A.M. Best Co. has affirmed the financial strength rating (FSR) of A+ (Superior) and issuer credit ratings (ICR) of “aa-” of the primary life/health subsidiaries of Protective Life Corporation (Protective) (headquartered in Birmingham, AL) [NYSE: PL], led by Protective Life Insurance Company (PLIC) (Brentwood, TN). Additionally, A.M. Best has affirmed the ICR of “a-” and debt ratings of Protective. (See below for a detailed listing of the companies and ratings.) The outlook for all ratings is stable.
The ratings reflect Protective’s diversified revenue and profit sources, expanding distribution capabilities and strong track record of effectively integrating acquired insurance companies and blocks of business. The ratings also acknowledge Protective’s seasoned block of traditional life insurance, which provides a predictable and stable source of earnings.
Protective has exhibited solid consolidated operating performance in recent periods. A.M. Best notes that the company’s business mix of primarily traditional life insurance provides for greater earnings stability and that its equity market linked product exposure, which is inherently more volatile, is generally more limited than peer companies. The stable, recurring premiums associated with Protective's seasoned block of life business are a source of strength as this block contains significant embedded profits. In addition, Protective’s acquisitions have increased its earnings and have allowed the company to enter new markets and realize operating efficiencies. Protective remains active in the acquisition arena and recently closed two transactions deploying more than $500 million of capital. These acquisitions were immediately accretive to earnings and added almost $60 million to GAAP operating income in 2011. Moreover, while new business and acquisition activity has given rise to substantial Regulation XXX and AXXX reserves, Protective has been effective in securing cost-effective longer term funding solutions.
A.M. Best believes Protective maintains adequate levels of risk-adjusted capital at all of its insurance entities. In addition, the company has reduced the level of below investment grade securities in its general account investment portfolio to approximately 5%, and the unrealized gain position has improved to roughly $1.8 billion as of year-end 2011.