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We are reiterating our Neutral recommendation on the shares of Protective Life Corp. (PL - Analyst Report) as low interest rate environment, an unsettled regulatory environment and intense competition across all retail product lines keeps us cautious. The life insurer carries a Zacks Rank #3 (Hold).

Why Reiterate?

The company’s Life marketing businesses is expected to remain under pressure in the near term, due to headwinds from low interest rates and slow sales growth from price rise instituted by the company.

Moreover, in 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.

Nevertheless, Protective Life has been changing its sales mix to improve life insurance margins and reduce interest rate exposure and reduce earnings volatility. 

Moreover, despite increasing competition, we expect Protective Life to benefit from changing demographic patterns in America where a large proportion of the population is aging. It thus generates greater demand for retirement savings products. 

Protective Life 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. The company also closed the acquisition of MONY Life Insurance Company in Oct 2013, which is expected to be accretive to 2013 earnings by 10-15 cents per share.

With respect to earnings performance, Protective Life Corp. reported third quarter 2013 net operating earnings of 98 cents per share, a penny ahead of the Zacks Consensus Estimate. 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.

Over the past 30 days Protective Life has witnessed an increase in earnings estimates. The Zacks Consensus Estimate for 2013 rose by 0.5% to $3.95 per share as 6 of 10 estimates were pulled up. For 2014, earnings estimates increased 0.9% year over year to $4.72 per share.

Other Stocks to consider

Other better ranked stocks StanCorp Financial Corp. (SFG - Analyst Report), with Zacks Rank #1 (Strong Buy), and American Equity Investment Life Holding Co. (AEL - Snapshot Report) and Manulife Financial Corporation (MFC - Analyst Report)  with Zacks Rank #2 (Buy) are worth considering.

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