Protective Life Earnings Beat by a Penny

Zacks Equity Research
October 31, 2013

Protective Life Corp. (PL) reported third quarter 2013 net operating earnings of 98 cents per share, a penny ahead of the Zacks Consensus Estimate of 97 cents per share. Earnings also surged 29% year over year.

The earnings beat came from strong contribution from Protective Life’s Stable Value Products and Asset Protection segment. However, low interest rate environment, an unsettled regulatory environment and intense competition across all retail product lines was a partial offset to the strong results.

Including one-time items, net income of Protective Life came in at $1.15 per share, up 57.5% year over year.

Operational Highlights

Total revenue of Protective Life was $892.8 million, down 6.3% year over year.

Protective Life’s gross premium and policy fees improved 4.2% year over year to $684.9 million.

Net investment income of Protective Life came in at $467.9 million, up 3.0% year over year.

Total benefits and expenses came in at $801.8 million, down 1.1% year over year.

Segment Highlights

The Life Marketing segment reported before-tax operating income of $29.2 million, up 1.7% year over year. The decline came on the back of favorable change in unlocking. Sales were $32.7 million, up 5% year over year.

Before tax, operating income of Acquisitions segment was $29.4 million, down 36% year over year. The decrease was due to unfavorable variance related to prospective unlocking.

The Annuities segment reported before tax operating income of $50.9 million which increased more than 5 times compared with $9.4 million in the year ago quarter. The increase was primarily driven by favorable change in unlocking. Annuities sale decreased 41% year over year to $538.2 million.

Higher participating mortgage income and higher operating spread led to a 47% year over year increase in tax operating income at the company’s Stable Value segment which came in $19.2 million. The segment’s sales, however, declined 45% year over year to $80.2 million.

The Asset Protection segment reported before-tax operating income of $6.8 million, up 62% year over year. The increase came from increase in credit insurance earnings. Sales increased 11% year over year to $130.0 million.

Corporate & Other segment pre-tax operating loss was $6.6 million compared to an operating loss of $14.3 million in the year-ago quarter.

Share Repurchase Update

During the reported quarter, Protective Life did not make any repurchases and has shares worth $170 million remaining under its authorization. Additionally, Protective Life stated that it might not undertake any repurchases for the rest of the year due to the recent completion of the acquisition of MONY Life Insurance Company and reinsurance of a portion of the MONY Life Insurance Company of America.

Protective Life carries a Zacks Rank #3 (Hold). Other players, StanCorp Financial Group Inc. (SFG) with Zacks Rank #1 (Strong Buy) beat the Zacks Consensus Estimate and  American Financial Group Inc. (AFG) with Zacks Rank #2 (Buy) reported in line with the Zacks Consensus Estimate. Sun Life Financial Inc. (SLF) with Zacks Rank #2 (Buy) is scheduled to report third quarter earnings on Nov 7, 2013.

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