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SEC Talks To Protective About Securities Loss Accounting

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NU Online News Service, March 26, 2003, 3:55 p.m. EST – Protective Life Corp., Birmingham, Ala., says the U.S. Securities and Exchange Commission may want it to change the way it accounts for problems with low-rated securities.

Protective notes that “unrealized losses” on low-rated securities amounted to $41.7 million in 2001 and $34.3 million in 2002.

The unrealized losses lower shareholders’ equity but have no direct effect on net income. If Protective finds that problems with low-rated securities will be “other than temporary” and recognizes the problems as “realized investment losses,” then it will have to include the losses in net income, the company says.

“The company is continuing to discuss these issues with the staff of the SEC, and no final determinations will be made until the conclusion of those discussions,” Protective says.

Protective says it believes the SEC is taking a hard look this year at all insurers’ methods for accounting for problems with low-rated securities.

Another insurer, UnumProvident Corp., Chattanooga, Tenn., recently announced that it has resolved discussions of its own with the SEC about the same accounting issue.