987,849

	Operating Segment Assets
	As of December 31, 2010
	(Dollars In Thousands)
	Life						Stable Value
	Marketing		Acquisitions		Annuities		Products
Investments and other assets	$	9,623,991	$	10,270,540	$	12,603,533	$	3,069,330
Deferred policy acquisition costs and value of business acquired	2,475,621		810,681		471,163		6,903
Goodwill	10,192		41,812		—		—
Total assets	$	12,109,804	$	11,123,033	$	13,074,696	$	3,076,233

	Asset		Corporate				Total
	Protection		and Other		Adjustments		Consolidated
Investments and other assets	$	691,973	$	7,313,232	$	23,686	$	43,596,285
Deferred policy acquisition costs and value of business acquired	83,878		3,497		—		3,851,743
Goodwill	62,671		83		—		114,758
Total assets	$	838,522	$	7,316,812	$	23,686	$	47,562,786