We are reiterating our Neutral recommendation on the shares of
Protective Life Corp.
), following the release of fourth quarter earnings. This life
insurer with a Zacks Rank #3 (Hold) reported a solid fourth
quarter which included 11.4% positive earnings
Protective Life has been changing its sales mix to improve
life insurance margins and reduce interest rate exposure. Thus it
significantly increased its business in short-guarantee universal
life product, which was less costly to underwrite and more
mortality driven. Management therefore expects short-guarantee
universal life to constitute a higher proportion of life sales
Despite increasing competition, we expect Protective Life to
benefit from the changing demographic pattern of America where a
large proportion of the population is aging; creating a greater
demand for retirement savings products. We expect this
trend will drive strong earnings growth in this business, given
that the Protective Life is already witnessing strong variable
annuity sales and increased premiums.
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, given sufficient cash in hand.
However, Protective's Life marketing businesses is expected to
remain under pressure throughout 2013, due to headwinds from low
interest rates and slow sales growth from price rise instituted
by the company. Other players that continue to face headwinds
from low interest rates include
Moreover, in the Protective's Life insurance segment,
marketing margins have steadily compressed over the past few
years due to higher reserve funding costs, and we do not foresee
material expansion from current levels.
Following the earnings release, 5 of 11 estimates were revised
pushing the Zacks Consensus Estimate for 2013 by 0.5% to $3.80
Other Stocks to consider
Reinsurance Group of America Inc
), among others, carry a favorable Zacks Rank #2 (Buy).
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