Protective Life Expects Global Exposure from Dai-ichi Buyout

On Sep 26, we issued an updated research report on U.S. life insurer, Protective Life Corp. (PL).

Protective Life has a long operating history in the U.S. and has grown on organic and inorganic routes. Its inorganic growth story seems impressive with several 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 that reflects it competence to acquire other companies and blocks of businesses.

This life insurer boasts solid asset quality, sound capital position and liquidity, and financial flexibility alongside robust enterprise risk management which drives credit rating agencies to assign it a strong credit score.

In Jun 2014, the company announced its takeover by the Japanese life insurer Dai-ichi Life Co. Post acquisition, Protective will become a wholly in subsidiary of Dai-ichi and will no longer be listed on any stock exchange. If the merger is adopted, each share will receive $70.00 in cash.

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 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.

During the last reported quarter, Protective Life reported net operating earnings of $1.31 per share, surpassing the Zacks Consensus Estimate by 9.2%. Earnings improved 36% year over year on better performance across most of the segments, but were dampened somewhat by weak results at the Stable Value Products.

Protective Life carries a Zacks Rank #2 (Buy). Other stocks Lincoln National Corporation (LNC), Symetra Financial Corporation (SYA) and China Life Insurance Co. Ltd. (LFC) all with same rank as Protective Life are worth considering.