On Jul 2, we issued an updated research report on U.S. life insurer, Protective Life Corp. (PL).
Last month, the company announced its takeover by the Japanese life insurer Dai-ichi Life Co. for $5.7 billion. The transaction – expected to close by year-end 2014 or early 2015 – will provide immense diversification benefits, helping it to transform from a national to an international player courtesy of being a wholly owned subsidiary of the one of the largest insurers in Japan.
This transaction will also enable Protective Life to deliver substantial, immediate cash value to its shareholders while sustaining growth. Moreover, Protective will be part of the thirteenth largest global insurer which Dai-ichi Life will transform to, post acquisition. Consequently, courtesy of its takeover, Protective will rise in rank from a medium to a large size U.S. insurer.
Protective Life has a long operating history in the U.S. and has grown via organic and inorganic routes. Its inorganic growth story seems impressive with 47 small and big acquisitions to its credit over the past four decades.
We appreciate the insurer’s diverse revenue and earnings sources, significant presence in the life insurance market, multiple distribution channels, manageable cash outflows at the holding company, and a solid track record that reflects it competence to acquire other companies and blocks of businesses.
This life insurer boasts solid asset quality and sound capital position, liquidity and financial flexibility alongside robust enterprise risk management which drives credit rating agencies to assign it a strong credit score.
During the last reported quarter, bottom line outpaced the Zacks Consensus estimate by 27% and year ago earnings by 34%. Solid performance by its Annuity and Stable Value lines of business drove the upside. Top line also improved year over year on higher net premium and net investment income, while falling in line with the Zacks Consensus Estimate.
Protective Life carries a Zacks Rank # 3 (Hold). Better-ranked players from the same industry include Lincoln National Corporation (LNC), China Life Insurance Co. Ltd. (LFC) and Sun Life Financial Corp. (SLF). All these stocks carry a Zacks Rank #2 (Buy).