We have initiated our coverage on the shares of
Protective Life Corp.
) with a Neutral recommendation.
Protective Life Corp., a diversified insurance company, has an
active presence in the U.S. Over the long term, we believe that
the company will be able to generate superior returns for its
investors, given a proactive approach to managing and mitigating
Protective has been changing its sales mix to improve life
insurance margins and reduce interest rate exposure. It has,
therefore, significantly increased its business in the
short-guarantee universal life products. As these products are
less costly to underwrite and more mortality driven, management
expects short-guarantee universal life to be a higher proportion
of life sales going forward.
Despite increasing competition, we expect Protective to benefit
from the changing demographic patterns of America, where a large
population is aging and thus generating greater demand for
retirement savings products.
Protective has a long history of successfully acquiring both
closed blocks of business and small companies. It has been
traditionally successful in generating operating efficiencies
along with increasing business scale via these acquisitions.
Going forward, we expect more such deals to be sealed by the
company if there is sufficient cash in hand.
The company also boasts strong financial ratings coupled with a
strong balance sheet.
However, the company faces headwinds from low interest rates,
which are exerting pressure on investment income.
Also Protective's Life marketing businesses are expected to
remain under pressure throughout 2013, due to headwinds from low
interest rates and slow sales growth from the price rise
instituted by the company.
Protective Life retains a Zacks Rank #3 (Hold). Peers
carrying a Neutral recommendation are
Prudential Financial, Inc.
Sun Life Financial Inc.
PROTECTIVE LIFE (PL): Free Stock Analysis
PRUDENTIAL FINL (PRU): Free Stock Analysis
SUN LIFE FINL (SLF): Free Stock Analysis
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